DigitalOcean(US:DOCN)2023-11-01 16:00Customer Metrics - As of September 30, 2023, DigitalOcean had approximately 633,000 active customers categorized as Learners, Builders, and Scalers, excluding "Testers" who spend less than $50 per month [149]. - DigitalOcean's customer base is spread across over 190 countries, with approximately two-thirds of revenue historically coming from international customers [154]. Revenue Growth - The average revenue per customer (ARPU) increased from $86.54 in Q3 2022 to $92.06 in Q3 2023, indicating a growth of approximately 5.8% year-over-year [156]. - Annual run-rate revenue (ARR) reached $713 million as of September 30, 2023, up from $641 million in the same period last year, reflecting a year-over-year increase of approximately 11.2% [156]. - Revenue for the three months ended September 30, 2023, increased by $24.9 million, or 16%, to $177.1 million compared to $152.1 million in the same period of 2022 [186]. - Revenue from Builders and Scalers increased by 19% and 14%, respectively, for the quarter ended September 30, 2023, compared to the same quarter in 2022 [157]. - Revenue for the nine months ended September 30, 2023, increased by $98.7 million, or 24%, to $512.0 million compared to $413.3 million in the same period of 2022 [195]. Geographic Revenue Distribution - For the three months ended September 30, 2023, 37% of revenue was generated from North America, 29% from Europe, 24% from Asia, and 10% from the rest of the world [154]. Financial Performance - The net dollar retention rate for Q3 2023 was 96%, down from 118% in Q3 2022, indicating a decrease in revenue growth from existing customers [167]. - Net income attributable to common stockholders for the three months ended September 30, 2023, was $19.2 million, compared to $7.9 million in the same period of 2022 [183]. - GAAP net income attributable to common stockholders for Q3 2023 was $19.175 million, up from $7.903 million in Q3 2022, representing a 142.5% increase [226]. - Non-GAAP net income for the nine months ended September 30, 2023, was $117.996 million, compared to $71.264 million for the same period in 2022, reflecting a 65.5% increase [226]. Expenses and Costs - Cost of revenue for the three months ended September 30, 2023, rose by $13.6 million, or 24%, to $70.3 million, primarily due to operating and variable lease costs related to new and acquired co-location facilities [187]. - Gross profit margin decreased to 60% for the three months ended September 30, 2023, down from 63% in the same period of 2022 [187]. - Research and development expenses increased by $2.4 million, or 8%, to $32.6 million for the three months ended September 30, 2023, driven by higher stock-based compensation and software license costs [188]. - General and administrative expenses decreased by $18.8 million, or 48%, to $20.1 million for the three months ended September 30, 2023, primarily due to reversed stock-based compensation related to the CEO's forfeited MRSUs [190]. - Total operating expenses decreased by $16.9 million, or 19%, to $71.3 million for the three months ended September 30, 2023 [188]. Cash Flow and Investments - Net cash provided by operating activities was $154.4 million for the nine months ended September 30, 2023, up from $132.3 million in 2022, driven by higher revenues and interest income [211]. - Net cash provided by investing activities was $248.3 million for the nine months ended September 30, 2023, compared to $1.2 billion used in 2022, reflecting reduced investments in available-for-sale securities [212]. - The company repurchased 13,888,704 shares of common stock for $475.0 million as part of its stock buyback program during the nine months ended September 30, 2023 [204]. Taxation - Income tax expense increased by $17.5 million, or 3,959%, for the three months ended September 30, 2023, primarily due to tax expenses in foreign jurisdictions [194]. - Income tax expense increased by $7.2 million, or 274%, to $(9.8) million for the nine months ended September 30, 2023, due to tax expenses in foreign jurisdictions [202]. - The company expects to be a U.S. taxpayer starting January 1, 2023, with a long-term fixed forecasted tax rate of 17% on non-GAAP pre-tax income for 2023 [229]. Restructuring and Charges - DigitalOcean's restructuring plan, approved on January 27, 2023, aimed to achieve greater than 20% adjusted free cash flow margins and was substantially completed by the end of Q3 2023 [158]. - Restructuring and other charges increased by $20.9 million, or 100%, to $20.9 million for the nine months ended September 30, 2023, due to one-time severance and benefit payments [200]. - Restructuring-related charges for the nine months ended September 30, 2023, amounted to $20.862 million, with a significant reversal of $29.484 million in Q3 2023 [226]. Stock-Based Compensation - Stock-based compensation for Q3 2023 was $28.731 million, up from $23.594 million in Q3 2022, indicating a 21.4% increase [226]. - The company reported acquisition-related compensation of $7.995 million in Q3 2023, compared to $2.361 million in Q3 2022, a significant increase of 238.5% [226]. - Amortization of acquired intangible assets increased to $5.651 million in Q3 2023 from $1.661 million in Q3 2022, a 239.5% rise [226]. Market Risk - There were no material changes in market risk from the previous annual report, indicating stability in the company's risk profile [230].