Revenue Grew 35% to $103.8 million and ARR
Increased to $426 million, Up 36% year-over-year
Net Dollar Retention Rate Increased to 113% and
Average Revenue Per Customer Grew 25% year-over-year
DigitalOcean Holdings, Inc. (NYSE: DOCN), the cloud for
developers, startups and SMBs, today announced results for its
second quarter ended June 30, 2021.
“We had an outstanding second quarter with strong revenue growth
acceleration and continued improvement in our capital efficiency,”
said Yancey Spruill, CEO of DigitalOcean. “We are excited about the
progress we have made in leveraging simplicity across our business
to better serve our customers and believe we have a path to a
durable 30%+ growth rate for 2021 and next year. Adding to the
strong quarter, we introduced Managed MongoDB which will continue
to drive the revenue growth from our managed service
offerings.”
Second Quarter 2021 Financial Highlights:
- Revenue was $103.8 million, an increase of 35%
year-over-year.
- Annual Run-Rate Revenue (ARR) ended the quarter at $426
million, an increase of 36% year-over-year.
- GAAP Gross Profit of $60.7 million or 58% of revenue and
adjusted Gross Profit of $81.1 million or 78% of revenue.
- Loss from operations was $2.6 million and operating margin was
(3)% as compared to income from operations of $1.8 million and
operating margin of 2% in the prior year period.
- Adjusted EBITDA was $31.4 million and adjusted EBITDA margin
was 30% of revenue as compared to adjusted EBITDA of $23.9 million
and adjusted EBITDA margin of 31% in the prior year period.
- Capital expenditures were $26.0 million or 25% of revenue as
compared to $30.8 million or 40% of revenue in the prior year
period.
- Cash, cash equivalents, and restricted cash were $579.4 million
with zero debt as of June 30, 2021.
Second Quarter 2021 Operational Highlights:
- Total customers of approximately 602K at the end of the
quarter, up 9% as compared to the second quarter 2020.
- Net Dollar Retention Rate (NDR) was 113%, an increase of 1,100
basis points from the second quarter 2020.
- Average Revenue Per Customer (ARPU) in the quarter was $58.07,
an increase of 25% over the second quarter 2020.
Launch of Managed MongoDB:
In late Q2, at DigitalOcean’s virtual conference for developers
and startups, deploy, the company announced Managed MongoDB, a new,
fully-managed database as a service (DBaaS) offering which helps
developers of all skill levels easily spin up MongoDB clusters on
DigitalOcean.
Financial Outlook:
Based on information available as of August 5, 2021, for the
third quarter of 2021 we expect:
- Total revenue of $106 to $109 million.
- Adjusted EBITDA margin of 30% to 31%.
- Fully diluted weighted average shares outstanding of 119 to 121
million shares.
For the full year 2021, we expect:
- Total revenue of $419 to $423 million.
- Adjusted EBITDA margin of 30% to 31%.
- Fully diluted weighted average shares outstanding of 115 to 117
million shares.
- Capital expenditures as a percentage of revenue of 25% to
26%.
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. Stock-based compensation expense-related charges, including
employer payroll tax-related items on employee stock transactions,
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, reconciliation is not
available without unreasonable effort, 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, August 5, 2021,
at 8:00 a.m. ET to review its results. The call can be accessed by
dialing (833) 282-0024 from the United States or (236) 714-3495
internationally with conference ID 6675755. 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 11:59 PM ET on August 12, 2021 at (800)
585-8367 from the United States or (416) 621-4642 internationally
with conference ID 6675755.
About DigitalOcean
DigitalOcean simplifies cloud computing so developers and
businesses can spend more time building software that changes the
world. With its mission-critical infrastructure and fully managed
offerings, DigitalOcean helps developers, startups and small and
medium-sized businesses (SMBs) rapidly build, deploy and scale
applications to accelerate innovation and increase productivity and
agility. DigitalOcean combines the power of simplicity, community,
open source and customer support so customers can spend less time
managing their infrastructure and more time building innovative
applications that drive business growth.
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; and (10) 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 Form 10-Q for the first quarter ended March 31,
2021 filed with the SEC on May 7, 2021 and the Form 10-Q that will
be filed for the second quarter ended June 30, 2021 and other
filings and reports we make with the Securities and Exchange
Commission 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 prepared and
presented in accordance with generally accepted accounting
principles in the United States, or GAAP, we use certain non-GAAP
performance financial measures, as described below, to evaluate our
ongoing operations and for internal planning and forecasting
purposes. We believe the following non-GAAP measures are useful in
evaluating our operating performance. We are presenting these
non-GAAP financial measures because we believe, when taken
collectively, they may be helpful to investors because they provide
consistency and comparability with past financial performance.
However, non-GAAP financial measures have limitations in their
usefulness to investors because they have no standardized meaning
prescribed by GAAP and are not prepared under any comprehensive set
of accounting rules or principles. In addition, other companies,
including companies in our industry, may calculate similarly titled
non-GAAP financial measures differently or may use other measures
to evaluate their performance, all of which could reduce the
usefulness of our non-GAAP financial measures as tools for
comparison. As a result, our non-GAAP financial measures are
presented for supplemental informational purposes only and should
not be considered in isolation or as a substitute for our
consolidated financial statements presented in accordance with
GAAP. Please see the tables included at the end of this release for
the reconciliation of GAAP to non-GAAP results.
Adjusted Gross Profit and Adjusted Gross Margin
We believe adjusted gross profit and adjusted gross margin, when
taken together with our GAAP financial results, provides a
meaningful assessment of our performance, and is useful for the
preparation of our annual operating budget and quarterly
forecasts.
We define adjusted gross profit as gross profit exclusive of
stock-based compensation, amortization of capitalized internal-use
software development costs and depreciation of our data center
equipment included within Cost of revenue. We exclude stock-based
compensation, which is a non-cash item, because we do not consider
it indicative of our core operating performance. We exclude
depreciation and amortization, which primarily relates to our
investments in our data center servers that are long lived assets
with an economic life of five years, because it may not reflect our
current or future cash spending levels to support our business.
While we intend to spend a significant amount on capital
expenditures on an absolute basis in the coming years, our capital
expenditures as a percentage of revenue has declined significantly
and will continue to decline. We define adjusted gross margin as a
percentage of adjusted gross profit to revenue.
Adjusted EBITDA and Adjusted EBITDA Margin
We define adjusted EBITDA as net loss attributable to common
stockholders, adjusted to exclude depreciation and amortization,
stock-based compensation, interest expense, income tax expense,
loss on extinguishment of debt, restructuring and severance
expense, asset impairment, revaluation of warrants and other
charges. 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.
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 define a customer at the end of any period as a person or
entity who has incurred usage in the period and, as a result, has
generated an invoice of greater than $0 for that period. We treat
each customer that generates an invoice as a unique customer, and a
single organization with multiple divisions, segments or
subsidiaries may be counted as multiple customers if they
separately signed up on our platform.
ARPU
We calculate ARPU on a monthly basis as our total revenue in
that period divided by the number of customers determined as of the
last day of that period. 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.
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 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.
Capital Expenditures as a Percentage of Revenue
We calculate capital expenditures as a percentage of revenue by
dividing total capital expenditures during the period, including
purchases of intangible assets, seller financed equipment purchases
and acquisition of property and equipment from capital leases, by
revenue.
DIGITALOCEAN HOLDINGS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
amounts)
(unaudited)
June 30, 2021
December 31, 2020
Cash and cash equivalents
$
577,218
$
100,311
Accounts receivable, less allowance for
doubtful accounts of $3,086 and $3,104, respectively
33,919
28,098
Prepaid expenses and other current
assets
17,980
19,544
Total current assets
629,117
147,953
Property and equipment, net
243,050
238,956
Restricted cash
2,226
2,226
Goodwill
2,674
2,674
Intangible assets
34,497
34,649
Deferred tax assets
84
82
Other assets
3,782
3,712
Total assets
$
915,430
$
430,252
Accounts payable
16,187
12,433
Accrued other expenses
21,976
27,025
Deferred revenue
5,030
4,873
Current portion of long-term debt
—
17,468
Other current liabilities
12,194
22,986
Total current liabilities
$
55,387
$
84,785
Deferred tax liabilities
205
211
Long-term debt
—
242,215
Other long-term liabilities
1,754
2,061
Total liabilities
$
57,346
$
329,272
Commitments and Contingencies
Convertible preferred stock
$
—
$
173,074
Preferred stock ($0.000025 par value per
share; 10,000,000 and 0 shares authorized; 0 shares issued and
outstanding as of June 30, 2021 and December 31, 2020,
respectively)
$
—
$
—
Common stock ($0.000025 par value;
750,000,000 and 111,400,000 shares authorized; 109,213,693 and
45,299,339 issued; and 107,245,465 and 43,331,111 outstanding as of
June 30, 2021 and December 31, 2020, respectively)
2
1
Treasury stock, at cost (1,968,228 shares
at June 30, 2021 and December 31, 2020)
(4,598
)
(4,598
)
Additional paid-in capital
1,035,514
99,783
Accumulated other comprehensive loss
(273
)
(245
)
Accumulated deficit
(172,561
)
(167,035
)
Total stockholders’ equity (deficit)
$
858,084
$
(72,094
)
Total liabilities, convertible preferred
stock and stockholders’ equity (deficit)
$
915,430
$
430,252
DIGITALOCEAN HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Revenue
$
103,810
$
76,911
$
197,471
$
149,703
Cost of revenue
43,145
35,205
82,689
69,888
Gross profit
60,665
41,706
114,782
79,815
Operating expenses:
Research and development
27,121
15,130
49,523
34,607
Sales and marketing
11,812
6,957
22,233
16,411
General and administrative
24,362
17,841
42,402
39,506
Total operating expenses
63,295
39,928
114,158
90,524
(Loss) income from operations
(2,630
)
1,778
624
(10,709
)
Other (income) expense:
Interest expense
233
3,779
2,489
7,295
Loss on extinguishment of debt
—
—
3,435
259
Other (income) expense, net
(203
)
318
(297
)
241
Other (income) expense
30
4,097
5,627
7,795
Loss before income taxes
(2,660
)
(2,319
)
(5,003
)
(18,504
)
Income tax (benefit) expense
(473
)
251
523
999
Net loss attributable to common
stockholders
$
(2,187
)
$
(2,570
)
$
(5,526
)
$
(19,503
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.02
)
$
(0.06
)
$
(0.07
)
$
(0.48
)
Weighted-average shares used to compute
net loss per share, basic and diluted
106,765
41,420
78,257
40,683
DIGITALOCEAN HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June
30,
2021
2020
Operating activities
Net loss
$
(5,526
)
$
(19,503
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
42,541
35,722
Loss on impairment
—
686
Stock-based compensation
18,825
12,139
Non-cash interest expense
296
909
Loss on extinguishment of debt
3,435
259
Revaluation of warrants
(556
)
287
Bad debt expense
3,467
6,891
Other
(41
)
(130
)
Changes in operating assets and
liabilities:
Accounts receivable
(9,287
)
(9,295
)
Prepaid expenses and other current
assets
1,563
(8,129
)
Accounts payable and accrued expenses
3,767
(2,021
)
Deferred revenue
157
(126
)
Other assets and liabilities
1,556
(794
)
Net cash provided by operating
activities
60,197
16,895
Investing activities
Capital expenditures - property and
equipment
(47,036
)
(48,045
)
Capital expenditures - internal-use
software development
(2,713
)
(7,350
)
Purchase of intangible assets
—
(3,630
)
Proceeds from sale of equipment
81
—
Net cash used in investing
activities
(49,668
)
(59,025
)
Financing activities
Repayment of capital leases
—
(463
)
Repayment of notes payable
(33,214
)
(5,520
)
Proceeds from third-party secured
financings
—
7,795
Repayment of term loan
(166,813
)
(71,375
)
Proceeds from issuance of term loan
—
170,000
Repayment of borrowings under revolving
credit facility
(63,200
)
(84,500
)
Proceeds from borrowings under revolving
credit facility
—
63,200
Payment of debt issuance costs
—
(3,274
)
Proceeds related to the issuance of common
stock under equity incentive plan, net of taxes withheld
6,480
9,393
Proceeds from the issuance of convertible
preferred stock, net of issuance costs
—
49,810
Payment of initial public offering
costs
—
(184
)
Proceeds from initial public offering, net
of underwriting discounts and commissions and other offering
costs
723,125
—
Net cash provided by financing
activities
466,378
134,882
Increase in cash, cash equivalents and
restricted cash
476,907
92,752
Cash, cash equivalents and restricted cash
- beginning of period
102,537
35,886
Cash, cash equivalents and restricted
cash - end of period
$
579,444
$
128,638
DIGITALOCEAN HOLDINGS,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
(in thousands)
(unaudited)
Adjusted Gross Profit and Adjusted
Gross Margin
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Gross profit
$
60,665
$
41,706
$
114,782
$
79,815
Adjustments:
Depreciation and amortization
20,042
16,864
39,266
32,912
Stock-based compensation
405
68
601
92
Adjusted gross profit
$
81,112
$
58,638
$
154,649
$
112,819
Gross margin
58
%
54
%
58
%
53
%
Adjusted gross margin
78
%
76
%
78
%
75
%
Adjusted EBITDA and Adjusted EBITDA
Margin
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Net loss attributable to common
stockholders
$
(2,187
)
$
(2,570
)
$
(5,526
)
$
(19,503
)
Adjustments:
Depreciation and amortization
21,589
18,328
42,541
35,722
Stock-based compensation(1)
12,201
2,757
18,825
12,139
Interest expense
233
3,779
2,489
7,295
Income tax (benefit) expense
(473
)
251
523
999
Loss on extinguishment of debt
—
—
3,435
259
Restructuring and severance(2)
—
630
—
3,922
Asset impairment(3)
—
148
—
686
Revaluation of warrants
—
284
(556
)
287
Other(4)
—
335
315
578
Adjusted EBITDA
$
31,363
$
23,942
$
62,046
$
42,384
Revenue
$
103,810
$
76,911
$
197,471
$
149,703
Adjusted EBITDA margin
30
%
31
%
31
%
28
%
_________________
(1)
Consists of stock-based
compensation for the three and six months ended June 30, 2020 and
includes compensation of $0.5 million and $8.1 million,
respectively, related to secondary sales of common stock by certain
current and former employees. There were no such expenses recorded
for the three and six months ended June 30, 2021.
(2)
Consists primarily of expenses
related to changes in our senior leadership, sales and
infrastructure teams.
(3)
Consists of internal-use software
impairment charges related to software that is no longer being
used.
(4)
Consists primarily of third-party
consulting costs to enhance our finance function.
DIGITALOCEAN HOLDINGS, INC.
SUPPLEMENTAL FINANCIAL
INFORMATION
(in thousands)
(unaudited)
Stock-Based Compensation
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Cost of revenue
$
405
$
68
$
601
$
92
Research and development
5,059
812
7,695
3,033
Sales and marketing
1,902
453
3,039
679
General and administrative
4,835
1,424
7,490
8,335
Total
$
12,201
$
2,757
$
18,825
$
12,139
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210805005208/en/
Investor Contact Rob Bradley
investors@digitalocean.com
Media Contact Shannon Paulk press@digitalocean.com
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