DigitalOcean Holdings Inc (DOCN) Q3 2023 Earnings: Revenue Up 16% YoY, Net Income at $19 Million
Revenue for Q3 2023 increased by 16% year-over-year to $177 million
GAAP Net Income was reported at $19 million
Adjusted EBITDA stood at $76 million, marking a 23% increase YoY
Year to date operating cash flow was $154 million
On November 2, 2023, DigitalOcean Holdings Inc (NYSE:DOCN) released its third-quarter earnings report for the period ending September 30, 2023. The company reported a 16% year-over-year increase in revenue, reaching $177 million. The GAAP Net Income for the quarter was $19 million, and the Adjusted EBITDA was $76 million, up 23% year over year.
Financial Highlights
DOCN's Q3 2023 financial highlights include a 16% YoY increase in revenue to $177 million and an 11% YoY growth in Annual Run-Rate Revenue (ARR) to $713 million. The company reported a gross profit of $107 million, representing 60% of the revenue. Net income attributable to common stockholders was $19 million, and the net income margin was 11%. Adjusted EBITDA was $76 million, up 23% YoY, and the adjusted EBITDA margin was 43%. The company had cash, cash equivalents, and marketable securities amounting to $384 million as of September 30, 2023.
Operational Highlights
In Q3 2023, DigitalOcean completed the acquisition of Paperspace, a leading provider of cloud infrastructure as a service for highly scalable applications leveraging graphics processing units (GPUs). The company's Net Dollar Retention Rate (NDR) was 96%, and the Average Revenue Per Customer (ARPU) was $92.06, a 6% increase over Q3 2022. The number of Builders and Scalers, customers spending more than $50 per month, increased by 9% from Q3 2022, and their revenue grew by 16% YoY. The company also repurchased 3,350,349 shares for $106 million, bringing the year-to-date total to 13,888,704 shares for $475 million in 2023.
Financial Outlook
For Q4 2023, DOCN is targeting total revenue of $178 million, an Adjusted EBITDA margin of 36% to 37%, and a non-GAAP diluted net income per share of $0.36 to $0.37. For the full year 2023, the company expects total revenue of $690 million, an Adjusted EBITDA margin of 38% to 39%, an adjusted free cash flow margin in the range of 21% to 22% of revenue, and a non-GAAP diluted net income per share of $1.52 to $1.54.
CEO's Commentary
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."
Balance Sheet Summary
As of September 30, 2023, DigitalOcean had total assets of $1.43 billion, including $79.36 million in cash and cash equivalents and $304.72 million in marketable securities. The total liabilities stood at $1.78 billion, including $1.48 billion in long-term debt. The total stockholders' deficit was $358.77 million.
Income Statement Summary
For the nine months ended September 30, 2023, DigitalOcean reported total revenue of $512.01 million. The net income attributable to common stockholders was $3.47 million. The company's operating expenses totaled $301.54 million, resulting in an income from operations of $911,000.
Cash Flow Statement Summary
For the nine months ended September 30, 2023, the net cash provided by operating activities was $154.43 million. The company's capital expenditures totaled $87.09 million, resulting in a free cash flow of $67.34 million.
Explore the complete 8-K earnings release (here) from DigitalOcean Holdings Inc for further details.
This article first appeared on GuruFocus.
