DigitalOcean Holdings, Inc.

that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I will now turn the conference over to Mr. Rob Bradley, Vice President of Investor Relations. You may begin.

Thank you, Abby. Good afternoon, and thank you for joining us today to review DigitalOcean's fourth quarter and full year 2023 financial results. With me on the call today are Patty Srinivasan, our newly joined Chief Executive Officer, and Matt Steinfort, our Chief Financial Officer. After prepared remarks, we will open the call up to a question and answer session. Before we begin, let me remind you that certain statements made on this call today may be considered forward-looking statements, which reflect management's best judgment based on currently available information. I refer specifically to discussion of our expectations and beliefs regarding our financial outlook for the first quarter and full year 2024. Our actual results may differ materially from those projected in these forward-looking statements. I direct your attention to the risk factors contained in the company's annual report on Form 10-K, filed with the SEC, and those referenced in today's press release that is posted to our website. DigitalOcean expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements made today. Additionally, non-GAAP financial measures will be discussed on this conference call. Reconciliations to the most directly comparable GAAP financial measures are also available in today's press release, as well as in an updated investor presentation that outlines the financial discussion in today's call. A webcast of today's call is also available on our website in the IR section. With that, I'd like to turn the call over to Patty.

Thank you, Rob. Good afternoon, and thank you for joining us today. I'm very excited to be here with you on my first call as the CEO of DigitalOcean. As today is my first opportunity to talk to you, I would like to start by sharing a bit about my background. why I was drawn to the DigitalOcean opportunity before providing an overview of our priorities for 2024 and highlighting the focus I will bring to the company. To start, I'm thrilled to be here at DigitalOcean. Having worked my entire career in technology companies and having a professional arc that spans engineering, product management, and C-level positions, I have a deep appreciation for the opportunity that DigitalOcean has in front of us and strongly believe that I'm well positioned, along with the DigitalOcean leadership team, to help the company reach its full potential. I started my career as a developer and spent my formative years of my career at Microsoft, where I worked on various products, including Windows Server, a variety of developer-centric distributed technologies, and finally, the Microsoft Office Server team. As I progressed in the leadership ranks at Microsoft, I had hands-on experience building platforms aimed at developers, working with independent software vendors, and managing businesses with tens of millions of users. From Microsoft, I moved to Oracle to help launch its Asia R&D Center focused on innovating products for the unique needs of that market. As an entrepreneur at Oracle, I picked up experience identifying market opportunities and developing platforms like mobile embedded databases with extremely small footprints and near real-time performance in a very low bandwidth network environment to meet those unique emerging market requirements. After Oracle, I co-founded Opstera, an application monitoring and managed cloud services platform. This experience, again, reinforced the importance of having a deep understanding of developer needs and using that to drive innovation as we worked to keep up with the evolving needs of nearly 500 early adopter cloud companies, including most of Microsoft's top Azure customers at that time. Following the successful sale of Opstera, I spent the majority of the last decade at GoTo, formerly known as LogMeIn, a SaaS pioneer, delivering cloud-based software applications with a global footprint with a stint of Amazon in between. At LogMeIn, I experienced 10x growth as we took the company from a little over $100 million at the time I joined to over $1.3 billion in revenue through both organic and inorganic expansion. As part of this journey, my team built an Internet of Things platform which was later acquired by Google to form the foundation of its IoT strategy. After leaving for Amazon to be the general manager of the data and machine learning platform that powers Alexa, I returned to GoTo as its chief product and technology officer before ultimately taking over as CEO. At LogMeIn and GoTo, I picked up what it takes to build a product-led growth motion and augmented with a high velocity sales and customer success machine to attract, convert, and expand hundreds of thousands of growing digital businesses at scale. All these roles and experiences have shaped my perspective and have nurtured my passion to understand customer needs, especially those of developers, innovating on their behalf by anticipating their needs, running modern infrastructure platforms to support global scale products, building efficient customer acquisition and expansion engines, and delivering value for all stakeholders, customers, employees, and shareholders. I'm really looking forward to bringing these experiences, focus, and operating discipline to DigitalOcean. Switching gears now, there are a few compelling reasons that drove me to join DigitalOcean, but three stand out that I would like to share with all of you today. It's the market that DigitalOcean is focused on, the cloud computing market, and especially the one that serves developers, is one of the largest and fastest-growing markets in the history of technology. This market, consisting of infrastructure as a service and platform as a service, is a $114 billion opportunity, which IDC is forecasting to grow in excess of 23% through 2027. This growth should continue well beyond the timeframe as the market benefits from ongoing migrations to the cloud, acceleration of new business formation that cloud computing enables, and the still very early impact of AI and machine learning and the new generation of applications that these capabilities are already unlocking in a variety of different industries. Second reason is the strong position that DigitalOcean has in this market. DO is the cloud leader focused on developers, startups, and growing digital businesses. DigitalOcean has more than 640,000 customers, a global footprint with revenue in over 190 countries, and serves customers across a wide range of industries and use cases. Our brand is beloved with a large and loyal developer community. that leverages our extensive library of content, including tutorials, Q&A, product how-tos, video guides, and articles. DigitalOcean has carved out a compelling segment in this market, providing a simple and easy-to-use developer cloud with transparent and cost-effective billing, and a level of support that small, growing businesses will not get from the larger hyperscalers. DigitalOcean has also steadily expanded its array of offerings, starting with core infrastructure as a service with its compute technology called droplets, object and block storage, and networking capacity with a global footprint to power our customers' apps and services. These are complemented and extended by platform as a service products, including managed databases, managed Kubernetes, app platform, and manage Kafka for those customers that need to leverage high volumes of data streaming. In addition to our core infrastructure and platform offerings, with CloudBase, we offer managed cloud hosting that is used to power digital agencies, e-commerce storefronts, and a variety of other online businesses. Finally, to take advantage of a generational technology shift, We acquired a leading AI machine learning application development platform, Paperspace, last year, increasing our addressable market and adding a very valuable growth lever. This further extends our platform by enabling developers to test, develop, and deploy AI and machine learning-centric cloud applications that harness the power of GPUs in ways that have been predominantly available only to large enterprises. I just talked about the vast and growing market that DigitalOcean is in and the strong position we have with our platform and customers, customer trust that we have learned over the years. But now let me talk about the third compelling reason that drew me to DigitalOcean, the growth and value creation opportunity that is still ahead of us. DigitalOcean has the opportunity to reach even more developers and expand the services we provide to these customers driving higher revenue growth while maintaining our strong profitability, enabling us to generate compelling investor returns. The plan for achieving this growth centers on understanding and addressing the needs of developers as they build growing digital businesses. We will achieve our near-term growth objectives and position ourselves for higher sustainable long-term growth by focusing on these very specific growth levels. First, we are enhancing our platform with global load balancing, data resiliency, granular identity and access management, storage enhancements, and many other new features that will enable our customers to operate and scale globally. Number two, we are investing in both network and infrastructure, providing increased diversity, lower latency enhance speed on our core IP backbone and edge to enhance the performance of our platform to benefit our customers and allow us to migrate more customer workloads from other providers onto our platform. On top of these product offerings and platform foundation, we will continue to expand our managed services offering to serve customers that want an assisted experience with robust scaling capabilities on our platform. As an example of this, just a few days ago, we announced Autonomous, a new cloud-based offering that enables growing businesses to scale their hosting needs dynamically without having to over-invest in infrastructure. Next, building on our recent paper space acquisition, we are investing in our AI ML strategy to take advantage of this market opportunity by bringing simple, easy-to-use AI ML capabilities on both hardware and software to developers, machine learning engineers, and application builders across a broad range of business types as we have done successfully with our core digital ocean cloud services. And finally, point number five is we will augment our durable self-service customer acquisition model with direct sales and customer success motions to acquire, retain and expand customers and amplify our reach through our vibrant partner ecosystem. For these reasons, I'm very excited to have joined DigitalOcean at this critical time of inflection. The company begins 2024 having weathered a challenging macro demand environment where like many large platform providers, top line growth slowed from historical highs. Recognizing early in 2023 that near-term growth could be pressured, we successfully accelerated the attainment of long-term target margins to build a durable cost structure that will generate attractive free cash flow. With plans to improve net dollar retention, or NDR, through increased customer engagement and continued product innovation, and driving higher growth opportunities across cloud-based In our new AI ML platform, we are positioned to establish a foundation to deliver low double-digit growth in 2024 while setting ourselves up for the future. Let me now finish by articulating the key focus areas that I'll be driving. While I'm excited about the company's long-term growth plans, as CEO, I will leverage my product and engineering background and deep cloud experience to bring an elevated focus to two critical priorities in the short term, product innovation and efficient go-to-market. Let me explain quickly. First and foremost, we will obsess over the developer experience on our platform. We will develop an intimate understanding of their needs, whether the use case is in SaaS application deployment and scaling, running the backend of web and mobile applications, game development or data streaming, e-commerce, storefronts, education technology, or any other workload, and we will be unrelenting in our quest to understand how to make their jobs easier and to be a critical part of their growth through our platform offerings. We will use this understanding to rapidly develop on our product roadmap, which includes several important enhancements in security, resiliency, performance, networking, and storage, which are really critical to our customers scaling on our platform. We will also increase the pace of identification and development of new capabilities that will drive value to our customers and fuel our growth further. Our ongoing investments in AI machine learning capabilities is a perfect example of this. In addition to driving innovation, we will augment our best-in-class self-service or product-led growth customer acquisition engine with an effective high velocity sales and customer service engine to improve NDR by establishing a trusted relationship with our top customers, drive adoption and visibility into our other offerings in our platform, and continue providing world-class support and community engagement that these customers have come to expect from DigitalOcean. By obsessing over the developer experience and innovating on their behalf, and enhancing our go-to-market, we will take advantage of the tremendous growth opportunity that is in front of us. Our aim is to cement our position in this $114 billion addressable market for infrastructure and platform as a service and be the foundation for developers at startups and growing digital businesses to rapidly build, deploy, host, and scale applications that change the world. In conclusion, over the first several weeks as CEO, I'll spend the majority of my time meeting with customers, employees, and investors to gather their feedback and sharpen our understandings of the market we serve. While we will continue incorporating this feedback into our ongoing plans, I'm very confident in the immediate priorities that I just outlined. We will continue to invest in our key revenue growth drivers to achieve our 2024 plan and position the company for further growth in 2025 and beyond. We will obsess over the developer experience and focus on innovating to meet their evolving needs with platform innovation and crisp go-to-market initiatives. We will reignite growth in our core infrastructure and platform as a service offering. We will leverage the strong margins in the core DigitalOcean business to help fund investment in our strategic long-term bets like AI and machine learning-centric cloud application development. We will maintain our long-term focus on increasing operating leverage and delivering attractive free cash flow margins, creating a compelling return for investors. As you can tell, I am very excited to be here at DigitalOcean. got a very busy quarter ahead, but I'm really looking forward to meeting many of you in the upcoming months. With that, I will now turn it over to Matt.