Hello, good afternoon. My name is Jeremy, and I'll be your conference operator today. At this time, I would like to welcome everyone to the DigitalOcean Q3 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question- and- answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one. I would now like to turn the call over to Rob Bradley, Vice President of Investor Relations. Thank you, Jeremy, and welcome everyone to DigitalOcean's Third Quarter 2023 Earnings Call. Joining me today is Yancey Spruill, our Chief Executive Officer, and Matt Steinfort, our Chief Financial Officer. Before we get started, I want to cover our safe harbor statement. During this conference call, we will be making forward-looking statements, including our financial outlook for the fourth quarter and full year, as well as statements about goals and business outlook, industry trends, market opportunities, and expectations for future financial performance and similar items. All of these statements are subject to risks, uncertainties, and assumptions. You can review more information about these in the Risk Factors section of our filings with the SEC. We remind everyone that our actual results may differ, and we undertake no obligation to revise or update any forward-looking statements. Finally, we will be discussing non-GAAP financial measures on our call, and reconciliations between our GAAP and non-GAAP financial results can be found in our earnings press release, which was issued earlier this afternoon, and in the investor presentations can be found on our investor website. With that, let me turn the call over to our CEO, Yancey Spruill. Yancey? Thanks, Rob. Good afternoon, and thank you all for joining us today. I'm pleased to share our solid Q3 results, representing another quarter with an attractive balance of growth and profitability. This afternoon, I'll share an update on the search for our next CEO, some broader macro observations that have been informed by customer and partner interactions, and briefly recap some of the exciting product announcements that we've made recently. I will also highlight a recent customer win that gives us enthusiasm for our product trajectory before turning the call over to Matt to go over the financial results and updated financial outlook. On the CEO transition front, the search process is well underway, and the board is making good progress in our recruitment of a new CEO. There has been very strong interest from numerous leading technology executives, and we are confident that we will hire an outstanding executive with extensive cloud infrastructure expertise. The board of directors is deeply engaged with several candidates, and we will continue to move these candidates through the interview process as the search progresses. It is still too early to communicate a specific timeline for the hiring of a new CEO, but the board is working with focus and deliberate speed to fill this critical role. Third quarter results were encouraging as the business delivered solid performance from both a top and bottom line perspective. Revenue grew 16% year-over-year to $177 million in our first quarter, having lapped the Q3 2022 pricing actions. As we indicated, we had started to see at the tail end of Q2, we continue to see positive signs through Q3 and in early Q4, that there are abating trends from the growth headwinds from our cohort that we have seen over the past 12-18 months. Our margin profile for the core DigitalOcean business was very strong for the quarter and enabled us to absorb the incremental costs from our Paperspace acquisition while remaining within our targeted range of adjusted EBITDA and free cash flow margins. The combination of a stabilizing revenue growth rate and the efficiency we have created in our core business is allowing us to deliver robust free cash flow margins. As we look to accelerate our top line growth rate, we continue to build distinct revenue growth drivers through product and infrastructure investments. A big portion of our focus over the past several months has been on our ongoing efforts to deliver on our product roadmap and continue to add critical capabilities that enable our customers to build and scale their own businesses. Through numerous interactions with customers, prospects, and partners, we continue to fine-tune and evolve how we can best serve customers as they navigate the complexities of the cloud markets. The consistent sentiment from our customers is that simplicity is foundational to our value proposition, and relying on DigitalOcean to remove the complexities of the cloud is a productivity multiplier for them. We are focused on enhancing our platform's performance, reliability, security, and scalability, which enables us to retain and grow the spend of our customers and positions us to win new customers. Over the past several months, we have delivered an increase in velocity of product releases and announcements as we focus on meeting our customers' evolving needs. In September, we launched Managed Kafka, a new fully managed database service. Managed Kafka is a critical tool for businesses whose model involves significant data streaming. However, for small and medium business customers, it often comes with increased complexity. With our new fully managed Kafka as a service offering, companies can focus on their development environment and not be slowed down by complex processes. Customers have provided strong, positive feedback about Managed Kafka, citing that it is allowing them to focus their time and resources on their customer-facing activities, referring to their increased productivity as a game changer. In September, we also introduced Premium General Purpose Droplets, extending the premium features of enhanced CPU, memory, and storage to offer improved performance to a broader way of cloud-native applications. Our first-generation Premium Dedicated Droplets saw broad adoption and drove strong ARPU growth when launched in the beginning of 2021, as customers expanded their computing capabilities and migrated certain workloads to this premium compute offering. Now we've taken it one step further and expanded the opportunity for more customers to use these enhanced features with this new premium general-purpose offering. And just a few weeks ago, we introduced Scalable Storage for Postgres and MySQL managed databases to help customers better utilize their cloud spend by scaling to meet their storage requirements without needing to similarly scale their compute and memory configurations. This introduction is a deliberate effort to better enable customer productivity on our platform. By introducing Scalable Storage, we are better serving our customers as they can monitor and optimize their utilization to get the best return on their investment. On the Paperspace front, we continue to be very excited by the addition of their AI/ML capabilities and the expanded market opportunity that this business creates for DigitalOcean. While we are still only a few months into the integration process, the demand for Paperspace's services has been very strong, and we continue to learn more about the market and how customers are leveraging our capabilities to develop and grow their businesses. To give you a sense for one such use case, I'll provide an overview of one of the exciting customers we recently added to the Paperspace platform. The company is Nomic, which was founded in 2022 to improve the explainability and accessibility of artificial intelligence. To date, Nomic has released two products, an open source AI model, GPT4All, which is the third fastest growing repository in GitHub history, and Atlas, a tool that allows users to visualize unstructured datasets used to build large language models. Nomic selected DigitalOcean to access high-performance compute, along with our intuitive software, customer support, and reliability. Their co-founder was quoted as saying, "Our team loves Paperspace. It's far more intuitive than other compute providers. It allows us to spend less time managing infrastructure and more time building great products for our customers." Their testimony to DigitalOcean's combination of simplicity, reliability, and support, along with the current demand environment that we see, excite us for the opportunity ahead. The RFPs that we are seeing span across multiple verticals for multiple applications and demonstrate the opportunity for new customers to join our platform, to not only build their AI applications, but also to scale their products while utilizing the breadth of our IaaS and PaaS capabilities. In summary, we're making good progress with our efforts to bring on a new CEO, and during this transition, our business is seeing stabilizing revenue trends while continuing to deliver significant free cash flow. We are seeing very encouraging signals that our top-line growth rate is stabilizing relative to the last six quarters of deceleration. We continue to work to re-accelerate our growth rate through targeted product and go-to-market initiatives. The improved operating leverage we have created in the business over the past year is enabling us to make strategic investments while still delivering compelling free cash flow margins. We remain excited about our near- and long-term potential in the large expanding $100 billion addressable market for SMB cloud infrastructure in which we compete. As we approach the end of the year, I'd like to thank each and every member of the DigitalOcean team for their commitment to our customers and for delivering these solid results. With that, I'd like to turn it over to Matt to provide details on our financial outlook, results, and our outlook for the balance of the year. Thanks, Yancey, and welcome to all of you who are joining us on today's earnings call as we review our solid Q3 results. In Q3, we continued to execute our strategy of accelerating the achievement of our long-term margin targets in the core DigitalOcean business, while positioning the company for accelerated future growth through both organic and inorganic investment in our platform, despite the ongoing macro headwinds. We have driven these margin improvements by achieving the savings that we had identified at the beginning of this year, which included improvements in our gross margin as we grew into capacity investments made in 2022, and the achievement of identified savings in both headcount and non-headcount related expenses. As we have continued to execute on these savings, we have increased our overall profitability and free cash flow margin significantly, allowing us the flexibility to make targeted investments in growth. During the first three quarters, we have continued to invest in organic growth by our product roadmap, as Yancey described, and in July, we invested inorganically in the acquisition of Paperspace, which meaningfully increases our total addressable market. With our strong balance sheet, our continued focus on improving operating leverage, and our commitment to share repurchases, we have made material progress driving earnings per share, increasing 22% year-over-year. As we approach 2024, our strategy remains the same. We will continue to drive operating leverage while balancing investment across organic and inorganic growth opportunities and share repurchases. With that context in mind, I will review the highlights of the third quarter. Revenue in the third quarter was $177.1 million, which was an increase of 16% year-over-year and 4% quarter over quarter. In our first full quarter that lapsed the pricing increase we implemented in early Q3 2022. Contributing to this growth was Cloudways, which grew 11% quarter over quarter, and the addition of Paperspace, the AI platform we acquired in early July, which contributed $3 million to our results for Q3, and which surpassed the $1 million in monthly revenue mark in September. Profitability was very strong as we delivered $75.8 million of adjusted EBITDA, a 43% margin for the second consecutive quarter. Adjusted EBITDA margin improvements are the result of improving gross margins as we grew into the incremental data center and bandwidth capacity investments that we had made in late 2022, and the ongoing benefit of the efficiency improvements that we had identified in Q1 of this year and have been realizing throughout the year. Free cash flow was also a highlight in the quarter as we generated $56 million, which was 32% of revenue. This 500 basis point improvement from Q2 was a result of both lower capital expense and working capital timing. Given the working capital timing dynamic, coupled with our anticipated near-term Paperspace investments, we expect free cash flow margin in Q4 to be lower than Q3 levels. While free cash flow margins can be lumpy quarter to quarter, we continue to be confident in our full-year free cash flow margin expectations. Finally, Non-GAAP earnings per share was $0.44, which is a 22% year-over-year increase as we have increased our profit margins while having simultaneously reduced our shares outstanding through our systematic share buyback program. As expected, net dollar retention declined in Q3 to the mid-90s, coming in at 96%, as we lapped the price increase that was implemented in July of 2022. Fortunately, despite the difficult year-over-year comp in Q3, we did continue to see evidence of the ongoing stabilization of market demand that had started to show signs of bottoming in Q2. As it has been for most of 2022, churn remained stable at historical levels, around 11%-12% for each of the months in Q3, which is consistent with historical churn levels in early 2022 prior to the market slowdown. Contraction, which has historically been in the 12% range in early 2022, showed improvement as we progressed through the quarter, ending at 15% after starting the quarter at over 16%. We also saw positive signs in expansion in Q3, which was the final metric we said we needed to see for stabilization, as it had continued to decline in Q2, albeit at a decelerating rate. In Q3, expansion stopped declining for the first time in over a year and was fairly consistent at 23%. While we have not yet seen a meaningful improvement in NDR, we are encouraged by the relative stability of the key component metrics in Q3. We expect NDR to improve in Q4 and early 2024, driven in part by the continued strength of the Cloudways business and more favorable year-over-year comparisons. From a customer perspective, our durable customer acquisition and graduation model remains solid despite the challenging growth environment. We graduated 4,000 Builders and Scalers on our platform in the quarter, and we now have more than 154,000 on the DigitalOcean platform. These customers, who spend more than $50 per month with DigitalOcean, continue to represent 86% of our overall revenue and remain a key focus of our product, sales, and customer success, success investments. Average monthly revenue per customer, or ARPU, was $92.06, which was an increase of 6% year over year, which, like NDR, faced a difficult year-over-year comp as we lapped the price increase from last July. Before providing guidance for Q4 and for the full year 2023, it is important to understand where we are in the 2024 planning process. We are working diligently to finalize our plan and budget for 2024, with a focus on delivering double-digit growth with healthy profit and free cash flow margins. Our strategy will remain the same in 2024. We will continue to drive operating leverage in the core DigitalOcean business while investing to take advantage of the compelling market opportunity we have with Paperspace. As we shared last quarter, despite the continued market pressures, we believe we have a solid foundation for double-digit top-line growth for 2024, with our steady self-serve funnel generating around 5% growth, Cloudways generating around 3% growth, and Paperspace producing at least 3% growth. Key to growing faster than this will be getting NDR above 100% at some point in 2024, which we are working aggressively to accomplish. We look forward to providing more specifics on our plan at our next earnings call in February, when we report our Q4 and full year results. In terms of financial guidance for Q4 of 2023, we are targeting revenue to be $178 million. For the fourth quarter, we expect adjusted EBITDA margins to be in the range of 36%-37% and non-GAAP earnings per share to be $0.36-$0.37, based on approximately 100 million-101 million weighted average, fully diluted shares outstanding. For the full year, we are targeting revenue to be $690 million. Given the strong performance driving margin improvement in our core DigitalOcean business, we continue to project adjusted EBITDA margins to be in the range of 38%-39% for the full year, despite our increased investment in our Paperspace AI/ML business. We project non-GAAP earnings per share to be in the range of $1.52-$1.54, with weighted average fully diluted shares outstanding for 2023 of 102-103 million. And finally, given the strong progress we have made on improving margins in our core DigitalOcean business, for the full year 2023, full free cash flow will be 21%-22% of revenue, consistent with our initial February guide, despite the incremental investment we are making into our Paperspace business. That concludes our formal remarks, and we'll now open the call up to Q&A. All right, perfect. Thank you. At this time, if you, I would like to remind everyone, in order to ask a question, press Star and the number one on your telephone keypad. I'll pause just for a moment to compile the Q&A. All right. Our first question comes from the line of Raimo Lenschow from Barclays. Remo, please go ahead. Hey, thank you, and congrats on a great quarter, and it's nice to see the stabilization and improvement. My first question is on Paperspace. Can you kind of talk a little bit about what you're seeing in the customer base in terms of how you see the adoption there? Because like, you know, at the moment, for us, AI is a lot of, like, big companies and copilots and stuff like that. Can you talk a little bit about, like, practical use cases, how, like, SMBs or, you know, are using this, and what you're seeing there in terms of excitement about that? And then I had one follow-up on financials. Thank you. Well, the customer base, I think Nomic that we provide an example is a good example of, you know. There are a diverse array of use cases, verticals, people targeting, you know, building large language models for specific use cases, creating tools that enable people to use AI productively. These are tech-enabled businesses. I don't know that we would call them SMBs, because I think they have aspirations to grow very rapidly, supporting a broad set of use cases. But the good news is the value proposition that we offer and the complementary aspect of the Paperspace platform, you know, which is built around simplicity, is making it easy for people to come onto the platform. And I think that's been a distinguishing characteristic for us over the life of DigitalOcean, and exciting to see that value proposition, you know, be weighted heavily as we move into the AI opportunity. Okay, perfect. And then a question, quick question on the free cash flow. So obviously, very strong performance this quarter, and you know, you called out CapEx and working capital a little bit as factors here. But how do you think about that, those two factors that you mentioned there in terms of, like, in theory, some of that could be driven forward, or was it just timing? Thank you. Thanks, Remo. We are still staying with our full year guide for this year of 21%-22%, and, you know, that's, we will have some of the working capital, you know, catch up in the fourth quarter. Looking at free cash flow margin on a quarterly basis is tough just because it's a lot influenced by timing of payments, so that'll normalize in the fourth quarter. And then in the fourth quarter, also, given some of the equipment purchases we made when we acquired Paperspace that are coming in, we expect that to, you know, to hit partially in the fourth quarter as well. So, again, the full year guide of 21%-22% is still, you know, the right way to be thinking about it. It's great that we have the margins as high as we do this year, you know, this quarter, which is evidence, again, of the core DO business. As we said, we were gonna drive, you know, free cash flow margins into the high 20s and approach 30 by the end of the year, and we've done that. And we're using that as a means of funding the growth opportunity that we have to drive more revenue in the Paperspace business, and yet we're still able to come in at 21%-22% for the year. So it's... We're really happy with the progress we made. Yeah. You know, excellent. Yeah, I know, really good performance. Thank you. Thank you. All right, our next question comes from the line of Mike Cikos from Needham & Co. Mike, please go ahead. Hey, guys, this is Matt Calitri for Mike Cikos over at Needham. Thanks for taking our questions. I know you hit on this a little bit, but kind of coming from a different angle, is there anything one-time or anything, I guess, that sticks out as far as shifts in timing of expenses that you would call out in the reduction to the implied 4Q EBITDA guide? Timing of the expenses related to the EBITDA, the timing. Sequential. Oh, the sequential decline in EBITDA? No, it's, I mean, this is again, it's, you know, with Paperspace being on board, that's, you know, clearly causing some, a couple of basis point, impact on the, on the margins. It's just a different margin business, given it's not at scale. And then as we invest to grow the business, you know, into next year, both the, the core DigitalOcean business and the, the, the Paperspace business, it's. There's nothing that's kind of one-time in nature. It's, again, the, the guide for EBITDA, of what is 38-39 for the year is, is the right way to, to think about it. I, I don't get caught up in the margin kind of, you know, the, the quarter-over-quarter margin, fluctuations. It's. You got to think about it over a longer period. Gotcha, that's helpful. Thank you. And then in any way, is the customer base showing any potential signs of greater caution, given news on the broader macro or digital native pressures in the SMB space? I think what we said is, you know, we're pleased with, you know, churn is been relatively stable now for several quarters as we've moved through the year. We saw improvement in contraction as we moved through Q three and that continues at a better level than it was, you know, six months ago. And we're seeing stabilizing signs and expansion. And so I think those are the, the, the biggest telltale signs for, for us as it relates to what our customers and new customers and existing customers are seeing, that you know, things seem to be stabilizing. Great. Thanks so much for the call. Our next question comes from the line of Josh Baer from Morgan Stanley. Josh, please go ahead. Great, thank you. Congrats on a good quarter. Was hoping you could break out some of the, some of the metrics around Paperspace, the contribution to ARR, and just how to think about the contribution to the different customer cohorts. So from an ARR standpoint, the, I think we said, what it was $2.8 million in the quarter. It's gonna be, you know, just a little over 3. We're gonna end up around 6 for the year. So from an ARR standpoint, you know, it's gonna be, you know, what, north of 12, because that's where the quarter is ending. But from a customer account standpoint, it added about, I want to say 12,000 customers in total to the customer base. And again, the average revenue per customer there is a lot bigger, so it's, you know, closer to average is, you know, 900-ish. So they tended to be added to the to the Scalers segment and the Builders segment. Great, thank you. Apologies if I missed this. Just looking at CapEx as a percent of revenue, it's pretty low. I understand that can be lumpy, and it is a priority to invest in Paperspace, but how should we think about the trajectory of that CapEx spend? And, and is it a good leading indicator sort of for your demand and top line growth? Thanks. No, no, I don't think it's a good leading indicator of the demand because it is lumpy. You know, we were originally tracking to be about 15% for the year. And what we said with Paperspace is we'll be closer to 17%, you know, 17% in CapEx as a percentage of revenue for the year. And some of that's just, it's lumpy. I mean, we ordered, you know, gear right out of the gate, when we bought Paperspace, and we increased that amount, because we're seeing a lot of really good demand and just the supply chain around GPUs, it's unpredictable. and so we didn't get, you know, everything that we ordered in Q3, and we're gonna start to get some of that in Q4, and then we'll start to get some more of it in early next year. So it really is working capital and the timing of that CapEx purchase, but it's not a... That's why we're saying that, you know, for the full year, we're still sticking to the 21%-22% free cash flow and still the target of around 17% CapEx as a percentage of revenue for the year. Got it. Thank you. Thank you. Our next question comes from the line of Patrick Walravens from JMP. Patrick, please go ahead. Oh, great. Thank you very much. And it's nice to see the business stabilizing. So my question is on, with Paperspace, you know, how are your GPU cloud data centers different than your traditional CPU cloud data centers that you had with DigitalOcean? And what's that GPU cloud data center footprint look like today, and where are you gonna take it? Obviously, it's been a big issue in the industry lately. Well, you know, GPU servers, you know, have heat, different heat consumption, much higher heat consumption. So the physical footprint, you know, is, is less dense than you might with standard compute. I think that's one of the principal differences. You know, we're still evaluating, as, as Matt mentioned in the 2024 planning process around, what the level of investment pacing, and that may include, you know, how to think about, evolving the data center infrastructure for both companies, or for the combined company, and incorporate the fact that, you know, it's gonna be a mix of GPU and standard compute, CPU, going forward. I don't think any decisions have been made on that. We've been fortunate some of the Paperspace data center footprint are very close in proximity, including in one particular case in the same building. And we'll see how we evolve that as the demand. We're learning a lot. Obviously, the demand is incredibly strong, and we're seeing what our where we're playing in that market, how we're gonna grow it, and how we're gonna need to add to the capacity footprint to support that growth, not just in terms of buying servers, but the physical imprint, and are looking to make decisions on that, you know, as we get into next year. All right, great. Thank you. Our next question comes from a line of Jim Fish from Piper Sandler. Jim, please go ahead. Hey, thanks. This is Quinton on for Jim Fish. Thanks for taking our questions. You know, first, we've seen significant product launches in the, kinda call it non-core compute side of DigitalOcean with storage and Managed Kafka, the most recent ones. Can you talk about how the team is thinking about bundling or potentially packaging those non-core compute with maybe compute and, and Paperspace coming on, and, and how we kinda can adapt to some of the go-to-market motions with that? Well, we've incorporated some of the for combined customers, some of the feature functionality, security, and other tools that make it easy and seamless across the board to use, you know, the AI and the standard products. You know, I think bundling, you know, some of the items that I highlighted, Scalable Storage, the Premium Droplets reflect you know this concept of bundling, which we've been talking about for a year to two years with investors, that is a real opportunity for us to, as we learn more about customer use cases in industry verticals, you know, the decoupling of compute from network bandwidth and storage is a key theme that we keep hearing, and security and other attributes of the product set. So I think, having a strong foundation now with standard and AI, compute, strong foundation and bandwidth, and security and other capabilities in storage, it's giving us the building blocks to be able to do bundling and unbundling to, to better meet our customers' needs. As we, as we highlighted today with the recent launch of Scalable S torage, you know, if a use case needs more storage but doesn't need more compute, let's give them that option, and, it's a more efficient growth path for customers. So I think that's gonna be a continuing theme and, you know, as we get into next year, we'll, we'll have more to say about sort of more integrated product bundling as it relates to both AI and standard compute. But that's certainly the concept of bundling and packaging is a pretty significant opportunity for us. Makes sense. And then obviously, you talked a little bit about wanting in the search for a new CEO, you're wanting a leader that has the kind of core cloud experience. But as you think about kind of the skills of the background, are you looking for someone with more technical background, or are you looking for an operational or sales kind of leader? Maybe any sort of color you can give on the fact, like, underlying skills would be helpful? Yeah. The board's very engaged right now in finding a CEO. As we've described in the prepared remarks, it's an active process, it's a deliberate process, but it's moving with as fast as possible without sacrificing, you know, the screens needed to canvas the market. There's not a timeline to announce anything, and we sort of spoke to... We're clearly looking for somebody with cloud experience, but not gonna speak anymore to the process or to the candidate pool beyond that. Got it. Thank you. Our next question comes from the line of Kingsley Crane from Canaccord Genuity. Kingsley, please go ahead. Hi, thanks for taking the question. We noticed on Cloudways website that no longer offers infrastructure services from SMB cloud competitors like Vultr, only including options for public clouds like AWS and GCP. So are you actively converting customers over to DigitalOcean Infrastructure, or is this primarily a new business dynamic? It's mostly a new business dynamic. We still have, you know, support customers on each of those platforms, but from a go-forward basis, we still offer the, you know, options to go multi-cloud through the hyperscalers or through our platform. But we continue to support partners that drive opportunities through some of those, you know, other providers. And clearly, we have a healthy installed base of customers that are leveraging other providers as well. That's a change that was made earlier this year in Q2. Okay, very helpful. And the second one would be, how's the momentum behind the Hatch Accelerator program? How important of a customer ramping mechanism has this become for you? And is there an opportunity to include Paperspace as part of the program? There's certainly an opportunity to include Paperspace as part of the program, and the Hatch program is something that's been a part of the company for a long time, and, you know, as we look for ways to accelerate the business and drive more adoption through the self-serve funnel, and, you know, it's certainly one of the areas that we continue to invest in. But it's certainly an opportunity to bring in, you know, both Cloudways and Paperspace into that kind of a program. Great. Thank you. Our next question comes from the line of Jason Ader from William Blair. Jason, please go ahead. Yeah, thank you. Hey, guys. Just wanted to ask about go-to-market strategy and how that- Jason, Jason, we can't, we can't really hear you. Can you speak a little louder? Is that any better? Much. Okay, sorry. I was asking about the go-to-market strategy and just, as you look out, especially over the next couple of years, how would you frame sort of where you've been, what you're doing now in terms of maybe some changes, and then where you wanna go, just from an overall go-to-market standpoint? Because I know you've been very much sort of, kind of bottom-up driven historically. Yeah, that's a good, good question, Jason. The self-serve funnel has been the primary vehicle for adding new customers. You know, as you think about net new logos, clearly the NDR drives, you know, revenue growth from the cohort. But in terms of driving new go-to-market around acquiring new customers, it's been primarily through the self-serve funnel, and as we said, it delivers a very healthy, you know, kinda call it in the $33 million-$35 million range of new revenue. We've invested over the past, call it, several years to try to expand the go-to-market channels to include more of a direct sales motion, where we would target customers that are on some of the larger clouds and maybe at the smaller end of their customer base, but where the, you know, improved customer service and more of a yeah, the direct exposure to the company and ability to talk with the customer service people would be attractive. Also, the economic, you know, it would be a cost savings and where the simplicity is valuable to them. So that's something that we've invested in. I'd say that's still very early innings. One of the things that we've learned over the course of this year and through the slowdown are some of the product enhancements and capabilities that you would need in order to attract a customer off of one of the larger hyperscalers. And so that's clearly feeding into our product roadmap and the capabilities that we're working to develop right now. There's also the opportunity to expand the partner channel. We have a lot of partners on our platform today, you know, and web agencies and developers building websites for other companies. But historically, we've treated them very much just like a customer. So they come on, and they have their own requirements, and you know, we meet those requirements, but we didn't treat them really differently, you know, as a partner. And we're investing to expand the capabilities there because, you know, that's a great source of potentially us reaching parts of the market we might not otherwise reach, who wouldn't self identify and come to our platform. So we're, we think, as you think about it over the next several years, that the ratio of new sales to self-serve should be, you know. It would be great to get it to be 50/50, but you know, we've got a bit of ways to go to get there. We're still very nascent, I'd say, in the channels outside of the self-serve motion that's been the foundation of the company's growth. Great. Thanks for that background. Just one quick follow-up on that. It would be helpful, I think, for investors as you go forward, just to provide some proof points on, you know, some of those newer channels and maybe anecdotes of customers that you've taken away from the hyperscalers, et cetera, just because I think that would be helpful for everyone to kinda just understand how that motion is working. Great. That's a good suggestion, Jason. Thank you. Thank you. Our next question comes from the line of Jaden Patel from JP Morgan. Jaden, please go ahead. Hey, guys. I'm on for Pinjalim Bora. Thanks for taking the question. Any early feedback on the Managed Kafka service? Some, maybe some of the use cases there, and do you think it could be a tailwind to growth next year? Well, as I mentioned, the feedback's been very good, very positive. We have lots of businesses on the platform that are big data streaming, whether it's e-commerce or gaming or other businesses, where there's a lot of data and a lot of data streaming, which is the use case or a principal use case that's highly aligned, and very productive or more productive on Kafka than other services. So it's a natural fit for our customer base, and the feedback's been great because, again, others have Kafka, but it's not built with simplicity. As we cited in the script, the feedback's been very positive, as it's a productivity enabler for our customers because they don't have to spend as much time managing Kafka, which other solutions are more complex, and that's giving them more productivity to focus on their customer-facing activities. So we absolutely—It's—It won't be material or significant this quarter as the adoption ramps, was launched late last quarter or just recently, but we will see that becoming a more meaningful contributor as we move through 2024. Okay, thank you. Then, on Paperspace, it seems like it's doing well. Are you still baking in less than $5 million in contribution for Paperspace for the second half of this year? I think what we said is it's, I mean, we disclosed the actual revenue in the, for the third quarter, and we said that the run rate is $1 million in September. If you just extrapolate that, it puts you at about $6 million. Okay, thanks for taking the question. All right, our next question comes from the line of Wamsi Mohan from Bank of America. Wamsi, please go ahead. Hi, this is Maddie Schnarr. We said taking the question on behalf of Wamsi. Thank you for taking the question. I was wondering if you could talk more about the underlying drivers in terms of the mix, in terms of the ARPU growth, especially for the upsell and the attach, and how are you thinking about, like, the trajectory for the ARPU growth? So, the ARPU growth, you know, again, year-over-year, we said was 6%, which was low relative to historical, based on the, you know, difficult comp on a price, given the price changes. But if you look at the products that we announced during this year, you know, you actually talked to a number of them, but we had launched a number of them earlier this year, and we have a roadmap, you know, that is designed to kind of appeal to the larger set of our customers. Products and capabilities like integrated, or sorry, identity and access management, IAM, or role-based access control, you know, virtual private clouds, certain capabilities that really resonate with some of the customers that have gotten to more scale on our platform. That's really where the focus is in our development in the near term. That enables us not only to continue to kind of, you know, take big share of our own customers' workloads as they grow, so they don't have to move off to the cloud, the other cloud providers, but it also enables us, as I mentioned earlier, to accelerate the direct sales. If you're trying to poach, you know, customers, smaller customers off the larger providers, these are some of the same capabilities you need. So that's really where the focus is on driving ARPU, on being able to provide the capabilities that enable our customers to continue to scale on our platform as we you know better meet and deliver on their requirements. If I could follow up, could you guys talk more about, like, what's the health of the SMB customer at the moment, and if there's any improvement in the usage trend? Yeah, well, we talked about this earlier. If you look at the from a macro standpoint, you think what's been going on in the market, our customers have not been growing as fast, their own businesses, as they were historically. And we see that through the expansion that they get with us. A year ago, we were seeing expansion from our customers that were growing in the high 30s, and we've seen that be declining, you know, month-over-month for well over a year, down into the 22, 23% range. But that's stabilized, and so our customers, the decline in their growth appears to be stabilizing, you know, in a similar vein, 'cause we're seeing that stabilization expansion. What we also saw with the customer base over the beginning of this year was that they were optimizing their spend and that they were reducing the amount that they were investing in software, and that causes contraction. And while the contraction is still elevated relative to historicals, it's around 15% right now. Historically, it was pretty consistently around 12. That has been stable for, you know, the past two quarters and actually has started to improve. So we think that, you know, just like we saw the downturn, perhaps earlier than others because of the usage-based nature of our platform, you know, we don't have renewal cycles, and, you know, when a customer needs to spend less with us, they just spend less. And so we saw the impact early, and we'll likely see the, you know, the return early because of the nature of the business model. Thank you. Congrats on the quarter. All right. Perfect, and our final question comes from the line of Michael Turits from KeyBanc. Michael, please go ahead. Hey, guys, it's Bill Sorenson from Michael. Just a quick follow-up to that last question. Good to see some of the, you know, leading metrics kind of stabilizing in the business. Anything you'd call out that was notable in different verticals or customer segments? No, actually, that's something that we, we, you know, spend a lot of time assessing. And the nice thing, one of the nice things about the DigitalOcean customer base is it's so diverse. 70% of the revenue comes from outside the U.S. There's no single vertical, there's no single, you know, use case. There's no single region that drives a disproportionate amount of our business. We really track kind of broad SMB and startup and developer trends. And so the recovery and the stabilization has been pretty consistent across all of them. We don't see kind of laggards, and we don't see any that have kind of raced ahead. It's, you know... Again, part of the appeal is it's a very, very, diverse and distributed, customer base. Great. Thank you. Thank you all for joining us. We're excited to report on a very solid quarter with a lot of encouraging trends, and appreciate your time this evening, and hope you have a good rest of the day. That concludes today's call. Have a pleasant day.