DigitalOcean Holdings Inc

Previous wording

DigitalOcean is a leading cloud computing platform offering on-demand infrastructure and platform tools for startups and growing technology businesses. We were founded with the guiding principle that the transformative benefits of the cloud should be easy to leverage, broadly accessible, reliable and affordable. Our platform simplifies cloud computing, enabling our customers to rapidly accelerate innovation and increase their productivity and agility.

Current wording

DigitalOcean is a leading cloud computing platform offering on-demand infrastructure and platform tools for startups and growing digital-native businesses. We were founded with the guiding principle that the transformative benefits of the cloud should be easy to leverage, broadly accessible, reliable and affordable. Our platform simplifies cloud computing, enabling our customers to rapidly accelerate innovation and increase their productivity and agility.

Previous wording

We offer mission-critical solutions across Infrastructure-as-a-Service (IaaS), including our Droplet virtual machines, storage and networking offerings; Platform-as-a-Service (PaaS), including our Managed Database and Managed Kubernetes offerings; Software-as-a-Service (SaaS), including our Managed Hosting and Marketplace offerings; and AI/ML, including our Machines, Notebooks and Deployments offerings. Our cloud platform was designed with simplicity in mind to ensure that startups and growing technology businesses can spend less time managing their infrastructure and more time building innovative applications that drive business growth. Improving the developer experience and increasing productivity are core to our mission. In just minutes, developers can set up thousands of virtual machines, secure their projects, enable performance monitoring and scale up and down as needed.

Current wording

We offer mission-critical solutions across Infrastructure-as-a-Service (IaaS), including our Droplet virtual machines, storage and networking offerings; Platform-as-a-Service (PaaS), including our Managed Database and Managed Kubernetes offerings; Software-as-a-Service (SaaS), including our Managed Hosting and Marketplace offerings; and AI/ML, including our Machines, Notebooks and Deployments offerings. Our cloud platform was designed with simplicity in mind to ensure that startups and growing digital-native businesses can spend less time managing their infrastructure and more time building innovative applications that drive business growth. Improving the developer experience and increasing productivity are core to our mission. In just minutes, developers can set up thousands of virtual machines, secure their projects, enable performance monitoring and scale up and down as needed.

Previous wording

We have a highly efficient self-service customer acquisition model, which we complement with a sales force focused on inside sales, targeted outside sales and partnership opportunities to drive revenue growth. Our model enables customers to get started on our platform very quickly and without the need for assistance. We focus heavily on enabling a self-service, low-friction model that makes it easy for users to try, adopt and use our products. For each of the three months ended June 30, 2024 and 2023, our sales and marketing expense was approximately 10% and 9% of our revenue, respectively. The efficiency of our go-to-market model and our focus on the needs of startups and growing technology businesses has enabled us to drive organic growth and establish a truly global customer base across a broad range of industries.

Current wording

We have a highly efficient self-service customer acquisition model, which we complement with a sales force focused on inside sales, targeted outside sales and partnership opportunities to drive revenue growth. Our model enables customers to get started on our platform very quickly and without the need for assistance. We focus heavily on enabling a self-service, low-friction model that makes it easy for users to try, adopt and use our products. For each of the three months ended September 30, 2024 and 2023, our sales and marketing expense was approximately 9% and 11% of our revenue, respectively. The efficiency of our go-to-market model and our focus on the needs of startups and growing digital-native businesses has enabled us to drive organic growth and establish a truly global customer base across a broad range of industries.

Previous wording

Our customers are spread across approximately 190 countries and around two-thirds of our revenue has historically come from customers located outside the United States. For the three months ended June 30, 2024, 38% of our revenue was generated from North America, 28% from Europe, 23% from Asia and 11% from the rest of the world.

Current wording

Our customers are spread across approximately 190 countries and around two-thirds of our revenue has historically come from customers located outside the United States. For the three months ended September 30, 2024, 39% of our revenue was generated from North America, 28% from Europe, 23% from Asia and 10% from the rest of the world.

Previous wording

Our average revenue per customer (consisting of the aggregate revenue and customer counts for our Learners, Builders and Scalers, but excluding revenue and customer counts for Testers), or ARPU, has increased from $90.84 in the quarter ended June 30, 2023 to $99.45 in the quarter ended June 30, 2024. We had no material customer concentration as our top 25 customers made up approximately 8% and 7% of our revenue in the three months ended June 30, 2024 and 2023, respectively. Our annual run-rate revenue, or ARR, as of June 30, 2024 was $781 million, up from $682 million as of June 30, 2023. ARR as of the end of each month represents total revenue for that month multiplied by 12.

Current wording

Our average revenue per customer (consisting of the aggregate revenue and customer counts for our Learners, Builders and Scalers, but excluding revenue and customer counts for Testers), or ARPU, has increased from $92.06 in the three months ended September 30, 2023 to $102.51 in the three months ended September 30, 2024. We had no material customer concentration as our top 25 customers made up approximately 9% and 7% of our revenue in the three months ended September 30, 2024 and 2023, respectively. Our annual run-rate revenue, or ARR, as of September 30, 2024 was $798 million, up from $713 million as of September 30, 2023. ARR as of the end of each month represents total revenue for that month multiplied by 12.

Previous wording

Growing our Builders and Scalers is a critical focus for us, and we have successfully increased the number of these customers and their percentage of our total revenue. We had approximately 18,000 Scalers as of June 30, 2024, up from approximately 16,000 as of June 30, 2023. We had approximately 143,000 Builders as of June 30, 2024, up from approximately 134,000 as of June 30, 2023. Revenue from Builders and Scalers increased 8% and 19%, respectively, for the three months ended June 30, 2024 from the three months ended June 30, 2023. Revenue from Builders and Scalers as a percentage of total revenue was 87% in the three months ended June 30, 2024 and 86% in the three months ended June 30, 2023.

Current wording

Growing our Builders and Scalers is a critical focus for us, and we have successfully increased the number of these customers and their percentage of our total revenue. We had approximately 18,000 Scalers as of September 30, 2024, up from approximately 16,000 as of September 30, 2023. We had approximately 145,000 Builders as of September 30, 2024, up from approximately 138,000 as of September 30, 2023. Revenue from Builders and Scalers increased 7% and 19%, respectively, for the three months ended September 30, 2024 from the three months ended September 30, 2023. Revenue from Builders and Scalers as a percentage of total revenue was 88% in the three months ended September 30, 2024 and 86% in the three months ended September 30, 2023.

Previous wording

Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, supply chain disruptions, inflationary pressures, interest rates, financial and credit market fluctuations, volatility in the capital markets, liquidity concerns at, and failures of, banks and other financial institutions, international trade relations, political turmoil, political instability and transitions of power in regions where we operate, including Pakistan following the most recent general election, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine, the Middle East or elsewhere, could cause a decrease in business investments in information technology and negatively affect the growth of our business and our results of operations.

Current wording

Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, supply chain disruptions, inflationary pressures, interest rates, financial and credit market fluctuations, volatility in the capital markets, liquidity concerns at, and failures of, banks and other financial institutions, international trade relations, political turmoil, political instability and transitions of power in regions where we operate, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine, the Middle East or elsewhere, could cause a decrease in business investments in information technology and negatively affect the growth of our business and our results of operations.

Previous wording

While we believe the total number of these customers is an important indicator of the growth of our business and future revenue opportunity, the trends relating to our Builders and Scalers is of particular importance to us as these customers represent a significant majority of our revenue and revenue growth, and they are representative of the startup and growing technology business customers that grow on our platform and use multiple products.

Current wording

While we believe the total number of these customers is an important indicator of the growth of our business and future revenue opportunity, the trends relating to our Builders and Scalers is of particular importance to us as these customers represent a significant majority of our revenue and revenue growth, and they are representative of the startup and growing digital-native business customers that grow on our platform and use multiple products.

Previous wording

Sales and marketing expenses consist primarily of personnel costs of our sales, marketing and customer support employees including salaries, bonuses, benefits and stock-based compensation. Sales and marketing expenses also include costs for marketing programs, commissions, advertising and professional service fees. We expect sales and marketing expenses to increase in absolute dollars as we enhance our product offerings and implement new marketing strategies.

Current wording

Sales and marketing expenses consist primarily of personnel costs of our sales, marketing and customer support employees including salaries, bonuses, benefits and stock-based compensation. Sales and marketing expenses also include costs for marketing programs, commissions, advertising and professional service fees. We expect sales and marketing expenses to increase in absolute dollars as we enhance our product offerings and implement new marketing and sales strategies.

Previous wording

Income tax (expense) benefit is attributable to the mix of income in the jurisdictions in which we conduct business. We maintain a full valuation allowance on our U.S. federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be realized.

Current wording

Income tax (expense) benefit is attributable to the mix of income in the jurisdictions in which we conduct business. We maintain a full valuation allowance on our U.S. federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be realized. We regularly assess all available evidence, including cumulative historic losses and forecasted earnings. Given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that sufficient positive evidence may become available in a future period to reach a conclusion that the U.S. valuation allowance will no longer be needed. Release of all, or a portion of, the valuation allowance would result in the recognition of U.S. federal and state deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded.

Previous wording

Revenue increased $22.7 million, or 13%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily driven by a 9% increase in ARPU to $99.45 from $90.84, and a 15% increase in revenue from Builders and Scalers. The increase in ARPU was primarily driven by continued adoption of our products by our customers leading to higher average usage on our platform.

Current wording

Revenue increased $21.4 million, or 12%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily driven by a 11% increase in ARPU to $102.51 from $92.06, and a 15% increase in revenue from Builders and Scalers. The increase in ARPU was primarily driven by continued adoption of our products by our customers leading to higher average usage on our platform.

Previous wording

Cost of revenue increased $7.8 million, or 12%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase is primarily due to a $5.0 million increase in depreciation and amortization of acquired finance leases and acquired developed technology, a $0.7 million increase in third-party license fees, a $0.6 million increase in partnership costs, and a $0.6 million increase in co-location costs. Gross profit increased to 61% for the three months ended June 30, 2024 from 60% for the three months ended June 30, 2023, primarily due to a decrease in ancillary equipment and bandwidth expenses as a percentage of revenue as a result of our ongoing cost optimization efforts, offset by our continued investment in AI/ML offerings.

Current wording

Cost of revenue increased $8.7 million, or 12%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase is primarily due to increases of $5.4 million in depreciation and amortization due to our continued investment in AI/ML offerings and infrastructure, $1.9 million in co-location costs and $1.1 million in third-party license fees. Gross profit remained consistent at 60% for the three months ended September 30, 2024 and 2023, primarily due to decreases in co-location costs and bandwidth expenses as a percentage of revenue as a result of our ongoing cost optimization efforts, offset entirely by our continued investment in AI/ML offerings.

Previous wording

Restructuring and other charges decreased $21.3 million, or 100%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. These charges were primarily due to one-time severance and benefit payments, as well as stock-based compensation related to vesting of certain equity awards in connection with the restructuring we announced in February 2023, which was substantially completed by the third quarter of 2023.

Current wording

There were $0.4 million in Restructuring and other charges during the three months ended September 30, 2023 and no such charges during the three months ended September 30, 2024. These charges were primarily due to one-time severance and benefit payments, as well as stock-based compensation related to vesting of certain equity awards in connection with the restructuring we announced in February 2023, which was substantially completed by the third quarter of 2023.

Previous wording

Income tax expense increased $2.4 million, or 71%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily as a result of increased worldwide pretax income creating a higher tax expense in 2024 compared to 2023.

Current wording

Income tax benefit increased $21.2 million, or 118%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily as a result of lower pretax income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to higher excess tax benefit taken from stock-based compensation and utilization of research and development credits in 2024 compared to 2023.

Previous wording

Revenue increased $42.3 million, or 13%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in revenue was primarily driven by a 9% increase in ARPU to $97.28 from $89.59; and a 14% increase in revenue from Builders and Scalers. The increase in ARPU was primarily driven by continued adoption of our products by our customers leading to higher average usage of our platform.

Current wording

Revenue increased $63.7 million, or 12%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in revenue was primarily driven by a 10% increase in ARPU to $99.02 from $90.43; and a 14% increase in revenue from Builders and Scalers. The increase in ARPU was primarily driven by continued adoption of our products by our customers leading to higher average usage of our platform.

Previous wording

Cost of revenue increased $8.6 million, or 6%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase is primarily due to a $7.9 million increase in depreciation and amortization from acquired finance leases and acquired developed technology, a $1.3 million increase in partnership costs and a $1.1 million increase in third-party license fees, partially offset by decreases of $1.5 million in bandwidth expenses due to reduction in our consumption from certain vendors and $1.4 million in ancillary equipment. Gross profit increased to 61% for the six months ended June 30, 2024 from 58% for the six months ended June 30, 2023, primarily due to a decrease in co-location costs and ancillary equipment expenses as a percentage of revenue as a result of our ongoing cost optimization efforts.

Current wording

Cost of revenue increased $17.3 million, or 8%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase is primarily due to increases of $13.2 million in depreciation and amortization from acquired finance leases and acquired developed technology, as well as our continued investment in AI/ML offerings and infrastructure, $3.0 million in co-location costs, $2.2 million in third-party license fees and $2.0 million in partnership costs, partially offset by decreases of $2.3 million in bandwidth expenses and $1.0 million in ancillary equipment. Gross profit increased to 61% for the nine months ended September 30, 2024 from 59% for the nine months ended September 30, 2023, primarily due to decreases in co-location costs, ancillary equipment and bandwidth expenses as a percentage of revenue as a result of our ongoing cost optimization efforts, offset by our continued investment in AI/ML offerings.

Previous wording

Sales and marketing expenses increased $6.6 million, or 19%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase is primarily due to a $3.1 million increase in advertising expenses, a $1.5 million increase in personnel costs, and a $1.5 million increase in amortization of acquired intangibles assets.

Current wording

Sales and marketing expenses increased $4.6 million, or 9%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase is primarily due to increases of $3.7 million in advertising expenses, $1.4 million in amortization of acquired intangibles assets and $0.8 million in other operating costs, offset by a $1.3 million decrease in personnel costs largely due to the reversal of stock-based compensation from forfeited RSUs.

Previous wording

There were $0.4 million in Restructuring and other charges during the three months ended June 30, 2023 and no such charges during the three months ended June 30, 2024. These charges were primarily due to one-time severance and benefit payments in connection with the restructuring we announced in February 2023.

Current wording

There were $20.9 million in Restructuring and other charges during the nine months ended September 30, 2023 and no such charges during the nine months ended September 30, 2024. The 2023 charges were primarily due to one-time severance and benefit payments, as well as stock-based compensation related to vesting of certain equity awards in connection with the restructuring we announced in February 2023, which was substantially completed by the third quarter of 2023.

Previous wording

In February 2024, our Board of Directors approved an additional repurchase program of up to an aggregate of $140 million of our common stock through fiscal year 2025. For the six months ended June 30, 2024, we repurchased and retired 497,364 shares of common stock for an aggregate purchase price of $18.2 million. The program will expire on December 31, 2025.

Current wording

In February 2024, our Board of Directors approved an additional repurchase program of up to an aggregate of $140 million of our common stock through fiscal year 2025. For the nine months ended September 30, 2024, we repurchased and retired 795,191 shares of common stock for an aggregate purchase price of $29.6 million. The program will expire on December 31, 2025.

Previous wording

As of June 30, 2024, we had $153,698 of estimated undiscounted fixed payment obligations for leases of co-location space at data center facilities and, to a lesser extent, office space, that have not yet commenced and were not included on the Condensed Consolidated Balance Sheets. These leases are expected to commence between September 2024 and August 2025, and have a weighted average lease term of 6 years.

Current wording

As of September 30, 2024, we had $167.3 million of estimated undiscounted fixed payment obligations for leases of co-location space at data center facilities and, to a lesser extent, office space, that have not yet commenced and were not included on the Condensed Consolidated Balance Sheets. These leases are expected to commence between October 2024 and August 2025, and have a weighted average lease term of 6 years.

Previous wording

As of June 30, 2024, we had $443.1 million in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash and money market funds.

Current wording

As of September 30, 2024, we had $439.9 million in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash and money market funds.

Previous wording

Net cash provided by operating activities was $138.0 million and $100.4 million for the six months ended June 30, 2024 and 2023, respectively. The increase was primarily driven by an increase in cash collections from higher revenues. These increases were partially offset by payments for leases, acquisition related compensation and cash bonuses.

Current wording

Net cash provided by operating activities was $211.4 million and $154.4 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily driven by an increase in cash collections from higher revenues. These increases were partially offset by payments for leases, acquisition related compensation and cash bonuses.

Previous wording

Net cash provided by investing activities was $12.1 million for the six months ended June 30, 2024 compared to $243.7 million for the six months ended June 30, 2023. The decrease in cash provided by investing activities was primarily driven by a $204.0 million reallocation of our marketable securities portfolio to cash equivalents and an increase of $28.7 million in cash payments for capital expenditures, partially offset by a $2.5 million decrease in cash activity for asset acquisitions.

Current wording

Net cash used in investing activities was $47.7 million for the nine months ended September 30, 2024 compared to $248.3 million for the nine months ended September 30, 2023. The decrease in cash provided by investing activities was primarily driven by a $329.2 million reallocation of our marketable securities portfolio to cash equivalents and an increase of $65.8 million in cash payments for capital expenditures, partially offset by a $2.5 million decrease in cash activity for asset acquisitions.

Previous wording

Net cash used in financing activities of $24.2 million and $365.0 million for the six months ended June 30, 2024 and 2023, respectively, was primarily due to the repurchase and retirement of our common stock for $18.2 million and $368.9 million, respectively.

Current wording

Net cash used in financing activities of $41.0 million and $473.3 million for the nine months ended September 30, 2024 and 2023, respectively, was primarily due to the repurchase and retirement of our common stock for $29.9 million and $475.0 million, respectively.

Previous wording

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with non-GAAP financial measures including: (i) adjusted EBITDA and adjusted EBITDA margin and (ii) non-GAAP net income and non-GAAP diluted net income per share. These measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Our calculations of each of these measures may differ from the calculations of measures with the same or similar titles by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider each of these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable financial measure calculated in accordance with GAAP and our other GAAP results. A reconciliation of each of our non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP is set forth below.

Current wording

GAAP diluted net income per share. These measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Our calculations of each of these measures may differ from the calculations of measures with the same or similar titles by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider each of these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable financial measure calculated in accordance with GAAP and our other GAAP results. A reconciliation of each of our non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP is set forth below.

Previous wording

We define adjusted EBITDA as net income (loss) attributable to common stockholders, adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, acquisition related compensation, acquisition and integration related costs, income tax expense, restructuring and other charges, restructuring related charges, impairment of long-lived assets, and other income, net. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. 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, evaluating our operating performance, and for internal planning and forecasting purposes.

Current wording

We define adjusted EBITDA as net income attributable to common stockholders, adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, acquisition related compensation, acquisition and integration related costs, income tax expense, restructuring and other charges, restructuring related charges, impairment of long-lived assets, and other income, net. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. 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, evaluating our operating performance, and for internal planning and forecasting purposes.

Previous wording

Our calculation of adjusted EBITDA and adjusted EBITDA margin may differ from the calculations of adjusted EBITDA and adjusted EBITDA margin by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, including our net income (loss) attributable to common stockholders and other GAAP results.

Current wording

Our calculation of adjusted EBITDA and adjusted EBITDA margin may differ from the calculations of adjusted EBITDA and adjusted EBITDA margin by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, including our net income attributable to common stockholders and other GAAP results.

Previous wording

The following table presents a reconciliation of Net income (loss) attributable to common stockholders, the most directly comparable financial measure stated in accordance with GAAP, to adjusted EBITDA for each of the periods presented:

Current wording

The following table presents a reconciliation of Net income attributable to common stockholders, the most directly comparable financial measure stated in accordance with GAAP, to adjusted EBITDA for each of the periods presented:

Previous wording

(1)For the six months ended June 30, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges. For the six months ended June 30, 2023, non-GAAP stock-based compensation excludes $3.9 million, as it is presented in Restructuring and other charges. There were no reclassifications of stock-based compensation for the three months ended June 30, 2024 and 2023.

Current wording

(1)For the nine months ended September 30, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges. There were no reclassifications of stock-based compensation for the three months ended September 30, 2024. For the three and nine months ended September 30, 2023, non-GAAP stock-based compensation excludes $31.3 million, reversal related to the former CEO’s forfeited MRSU award that is reported in Restructuring related charges.

Previous wording

(2)For the three and six months ended June 30, 2024, primarily consists of executive reorganization charges. For the three and six months ended June 30, 2023, primarily consists of salary continuation charges.

Current wording

(2)For the three and nine months ended September 30, 2024, primarily consists of executive reorganization charges. For the three and nine months ended September 30, 2023, primarily consists of the $31.3 million reversal of stock-based compensation related to the former CEO’s forfeited MRSU award, partially offset by salary continuation charges, executive reorganization charges including severance, CEO search firm fees, and other legal and professional service costs.

Previous wording

(3)For the three and six months ended June 30, 2024 and 2023, primarily consists of interest and accretion income from our cash and cash equivalents and marketable securities.

Current wording

(3)For the three and nine months ended September 30, 2024 and 2023, primarily consists of interest and accretion income from our cash and cash equivalents and marketable securities.

Previous wording

We define non-GAAP net income as net income (loss) attributable to common stockholders, excluding stock-based compensation, acquisition related compensation, amortization of acquired intangibles, acquisition and integration related costs, restructuring and other charges, restructuring related charges, impairment of long-lived assets, and other unusual or non-recurring transactions as they occur. We define non-GAAP diluted net income per share as non-GAAP net income divided by the weighted-average diluted shares outstanding, which includes the potentially dilutive effect of our stock options, RSUs, PRSUs, and Convertible Notes.

Current wording

We define non-GAAP net income as net income attributable to common stockholders, excluding stock-based compensation, acquisition related compensation, amortization of acquired intangibles, acquisition and integration related costs, restructuring and other charges, restructuring related charges, impairment of long-lived assets, and other unusual or non-recurring transactions as they occur. We define non-GAAP diluted net income per share as non-GAAP net income divided by the weighted-average diluted shares outstanding, which includes the potentially dilutive effect of our stock options, RSUs, PRSUs, and Convertible Notes.

Previous wording

The following table presents a reconciliation of Net income (loss) attributable to common stockholders, the most directly comparable financial measure stated in accordance with GAAP, to Non-GAAP Net income for each of the periods presented:

Current wording

The following table presents a reconciliation of Net income attributable to common stockholders, the most directly comparable financial measure stated in accordance with GAAP, to Non-GAAP Net income for each of the periods presented:

Previous wording

(1)For the six months ended June 30, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges. For the six months ended June 30, 2023, non-GAAP stock-based compensation excludes $3.9 million, as it is presented in Restructuring and other charges. There were no reclassifications of stock-based compensation for the three months ended June 30, 2024 and 2023.

Current wording

(1)For the nine months ended September 30, 2024, non-GAAP stock-based compensation excludes $0.1 million as it is presented in Restructuring related charges. There were no reclassifications of stock-based compensation for the three months ended September 30, 2024. For the three and nine months ended September 30, 2023, non-GAAP stock-based compensation excludes $31.3 million, reversal related to the former CEO’s forfeited MRSU award that is reported in Restructuring related charges.

Previous wording

(3)For the periods in fiscal year 2024, we used a tax rate of 16%, which we believe is a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for 2024. For the periods in fiscal year 2023, we used a tax rate of 17%, which we believe was a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for 2023.

Current wording

(3)For the three and nine months ended September 30, 2024, we used a tax rate of 16%, which we believe is a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for 2024. For the three and nine months ended September 30, 2023, we used a tax rate of 17%, which we believe was a reasonable estimate of our long-term effective tax rate applicable to non-GAAP pre-tax income for 2023.