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They've accrued up losses of $43M, $40M and $35M in the 3 preceding years. Funny how that's considered financially healthy in the world we're living right now.

breck 6y ago
25% revenue growth past 2 years and losses have remained constant. If this wasn't hard tech, I would be worried, but this is hard capital intensive stuff and looks to me like they are doing fine. If in 10 years there ends up being 1 independent cloud company, that would be a pretty amazing business. DO has a good a shot as any (only thing I can think off is AWS spins out). DO is so good that there I can't think of a worst case scenario being anything other than one of the big 3 buys them. Best case is the moon.
aeturnum 6y ago
I think it's good to point this out and think a little about what "health" means here. Looking at their consolidated financial data on page 11, you can see they spend about $1 providing a service someone pays $2 for. Then all the rest of it gets eaten up by salary, r&d and marketing. It feels like a very different situation than, say, Uber - where there's a question about if Uber can balance driver payouts and customer fees in a way where they make money. DO, instead, is already turning $1 in goods into $2 in revenue and they're just looking to grow enough so that $1 in potential profit covers everything.
ttul 6y ago
So long as the investment into growth (sales and marketing) is paid back through the cashflow of customers during their lifetime, the losses are tolerable. A provider like DO expects to have customers for many years. At 50% gross margins, $100 spent to acquire a $50/yr customer will be returned in four years. That may be an acceptable trade off.
mgfist 6y ago
Capital is cheap
impulser_ 6y ago
The business is making money, they are just spending it growing the business. Most tech companies that are still in the growth stage will lose money because they have to spend a lot on R&D and keeping employees at the company with compensation. The tech industry is highly competitive and you have to spend a lot to stay competitive.
imtringued 6y ago
Depends, what are they spending the money on? Are they wasting it on user acquisition or are they using it to build more datacenters? Are their losses projected to grow or are they staying the same while increasing revenue? Are customers actually using the service or are they just being lured in through loss leaders? One should probably create a personal checklist to see whether a company is doing well or not and then just make decisions based on the checklist.

breck 6y ago

25% revenue growth past 2 years and losses have remained constant. If this wasn't hard tech, I would be worried, but this is hard capital intensive stuff and looks to me like they are doing fine. If in 10 years there ends up being 1 independent cloud company, that would be a pretty amazing business. DO has a good a shot as any (only thing I can think off is AWS spins out). DO is so good that there I can't think of a worst case scenario being anything other than one of the big 3 buys them. Best case is the moon.

aeturnum 6y ago

I think it's good to point this out and think a little about what "health" means here. Looking at their consolidated financial data on page 11, you can see they spend about $1 providing a service someone pays $2 for. Then all the rest of it gets eaten up by salary, r&d and marketing. It feels like a very different situation than, say, Uber - where there's a question about if Uber can balance driver payouts and customer fees in a way where they make money. DO, instead, is already turning $1 in goods into $2 in revenue and they're just looking to grow enough so that $1 in potential profit covers everything.

ttul 6y ago

So long as the investment into growth (sales and marketing) is paid back through the cashflow of customers during their lifetime, the losses are tolerable. A provider like DO expects to have customers for many years. At 50% gross margins, $100 spent to acquire a $50/yr customer will be returned in four years. That may be an acceptable trade off.

mgfist 6y ago

Capital is cheap

impulser_ 6y ago

The business is making money, they are just spending it growing the business. Most tech companies that are still in the growth stage will lose money because they have to spend a lot on R&D and keeping employees at the company with compensation. The tech industry is highly competitive and you have to spend a lot to stay competitive.

imtringued 6y ago

Depends, what are they spending the money on? Are they wasting it on user acquisition or are they using it to build more datacenters? Are their losses projected to grow or are they staying the same while increasing revenue? Are customers actually using the service or are they just being lured in through loss leaders? One should probably create a personal checklist to see whether a company is doing well or not and then just make decisions based on the checklist.