Digital Ocean Q3 2021 Earnings Report News. Digital Ocean Stock reported their Q3 2021 Earnings to report pre-market on the 4th November 2021. This has been a staple in the Prophet Portfolio so we will review our original thesis on digital oceans and review the latest news!
DOCN Q3 2021 Earnings Report Latest News
The group started the earnings call by increasing their outlook for the balance of 2021 and reiterating confidence for 30% or better growth in 2022.
Headline results from the DOCN Q3 2021 results were as follows:
- Revenue up 37% on the prior comparable period to US$111million
- Scaling Annual Recurring revenue up 36% to $455M.
- Customer growth up 7% to 598k
- Strong ARPU Increase up 28% to $61.97 per user.
The take-away from the DOCN Q3 2021 earnings call is in line with our original comments in the first article, where we believe customers on the platform will continue to spend more and increase APRU per user as the customers business expands and the customer includes additional products in their subscription.
The group also mentioned that there are a number of large customers on the platform who are increasing ARPU at rates of over 50% as many of them buy multiple services on the platform and churn at a much lower rate than some of the smaller customers.
Digital Ocean Q3 2021 Earnings Report News – Financials
In the quarter Digital Ocean increased their revenue guidance for the full year to $427million. This is an approximate top-line growth rate of ~26% over the year, ADJ EBITDA guidance also increased around 27% over the year.
This represents a revenue CAGR of over 20% and an earnings CAGR of over 35%.
Digital Ocean reiterated its focus on increasing its cash flow position and has increased its full-year revenue guidance. The group generated over $40million in cash flows for the quarter this is 36% of revenue and up over 70% year over year.
Full-year revenue guidance increased from $419-$423 up to a midpoint of guidance now being higher at $427million.
One of the largest key indicators we look for in the digital ocean is the monthly ARPU. This metric in our mind is a measure of the quality of service and increasing spending on the platform by the same users.
DOCN Q3 2021 – Stock Price
On the back of the DOCN Q3 2021 Earnings Report, the stock was up over 11.4% for the day!
When we first bought into Digital Ocean stock back in August 2021 the stock was trading at around $53.17 per stock. Prophet’s Initial investment in DOCN stock is now up well over 97% over the past three months!
Over the past year, Digital Ocean Stock is now up over 147% to trade at today’s price of $105 per share and a market capitalisation of 11.31billion.
DOCN Q3 2021 – Prophets Take
The result from DOCN was extremely positive with Prophet’s original thesis remaining intact. The group continue to reiterate they are playing in a $50billion market which is increasing at over 27% year over year.
We really like Digital Ocean Shares at the current prices, in fact, we use DOCN to host our own website. It was the easiest, cheapest and most user-friendly option to set up. We really like the fact that as our business grows and our compute requires additional performance, scaling the servers is very straightforward.
As customers grow their own businesses and start repeating business with DOCN we should also start to see revenue and margin expansion. DOCN offers a multitude of tools available to online businesses to expand their online offerings and hence users will find it hard to find a ‘better’ offering at lower prices.
Digital Ocean stock has grown revenue year on year since 2018, also growing EBITDA and expanding GP along the way. As Google, Microsoft and Amazon continue generating significant growth through their own cloud platforms we should see the whole sector lift in value.
We are bullish on Digital Ocean Stock at the current prices. However, a key risk in our opinion is the high concentration of VP/PE firms on the ownership table. Depending on the objectives of the VE firm this may cause selling pressure on the share price as it rises, however, this is impossible to tell their motives.
Our original thesis is still valid and the increasing ARPU and further expansion of the product suite are extremely positive.