Revenue grew 16% to $177 million
GAAP Net Income was $19 million and Adjusted
EBITDA was $76 million
Year to Date Operating Cash Flow of $154
million and Adjusted Free Cash Flow of $127 million
DigitalOcean Holdings, Inc. (NYSE: DOCN), the cloud for startups
and SMBs, today announced results for its third quarter ended
September 30, 2023.
“We are encouraged by the stabilization we saw in our key
revenue growth metrics in Q3, and we continued to both invest in
our platform and drive further margin improvements.” said Yancey
Spruill, CEO of DigitalOcean. “We added several new products and
features for our customers while also generating strong free cash
flow.”
Third Quarter 2023 Financial Highlights:
- Revenue was $177 million, an increase of 16%
year-over-year.
- Annual Run-Rate Revenue (ARR) ended the quarter at $713
million, representing 11% year-over-year growth.
- Gross profit of $107 million or 60% of revenue.
- Net income attributable to common stockholders was $19 million
and net income margin was 11%.
- Adjusted EBITDA was $76 million, up 23% year over year, and
adjusted EBITDA margin was 43%.
- Diluted net income per share was $0.20 and non-GAAP diluted net
income per share was $0.44.
- Cash, cash equivalents, and marketable securities was $384
million as of September 30, 2023.
Third Quarter 2023 Operational Highlights:
- Closed the acquisition of Paperspace, a leading provider of
cloud infrastructure as a service for highly scalable applications
leveraging graphics processing units (GPUs).
- Net Dollar Retention Rate (NDR) was 96%.
- Average Revenue Per Customer (ARPU) was $92.06, an increase of
6% over the third quarter 2022.
- Builders and Scalers, those customers spending more than $50
per month, increased 9% from the third quarter 2022 and their
revenue grew 16% year-over-year.
- Repurchased 3,350,349 shares for $106 million for a
year-to-date total of 13,888,704 shares for $475 million in
2023.
Financial Outlook:
Based on information available as of November 2, 2023, for the
fourth quarter of 2023 we expect:
- Targeting total revenue of $178 million.
- Adjusted EBITDA margin of 36% to 37%.
- Non-GAAP diluted net income per share of $0.36 to $0.37.
- Fully diluted weighted average shares outstanding of
approximately 100 to 101 million shares.
For the full year 2023, we expect:
- Targeting total revenue of $690 million.
- Adjusted EBITDA margin of 38% to 39%.
- Adjusted free cash flow margin in the range of 21% to 22% of
revenue.
- Non-GAAP diluted net income per share of $1.52 to $1.54.
- Fully diluted weighted average shares outstanding of
approximately 102 to 103 million shares.
A reconciliation of non-GAAP guidance measures to corresponding
GAAP measures is not available on a forward-looking basis without
unreasonable effort due to the uncertainty regarding, and the
potential variability of, expenses that may be incurred in the
future. For example, stock-based compensation expense-related
charges are impacted by the timing of employee stock transactions,
the future fair market value of our common stock, and our future
hiring and retention needs, all of which are difficult to predict
and subject to constant change. Accordingly, a reconciliation is
not available without unreasonable effort and we are unable to
assess the probable significance of the unavailable information,
although it is important to note that these factors could be
material to our results computed in accordance with GAAP.
Conference Call Information:
DigitalOcean will host a conference call today, November 2,
2023, at 4:30 p.m. ET to review its results. The conference call
can be accessed by dialing (888) 330-3637 with conference ID
7741047. A live webcast and replay of the conference call can be
accessed from the DigitalOcean investor relations website at
http://investors.digitalocean.com.
Following the completion of the call, a telephonic replay will
be available through November 9, 2023, by dialing (800) 770-2030
with conference ID 7741047.
About DigitalOcean
DigitalOcean simplifies cloud computing so businesses can spend
more time creating software that changes the world. With its
mission-critical infrastructure and fully managed offerings,
DigitalOcean helps developers at startups and small and
medium-sized businesses (SMBs) rapidly build, deploy and scale,
whether creating a digital presence or building digital products.
DigitalOcean combines the power of simplicity, security, community
and customer support so customers can spend less time managing
their infrastructure and more time building innovative applications
that drive business growth. For more information, visit
digitalocean.com.
Forward‑Looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
regarding our performance, including but not limited to statements
in the section titled “Financial Outlook.” The forward-looking
statements contained in this release and the accompanying earnings
call referenced in this release are subject to known and unknown
risks, uncertainties, assumptions, and other factors that may cause
actual results or outcomes to be materially different from any
future results or outcomes expressed or implied by the
forward-looking statements. These risks, uncertainties,
assumptions, and other factors include, but are not limited to: (1)
our recent growth may not be indicative of our future growth; (2)
our history of operating losses; (3) our limited operating history;
(4) our ability to attract and retain customers and/or expand usage
of our platform by such customers; (5) breaches in our security
measures allowing unauthorized access to our platform, our data, or
our customers’ data; (6) our ability to release updates and new
features to our platform and adapt and respond effectively to
rapidly changing technology or customer needs; (7) the competitive
markets in which we participate; (8) the rapidly evolving laws and
industry standards that relate to privacy, data security, liability
for service providers regarding the activities of customers, and
access to the internet; (9) risks associated with successfully
managing our growth; (10) our ability to successfully integrate
acquired businesses, including Cloudways and Paperspace, and
achieve expected synergies and benefits; and (11) general market,
political, economic, and business conditions.
Further information on these and additional risks,
uncertainties, assumptions and other factors that could cause
actual results or outcomes to differ materially from those included
in or contemplated by the forward-looking statements contained in
this release are included under the caption “Risk Factors” and
elsewhere in our Annual Report on Form 10-K/A for the year ended
December 31, 2022, our Quarterly Report on Form 10-Q for the
quarters ended June 30, 2023 and September 30, 2023, and other
filings and reports we make with the SEC from time to time.
We operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time,
and it is not possible for us to predict all risks and
uncertainties that could have an impact on the forward-looking
statements contained in this release. The results, events and
circumstances reflected in the forward-looking statements may not
be achieved or occur. The forward-looking statements made in this
release relate only to events as of the date on which the
statements are made. We assume no obligation to, and do not
currently intend to, update any such forward-looking statements
after the date of this release.
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with generally accepted
accounting principles in the United States, or GAAP, we provide
investors with non-GAAP financial measures including: (i) adjusted
EBITDA and adjusted EBITDA margin; (ii) non-GAAP net income and
non-GAAP diluted net income per share; and (iii) adjusted free cash
flow and adjusted free cash flow margin. These measures are
presented for supplemental informational purposes only, have
limitations as analytical tools and should not be considered in
isolation or as a substitute for financial information presented in
accordance with GAAP. In particular, adjusted free cash flow is not
a substitute for cash provided by operating activities.
Additionally, the utility of adjusted free cash flow as a measure
of our financial performance and liquidity is further limited as it
does not represent the total increase or decrease in our cash
balance for a given period. Our calculations of each of these
measures may differ from the calculations of measures with the same
or similar titles by other companies and therefore comparability
may be limited. Because of these limitations, when evaluating our
performance, you should consider each of these non-GAAP financial
measures alongside other financial performance measures, including
the most directly comparable financial measure calculated in
accordance with GAAP and our other GAAP results. A reconciliation
of each of our non-GAAP financial measures to the most directly
comparable financial measure calculated in accordance with GAAP is
set forth in the tables in the section “Reconciliation of GAAP to
Non-GAAP Data.”
Adjusted EBITDA and Adjusted EBITDA Margin
We define adjusted EBITDA as net income (loss) attributable to
common stockholders, adjusted to exclude depreciation and
amortization, stock-based compensation, interest expense,
acquisition related compensation, acquisition and integration
related costs, income tax benefit (expense), loss on extinguishment
of debt, restructuring and other charges, restructuring related
charges, impairment of long-lived assets and other income. We
define adjusted EBITDA margin as adjusted EBITDA as a percentage of
revenue. We believe that adjusted EBITDA, when taken together with
our GAAP financial results, provides meaningful supplemental
information regarding our operating performance and facilitates
internal comparisons of our historical operating performance on a
more consistent basis by excluding certain items that may not be
indicative of our business, results of operations or outlook. In
particular, we believe that the use of adjusted EBITDA is helpful
to our investors as it is a measure used by management in assessing
the health of our business, determining incentive compensation,
evaluating our operating performance, and for internal planning and
forecasting purposes.
Our calculation of adjusted EBITDA and adjusted EBITDA margin
may differ from the calculations of adjusted EBITDA and adjusted
EBITDA margin by other companies and therefore comparability may be
limited. Because of these limitations, when evaluating our
performance, you should consider adjusted EBITDA and adjusted
EBITDA margin alongside other financial performance measures,
including our net income (loss) attributable to common stockholders
and other GAAP results.
Non-GAAP Net Income and Non-GAAP Diluted Net Income Per
Share
We define non-GAAP net income as net income (loss) attributable
to common stockholders, excluding stock-based compensation,
acquisition related compensation, amortization of acquired
intangibles, acquisition and integration related costs, loss on
extinguishment of debt, impairment of long-lived assets,
restructuring and other charges, restructuring related charges, and
other unusual or non-recurring transactions as they occur. We
define non-GAAP diluted net income per share as non-GAAP net income
divided by the weighted-average diluted shares outstanding, which
includes the potentially dilutive effect of our stock options,
RSUs, PRSUs, and Convertible Notes.
We believe non-GAAP net income per share provides our management
and investors consistency and comparability with our past financial
performance and facilitates period-to-period comparisons of
operations, as this metric generally eliminates the effects of
unusual or non-recurring items from period to period for reasons
unrelated to overall operating performance.
Adjusted Free Cash Flow and Adjusted Free Cash Flow
Margin
Adjusted free cash flow is a non-GAAP financial measure that we
define as Net cash provided by operating activities less purchases
of property and equipment, capitalized internal-use software costs,
purchase of intangible assets and excluding cash paid for
restructuring and other charges, acquisition related compensation,
restructuring related charges, and acquisition and integration
related costs. Adjusted free cash flow margin is calculated as
adjusted free cash flow divided by total revenue.
We believe that adjusted free cash flow and adjusted free cash
flow margin are useful indicators of liquidity that provide
information to management and investors about the amount of cash
generated from our core operations that can be used for strategic
initiatives, including investing in our business and selectively
pursuing acquisitions and strategic investments. We further believe
that historical and future trends in adjusted free cash flow and
adjusted free cash flow margin, even if negative, provide useful
information about the amount of Net cash provided by operating
activities that is available (or not available) to be used for
strategic initiatives. One limitation of adjusted free cash flow
and adjusted free cash flow margin is that they do not reflect our
future contractual commitments. Additionally, adjusted free cash
flow does not represent the total increase or decrease in our cash
balance for a given period.
Key Business Metrics:
We utilize the key metrics set forth below to help us evaluate
our business and growth, identify trends, formulate financial
projections and make strategic decisions.
Customers
We divide our customer population into the following
categories:
- Testers: users that both (i) spend less than $50 per month and
(ii) utilize our platform for three months or less.
- Learners: users that both (i) spend less than or equal to $50
for the month-end period and (ii) have been on our platform for
more than three months.
- Builders: users that spend greater than $50 and less than or
equal to $500 for the month-end period.
- Scalers: users that spend greater than $500 for the month-end
period.
We view Learners, Builders and Scalers as the most appropriate
measure of our customer population, and Testers have therefore been
excluded from the total customer population count.
While we believe the total number of these customers is an
important indicator of the growth of our business and future
revenue opportunity, the trends relating to our Builders and
Scalers is of particular importance to us as these customers
represent a significant majority of our revenue and revenue growth,
and they are representative of the SMB customers that grow on our
platform and use multiple products.
ARPU
We calculate ARPU on a monthly basis as our total revenue for
Learners, Builders and Scalers in that period divided by the number
of total Learner, Builder and Scaler customers determined as of the
last day of that period, excluding aggregate Testers revenue and
total user count from the calculation. For a quarterly or annual
period, ARPU is determined as the weighted average monthly ARPU
over such three or 12-month period.
ARR
We calculate ARR at a point in time by multiplying the latest
monthly period’s revenue by 12. For our ARR calculations, we
include the total revenue from all customers, including Testers,
Learners, Builders and Scalers.
Net Dollar Retention Rate
We calculate net dollar retention rate monthly by starting with
the revenue from the cohort of all customers during the
corresponding month 12 months prior, or the Prior Period Revenue.
We then calculate the revenue from these same customers as of the
current month, or the Current Period Revenue, including any
expansion and net of any contraction or attrition from these
customers over the last 12 months. The calculation also includes
revenue from customers that generated revenue before, but not in,
the corresponding month 12 months prior, but subsequently generated
revenue in the current month and are therefore reflected in the
Current Period Revenue. We include this group of re-engaged
customers in this calculation because our customers frequently use
our platform for projects that stop and start over time. We then
divide the total Current Period Revenue by the total Prior Period
Revenue to arrive at the net dollar retention rate for the relevant
month. For our net dollar retention rate calculations, we include
the total revenue from all customers, including Testers, Learners,
Builders and Scalers. For a quarterly or annual period, the net
dollar retention rate is determined as the average monthly net
dollar retention rates over such three or 12-month period.
DIGITALOCEAN HOLDINGS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
amounts)
(unaudited)
September 30, 2023
December 31, 2022
Current assets:
Cash and cash equivalents
$
79,361
$
140,772
Marketable securities
304,720
723,462
Accounts receivable, less allowance for
credit losses of $5,584 and $6,099, respectively
60,237
53,833
Prepaid expenses and other current
assets
27,141
27,924
Total current assets
471,459
945,991
Property and equipment, net
284,806
273,170
Restricted cash
1,747
1,935
Goodwill
348,322
315,168
Intangible assets, net
145,886
118,928
Operating lease right-of-use assets,
net
166,294
153,701
Deferred tax assets
731
751
Other assets
5,892
5,987
Total assets
$
1,425,137
$
1,815,631
Current liabilities:
Accounts payable
$
14,306
$
21,138
Accrued other expenses
24,779
33,987
Deferred revenue
5,094
5,550
Operating lease liabilities, current
76,122
57,432
Other current liabilities
63,988
47,409
Total current liabilities
184,289
165,516
Deferred tax liabilities
6,640
20,757
Long-term debt
1,475,913
1,470,270
Operating lease liabilities,
non-current
107,230
107,693
Other long-term liabilities
9,838
3,826
Total liabilities
1,783,910
1,768,062
Commitments and Contingencies
Preferred stock ($0.000025 par value per
share; 10,000,000 shares authorized; 0 shares issued and
outstanding as of September 30, 2023 and December 31, 2022)
—
—
Common stock ($0.000025 par value per
share; 750,000,000 shares authorized; 86,194,445 and 96,732,507
issued and outstanding as of September 30, 2023 and December 31,
2022, respectively)
2
2
Additional paid-in capital
—
263,957
Accumulated other comprehensive loss
(1,022
)
(2,048
)
Accumulated deficit
(357,753
)
(214,342
)
Total stockholders’ (deficit) equity
(358,773
)
47,569
Total liabilities and stockholders’
equity
$
1,425,137
$
1,815,631
DIGITALOCEAN HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended
Nine Months
Ended
September 30,
September 30,
2023
2022
2023
2022
Revenue
$
177,062
$
152,115
$
512,010
$
413,324
Cost of revenue
70,329
56,730
209,562
151,746
Gross profit
106,733
95,385
302,448
261,578
Operating expenses:
Research and development
32,627
30,243
109,468
104,440
Sales and marketing
19,015
19,097
53,346
56,360
General and administrative
20,064
38,847
117,861
115,109
Restructuring and other charges
(441
)
—
20,862
—
Total operating expenses
71,265
88,187
301,537
275,909
Income (loss) from operations
35,468
7,198
911
(14,331
)
Other income (expense):
Interest expense
(2,333
)
(2,127
)
(6,634
)
(6,281
)
Loss on extinguishment of debt
—
—
—
(407
)
Interest income and other income, net
3,979
3,274
18,967
6,206
Other income (expense), net
1,646
1,147
12,333
(482
)
Income (loss) before income taxes
37,114
8,345
13,244
(14,813
)
Income tax expense
(17,939
)
(442
)
(9,774
)
(2,611
)
Net income (loss) attributable to common
stockholders
$
19,175
$
7,903
$
3,470
$
(17,424
)
Net income (loss) per share attributable
to common stockholders
Basic
$
0.22
$
0.08
$
0.04
$
(0.17
)
Diluted
$
0.20
$
0.08
$
0.04
$
(0.17
)
Weighted-average shares used to compute
net income (loss) per share attributable to common stockholders
Basic
87,667
96,559
90,769
102,134
Diluted
102,674
104,931
97,747
102,134
DIGITALOCEAN HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September
30,
2023
2022
Operating activities
Net income (loss) attributable to common
stockholders
$
3,470
$
(17,424
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
87,085
73,900
Stock-based compensation
65,589
77,758
Provision for expected credit losses
11,416
12,217
Operating lease right-of-use assets and
liabilities, net
5,783
3,207
Loss on extinguishment of debt
—
407
Net accretion of discounts and
amortization of premiums on investments
(2,262
)
(3,099
)
Non-cash interest expense
5,958
5,898
Loss on impairment of long-lived
assets
1,140
144
Deferred income taxes
561
247
Release of VAT reserve
(819
)
—
Other
484
3,582
Changes in operating assets and
liabilities:
Accounts receivable
(16,777
)
(20,270
)
Prepaid expenses and other current
assets
(7,569
)
(4,938
)
Accounts payable and accrued expenses
(15,870
)
(4,277
)
Deferred revenue
(561
)
(364
)
Other assets and liabilities
16,798
5,330
Net cash provided by operating
activities
154,426
132,318
Investing activities
Capital expenditures - property and
equipment
(67,077
)
(79,679
)
Capital expenditures - internal-use
software development
(4,075
)
(6,593
)
Purchase of intangible assets
—
(4,915
)
Cash paid for acquisition of businesses,
net of cash acquired
(99,340
)
(305,163
)
Cash paid for asset acquisitions
(2,500
)
(5,400
)
Purchase of available-for-sale
securities
(352,313
)
(1,379,277
)
Sales of available-for-sale securities
—
19,992
Maturities of available-for-sale
securities
773,335
558,371
Purchased interest on available-for-sale
securities
(151
)
(1,556
)
Proceeds from interest on
available-for-sale securities
151
1,549
Proceeds from sale of equipment
236
967
Net cash provided by (used in)
investing activities
248,266
(1,201,704
)
Financing activities
Payment of debt issuance costs
—
(1,520
)
Proceeds related to the issuance of common
stock under equity incentive plan
15,358
10,352
Proceeds from the issuance of common stock
under employee stock purchase plan
2,797
5,245
Principal repayments of finance leases
(947
)
—
Employee payroll taxes paid related to net
settlement of equity awards
(15,594
)
(24,618
)
Repurchase and retirement of common
stock
(474,950
)
(600,000
)
Net cash used in financing
activities
(473,336
)
(610,541
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(55
)
(348
)
Decrease in cash, cash equivalents and
restricted cash
(70,699
)
(1,680,275
)
Cash, cash equivalents and restricted cash
- beginning of period
151,807
1,715,425
Cash, cash equivalents and restricted
cash - end of period
$
81,108
$
35,150
DIGITALOCEAN HOLDINGS,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
(unaudited)
Adjusted EBITDA and Adjusted EBITDA
Margin
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In
thousands)
2023
2022
2023
2022
GAAP Net income (loss) attributable to
common stockholders
$
19,175
$
7,903
$
3,470
$
(17,424
)
Adjustments:
Depreciation and amortization
30,554
25,626
87,085
73,900
Stock-based compensation(1)
28,731
23,594
92,754
77,758
Interest expense
2,333
2,127
6,634
6,281
Acquisition related compensation
7,995
2,361
22,576
2,361
Acquisition and integration related
costs
2,366
2,700
5,113
2,868
Income tax expense
17,939
442
9,774
2,611
Loss on extinguishment of debt
—
—
—
407
Restructuring and other charges
(441
)
—
20,862
—
Restructuring related charges(2)
(29,484
)
—
(26,757
)
—
Impairment of long-lived assets
587
24
1,140
1,615
Other income, net(3)
(3,979
)
(3,274
)
(18,967
)
(6,206
)
Adjusted EBITDA
$
75,776
$
61,503
$
203,684
$
144,171
As a percentage of revenue:
Net income (loss) margin
11
%
5
%
1
%
(4
)%
Adjusted EBITDA margin
43
%
40
%
40
%
35
%
___________________
(1)
For the three and nine months ended
September 30, 2023, non-GAAP stock-based compensation excludes the
$31.3 million reversal related to the forfeited MRSU award as it is
presented in Restructuring related charges.
(2)
Primarily consists of salary continuation
charges, executive reorganization charges including CEO search firm
fees and other legal and professional service costs, and the $31.3
million reversal of stock-based compensation related to the
forfeited MRSU award.
(3)
Other income, net primarily consists of
interest and accretion income from our marketable securities.
DIGITALOCEAN HOLDINGS,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
(unaudited)
Non-GAAP Net Income and Non-GAAP
Diluted Net Income Per Share
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In thousands,
except per share amounts)
2023
2022
2023
2022
GAAP Net income (loss) attributable to
common stockholders
$
19,175
$
7,903
$
3,470
$
(17,424
)
Stock-based compensation(1)
28,731
23,594
92,754
77,758
Acquisition related compensation
7,995
2,361
22,576
2,361
Amortization of acquired intangible
assets
5,651
1,661
13,231
2,687
Acquisition and integration related
costs
2,366
2,700
5,113
2,868
Loss on extinguishment of debt
—
—
—
407
Impairment of long-lived assets
587
24
1,140
1,615
Restructuring and other charges
(441
)
—
20,862
—
Restructuring related charges(2)
(29,484
)
—
(26,757
)
—
Non-GAAP income tax adjustment(3)
9,011
710
(14,393
)
992
Non-GAAP Net income
$
43,591
$
38,953
$
117,996
$
71,264
GAAP Net income (loss) per share
attributable to common stockholders, diluted
$
0.20
$
0.08
$
0.04
$
(0.17
)
Stock-based compensation(1)
0.27
0.21
0.87
0.69
Acquisition related compensation
0.07
0.02
0.21
0.02
Amortization of acquired intangible
assets
0.05
0.01
0.12
0.02
Acquisition and integration related
costs
0.02
0.02
0.05
0.04
Impairment of long-lived assets
—
—
0.01
0.01
Restructuring and other charges
—
—
0.20
—
Restructuring related charges(2)
(0.28
)
—
(0.25
)
—
Non-cash charges related to convertible
notes(4)
0.02
0.01
0.04
0.04
Non-GAAP income tax adjustment(3)
0.09
0.01
(0.13
)
0.01
Non-GAAP Net income per share, diluted
$
0.44
$
0.36
$
1.16
$
0.66
GAAP weighted-average shares used to
compute net income (loss) per share, diluted
102,674
104,931
97,747
102,134
Weighted-average dilutive effect of
potentially dilutive securities(5)
—
8,403
8,403
12,375
Non-GAAP weighted-average shares used to
compute net income per share, diluted
102,674
113,334
106,150
114,509
___________________
(1)
For the three and nine months ended
September 30, 2023, non-GAAP stock-based compensation excludes the
$31.3 million reversal related to the forfeited MRSU award as it is
presented in Restructuring related charges.
(2)
Primarily consists of salary continuation
charges, executive reorganization charges including CEO search firm
fees and other legal and professional service costs, and the $31.3
million reversal of stock-based compensation related to the
forfeited MRSU award.
(3)
Previously, we calculated the income tax
effects of non-GAAP adjustments based on the applicable statutory
tax rate for the relevant jurisdiction, except for those items
which were non-taxable or subject to valuation allowances for which
the tax expense (benefit) was calculated at 0%. Prior to fiscal
year 2023, U.S. income tax effects of non-GAAP adjustments were
subject to a valuation allowance and, therefore, were taxed at 0%.
Beginning January 1, 2023, the Company projects to be a U.S.
taxpayer and will use a long term fixed forecasted rate of 17% on
non-GAAP pre-tax income for 2023.
(4)
Consists of non-cash interest expense for
amortization of deferred financing fees related to the Convertible
Notes.
(5)
Consists of the potentially dilutive
effects of our stock options, RSUs, PRSUs, and Convertible Notes.
In periods with a GAAP net loss position, these are excluded from
GAAP weighted-average shares.
Adjusted Free Cash Flow and Adjusted
Free Cash Flow Margin
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In
thousands)
2023
2022
2023
2022
GAAP Net cash provided by operating
activities
$
54,050
$
55,845
$
154,426
$
132,318
Adjustments:
Capital expenditures - property and
equipment
(20,229
)
(30,989
)
(67,077
)
(79,679
)
Capital expenditures - internal-use
software development
(1,180
)
(2,263
)
(4,075
)
(6,593
)
Purchase of intangible assets
—
—
—
(4,915
)
Restructuring and other charges
848
—
16,774
—
Acquisition related compensation
16,851
—
16,851
—
Restructuring related charges(1)
1,231
—
3,958
—
Acquisition and integration related
costs
4,506
1,021
6,067
1,332
Adjusted free cash flow
$
56,077
$
23,614
$
126,924
$
42,463
As a percentage of revenue:
GAAP Net cash provided by operating
activities
31
%
37
%
30
%
32
%
Adjusted free cash flow margin
32
%
16
%
25
%
10
%
___________________
(1)
Primarily consists of salary continuation
charges and executive reorganization charges, including CEO search
firm fees and other legal and professional service costs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101187716/en/
Investor Contact Rob Bradley
investors@digitalocean.com
Media Contact Spencer Anopol press@digitalocean.com
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