- DigitalOcean announced strong revenue growth with an increase in free cash flow margin for the fourth quarter and the full year.
- The company also announced a restructuring plan to reduce the company’s total workforce by approximately 11%.
- DigitalOcean will also repurchase up to $500 million of stock during 2023, committed to purchasing at least $230 million.
Cloud provider for startups and SMBs, DigitalOcean announced the company’s financial results for its fourth quarter and fiscal year ended December 31, 2022. At the end of the fourth quarter, the company’s revenue increased by 36% year-over-year. For the fiscal year, revenue was $576.3 million, an increase of 34% year-over-year.
Restructuring plan
DigitalOcean’s Board of Directors also approved a restructuring plan to adjust its cost structure on January 27, 2023. The plan is including the elimination of positions and shifting of additional positions across a broader geographical footprint within the next months. As a result of the plan, the company is reducing its workforce by approximately 11%.
Fourth quarter 2022 financial highlights
- Revenue was $163.0 million, an increase of 36% year-over-year.
- Annual Run-Rate Revenue (ARR) ended the quarter at $658.8 million, representing 34% year-over-year growth.
- Gross profit of $99.6 million or 61% of revenue, a decrease of 200 basis points year-over-year, and adjusted gross profit of $125.1 million or 77% of revenue.
- Loss from operations was $15.1 million and operating margin was (9)%.
- Non-GAAP income from operations was $26.3 million and non-GAAP operating margin was 16%.
- Net loss per share was $(0.10) and non-GAAP diluted net income per share was $0.28.
- Cash, cash equivalents, and marketable securities was $864 million as of December 31, 2022.
Fiscal year 2022 financial highlights
- Revenue was $576.3 million, an increase of 34% year-over-year.
- Gross profit of $364.4 million or 63% of revenue, an increase of 300 basis points year-over-year.
- Loss from operations was $26.2 million and operating margin was (5)%.
- Non-GAAP income from operations was $102.4 million and non-GAAP operating margin was 18%.
- Net loss per share was $(0.24) and non-GAAP diluted net income per share was $0.94.
- Net cash from operating activities was $195.2 million, an increase from $133.1 million in the prior year.
- Free cash flow was $77.8 million as compared to $24.5 million in fiscal year 2021.
The Board of Directors of the company also approved an expansion of the Company’s share repurchase program to maximize value for investors. As a result, the company will repurchase up to $500 million of stock during 2023, following the repurchase of $600 million of stock in 2022. DigitalOcean is committed to purchasing at least $230 million in 2023. It can go up to $500 million during 2023. The company also announced its financial outlook for the first quarter of 2023 and the full year.
Based on information available as of February 16, 2023, for the first quarter of 2023, the company expects:
- Total revenue of $163 to $165 million.
- Adjusted EBITDA margin of 31% to 32%.
- Non-GAAP diluted net income per share of $0.28 to $0.29.
- Fully diluted weighted average shares outstanding of approximately 113 to 115 million shares.
For the full year 2023, the company expects:
- Total revenue of $700 to $720 million.
- Adjusted EBITDA margin of 38% to 39%.
- Free cash flow in the range of 21% to 22% of revenue.
- Non-GAAP diluted net income per share of $1.65 to $1.69.
- Fully diluted weighted average shares outstanding of approximately 114 to 116 million shares.
Yancey Spruill, CEO of DigitalOcean said,
« Despite multiple headwinds in 2022, we delivered strong revenue growth, with significant increases in free cash flow margin. We broadened our product portfolio and addressable market with the Cloudways acquisition. For 2023, our focus is to deliver on our growth initiatives, utilize the restructuring to accelerate free cash flow margins to 20% or better and increase our share buyback program by up to $500 million. »