The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10- Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Final Prospectus for our IPO dated as ofMarch 23, 2021 and filed with theSEC pursuant to Rule 424(b)(4) onMarch 24, 2021 , or Final Prospectus. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy, plans and objectives of management for future operations and the potential impact that the ongoing COVID-19 pandemic may have on our business, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading "Risk Factors" in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. OverviewDigitalOcean is a leading cloud computing platform offering on-demand infrastructure and platform tools for developers, start-ups and small and medium-sized businesses, or SMBs. 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. Over 585,000 individual and business customers currently use our platform to build, deploy and scale software applications. Our users include software engineers, researchers, data scientists, system administrators, students and hobbyists. Our customers use our platform across numerous industry verticals and for a wide range of use cases, such as web and mobile applications, website hosting, e-commerce, media and gaming, personal web projects, and managed services, among many others. We believe that our focus on simplicity, community, open source and customer support are the four key differentiators of our business, driving a broad range of customers around the world to build their applications on our platform. Improving the developer experience and increasing developer productivity are core to our mission. Our developer cloud platform was designed with simplicity in mind to ensure that software developers can spend less time managing their infrastructure and more time turning their ideas into innovative applications to grow their businesses. Simplicity guides how we design and enhance our easy-to-use-interface, the core capabilities we offer our customers and our approach to predictable and transparent pricing for our solutions. We offer mission-critical infrastructure solutions across compute, storage and networking, and we also enable developers to extend the native capabilities of our cloud with fully managed application, container and database offerings. In just minutes, developers can set up thousands of virtual machines, secure their projects, enable performance monitoring and scale up and down as needed. We generate revenue from the usage of our cloud computing platform by our customers, including but not limited to compute, storage and networking services. We recognize revenue based on the customer utilization of these resources. Our pricing is consumption-based and billed monthly in arrears, making it easy for our customers to track usage on an 16
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` ongoing basis and optimize their deployments. The pricing for each of our products is available on our website. For example, the standard price for a Droplet is$5.00 per month, and our Managed Database product is available starting at$15.00 per month. We have historically generated almost all of our revenue from our efficient self-service marketing model, which 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 the three months endedMarch 31, 2021 and 2020, our sales and marketing expense was approximately 11% and 13% of our revenue, respectively. The efficiency of our go-to-market model and our focus on the needs of the individual and SMB markets have enabled us to drive organic growth and establish a truly global customer base across a broad range of industries. We had approximately 585,000 customers as ofMarch 31, 2021 , up from approximately 546,000 as ofMarch 31, 2020 . Our customers are spread across approximately 185 countries, and around two-thirds of our revenue has historically come from customers located outsidethe United States . For the three months endedMarch 31, 2021 , 38% of our revenue was generated fromNorth America , 29% fromEurope , 23% fromAsia and 10% from the rest of the world. We have a growing number of customers with higher spending levels, and our existing customers are continuing to expand their business with us. Our average revenue per customer, or ARPU, has increased significantly, from$44.68 in the quarter endedMarch 31, 2020 to$53.68 in the quarter endedMarch 31, 2021 . We had no material customer concentration for the three months endedMarch 31, 2021 as our top 25 customers made up approximately 10% of our revenue. We have experienced strong and predictable growth in recent periods. Our annual run-rate revenue, or ARR, as ofMarch 31, 2021 was$388 million , up from$299 million as ofMarch 31, 2020 . ARR as of the end of each month represents total revenue for that month multiplied by 12. Impact of the COVID-19 Pandemic To date, the COVID-19 pandemic has not had a significant impact on our operations or financial performance. However, the extent of the impact of the COVID-19 pandemic on our operational and financial performance depends on certain developments, including the duration and spread of the outbreak, its impact on industry events, and its effect on our customers, partners, suppliers and vendors and other parties with whom we do business, all of which are uncertain and cannot be predicted at this time. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and employee work locations, and conducting our marketing and sales activities virtually. We actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our business operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, vendors and stockholders. The extent to which the COVID-19 pandemic may impact our results of operations and financial condition remains uncertain. Key Factors Affecting Our Performance Increasing Importance of Cloud Computing and Developers Our future success depends in large part on the continuing adoption of cloud computing, proliferation of cloud-native start-ups and SMBs and the increasing importance of developers, all of which are driving the adoption of our developer cloud platform. We believe our market opportunity is large and that these factors will continue to drive our growth. We plan to continue to invest significantly in scaling across many organizational functions in order to grow our operations both domestically and internationally to capitalize on these trends. Growing our Customer Base We believe there is a substantial opportunity to further expand our customer base, and our future growth depends, in large part, on our ability to increase the number of customers using our cloud computing platform. We have historically attracted customers by offering a low-friction, self-service cloud platform combined with a highly-efficient self-service marketing model. We are investing in strategies that we believe will continue to drive new customer adoption, especially among SMB customers, such as implementing new marketing initiatives that further optimize our self-service revenue funnel and expanding our go-to market teams in select international locations. Our ability to attract new customers will depend on a number of factors, including our success in recruiting and expanding our sales and marketing organization and competitive dynamics in our target markets. 17
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` Increasing Usage by Our Existing Customers Our customer base of more than 585,000 customers represents a significant opportunity for further consumption of our services. There are substantial opportunities to expand revenue within our large customer base through increased usage of our platform as our customers grow their businesses, adoption of additional product offerings and targeted sales initiatives focused on our larger customers. Our consumption-based pricing model makes it frictionless for customers to increase their usage of our platform as they require more compute and storage as they grow and scale. We have also expanded the breadth of our platform offerings and will continue to do so as we have experienced strong adoption of recently developed products. To accelerate this growth across our larger customers, we have recently complemented our self-service marketing model with internal go-to-market teams that are specifically focused on expanding our business with our larger customers. Our ability to increase the usage of our platform by existing customers will depend on a number of factors, including our customers' satisfaction with our platform and product offerings, competition, pricing and overall changes in our customers' spending levels. Enhancing Our Platform and Product Offerings We believe the market opportunity for serving developers, start-ups and SMBs is very large and goes far beyond providing the core IaaS services of compute, storage and networking. We have a history of, and will continue to invest significantly in, developing and delivering innovative products, features and functionality targeted at our core customer base. In addition, while we have not been focused on acquisition opportunities to drive our growth, we may pursue both strategic partnerships and acquisitions that we believe will be complementary to our business, accelerate customer acquisition, increase usage of our platform and/or expand our product offerings in our core markets. Our results of operations may fluctuate as we make these investments to drive usage and take advantage of our expansive market opportunity. Key Business Metrics We utilize the key metrics set forth below to help us evaluate our business and growth, identify trends, formulate financial projections and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, and other companies may not calculate similarly titled metrics in a consistent manner, which may hinder comparability. Three Months Ended March 31, 2021 2020 Customers 585,466 546,453 ARPU $ 53.68 $ 44.68 ARR (in millions) $ 388 $ 299 Net dollar retention rate 107 % 101 % Capital expenditures as a percentage of revenue 25 % 44 %
Customers
We believe that the number of customers is an important indicator of the growth
of our business and future revenue opportunity. We define a customer at the end
of any period as a person or entity who has incurred usage in the period and, as
a result, has generated an invoice of greater than
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ARR
Given the renewable nature of our business, we view annual run-rate revenue as an important indicator of our current progress towards meeting our revenue targets and projected growth rate going forward. We calculate ARR at a point in time by multiplying the latest monthly period's revenue by 12. Net Dollar Retention Rate Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue from our existing customers. We have a history of retaining customers for multiple years and in many cases increasing their spend with us over time. To help us measure our performance in this area, we monitor our net dollar retention rate. We calculate net dollar retention rate monthly by starting with the revenue from the cohort of all customers during the corresponding month 12 months prior, or the Prior Period Revenue. We then calculate the revenue from these same customers as of the current month, or the Current Period Revenue, including any expansion and net of any contraction or attrition from these customers over the last 12 months. The calculation also includes revenue from customers that generated revenue before, but not in, the corresponding month 12 months prior, but subsequently generated revenue in the current month and are therefore reflected in the Current Period Revenue. We include this group of re-engaged customers in this calculation because our customers frequently use our platform for projects that stop and start over time. We then divide the total Current Period Revenue by the total Prior Period Revenue to arrive at the net dollar retention rate for the relevant month. For a quarterly or annual period, the net dollar retention rate is determined as the average monthly net dollar retention rates over such three or 12-month period. Our net dollar retention rate for the three months endedMarch 31, 2021 includes approximately 3% from re-engaged customers. Capital Expenditures as a Percentage of Revenue We consider capital expenditures as a percentage of revenue to be an important indicator of our efficiency of capital spend. We calculate capital expenditures as a percentage of revenue by dividing total capital expenditures during the period, including purchases of intangible assets, seller financed equipment purchases and acquisition of property and equipment from capital leases, by revenue. NonGAAP Financial Measures To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles inthe United States , or GAAP, we provide investors with non-GAAP financial measures including: (i) adjusted gross profit and adjusted gross margin; and (ii) adjusted EBITDA and adjusted EBITDA margin. 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. Adjusted Gross Profit and Adjusted Gross Margin We believe adjusted gross profit and adjusted gross margin, when taken together with our GAAP financial results, provides a meaningful assessment of our performance, and is useful for the preparation of our annual operating budget and quarterly forecasts. We define adjusted gross profit as gross profit exclusive of stock-based compensation, amortization of capitalized internal-use software development costs and depreciation of our data center equipment included within Cost of revenue. We exclude stock-based compensation, which is a non-cash item, because we do not consider it indicative of our core operating performance. We exclude depreciation and amortization, which primarily relates to our investments in our data center servers that are long lived assets with an economic life of five years, because it may not reflect our current or future cash spending levels to support our business. While we intend to spend a significant amount on capital expenditures on an absolute basis in the coming years, our capital expenditures as a percentage of revenue has declined significantly and will continue to decline. We define adjusted gross margin as a percentage of adjusted gross profit to revenue. The following table presents a reconciliation of gross profit, the most directly comparable financial measure stated in accordance with GAAP, to adjusted gross profit, for each of the periods presented: 19
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` Three Months Ended March 31, (In thousands) 2021 2020 Gross profit$ 54,117 $ 38,109 Adjustments: Depreciation and amortization 19,225 16,048 Stock-based compensation 196 24 Adjusted gross profit$ 73,538 $ 54,181 Gross margin 58 % 52 % Adjusted gross margin 79 % 74 % Adjusted EBITDA and Adjusted EBITDA Margin We define adjusted EBITDA as net loss attributable to common stockholders, adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, income tax expense, loss on extinguishment of debt, restructuring and severance expense, asset impairment, revaluation of warrants and other charges. 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, determining incentive compensation, evaluating our operating performance, and for internal planning and forecasting purposes. 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 loss attributable to common stockholders and other GAAP results. The following table presents a reconciliation of net 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: Three Months Ended March 31, (In thousands) 2021 2020 Net loss attributable to common stockholders$ (3,339) $ (16,933)
Adjustments:
Depreciation and amortization 20,951 17,394 Stock-based compensation(1) 6,624 9,382 Interest expense 2,256 3,516 Income tax expense 996 748 Loss on extinguishment of debt 3,435 259 Restructuring and severance(2) - 3,292 Asset impairment(3) - 538 Revaluation of warrants (556) 3 Other(4) 315 243 Adjusted EBITDA$ 30,682 $ 18,442 Revenue$ 93,661 $ 72,792 Adjusted EBITDA margin 33 % 25 % ___________________ 20
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` (1)Consists of stock-based compensation for the three months endedMarch 31, 2020 and includes compensation of$7.6 million related to secondary sales of common stock by certain current and former employees. There were no such expenses recorded for the three months endedMarch 31, 2021 . (2)Consists primarily of expenses related to changes in our senior leadership, sales and infrastructure teams. (3)Consists of internal-use software impairment charges related to software that is no longer being used. (4)Consists primarily of third-party consulting costs to enhance our finance function. Components of Results of Operations Revenue We provide cloud computing services, including but not limited to compute, storage and networking, to our customers. We recognize revenue based on the customer utilization of these resources. Customer contracts are primarily month-to-month and do not include any minimum guaranteed quantities or fees. Fees are billed monthly, and payment is typically due upon invoicing. Revenue is recognized net of allowances for credits and any taxes collected from customers, which are subsequently remitted to governmental authorities. We may offer sales incentives in the form of promotional and referral credits and grant credits to encourage customers to use our services. These types of promotional and referral credits typically expire in two months or less if not used. For credits earned with a purchase, they are recorded as contract liabilities when earned and recognized at the earlier of redemption or expiration. The majority of credits are redeemed in the month they are earned. Cost of Revenue Cost of revenue consists primarily of fees related to operating in third-party co-location facilities, personnel expenses for those directly supporting our data centers and non-personnel costs, including amortization of capitalized internal-use software development costs and depreciation of our data center equipment. Third-party co-location facility costs include data center rental fees, power costs, maintenance fees, network and bandwidth. Personnel expenses include salaries, bonuses, benefits, and stock-based compensation. We intend to continue to invest additional resources in our infrastructure to support our product portfolio and scalability of our customer base. The level, timing and relative investment in our infrastructure could affect our cost of revenue in the future. Operating Expenses Research and Development Expenses Research and development expenses consist primarily of personnel costs including salaries, bonuses, benefits and stock-based compensation. Research and development expenses also include amortization of capitalized internal-use software development costs for research and development activities, which are amortized over three years, and professional services, as well as costs related to our efforts to add new features to our existing offerings, develop new offerings, and ensure the security, performance, and reliability of our global cloud platform. We expect research and development expenses to increase in absolute dollars as we continue to invest in our platform and product offerings. Sales and Marketing Expenses 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, advertising and professional service fees. We expect sales and marketing expenses to continue to increase in absolute dollars as we enhance our product offerings and implement new marketing strategies. General and Administrative Expenses General and administrative expenses consist primarily of personnel costs of our human resources, legal, finance, and other administrative functions including salaries, bonuses, benefits and stock-based compensation. General and administrative expenses also include bad debt expense, software, payment processing fees, depreciation and amortization expenses, rent and facilities costs, and other administrative costs. We expect to incur significant additional legal, accounting and other expenses to support our transition to and operations as a public company, including costs associated with our compliance with the Sarbanes-Oxley Act. We also expect general and administrative expenses to increase in absolute dollars as we continue to grow our business. 21
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` Other (Income) Expense Other (income) expense consists primarily of interest expense on our existing credit facility and third-party equipment financing, loss on extinguishment of debt, and gains or losses on foreign currency exchange. Income Tax Expense Income tax expense consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on ourU.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. Results of Operations The following table sets forth our results of operations for the periods presented: Three Months Ended March 31, 2021 2020 (in thousands) Revenue$ 93,661 $ 72,792 Cost of revenue(1) 39,544 34,683 Gross profit 54,117 38,109 Operating expenses: Research and development(1) 22,402 19,477 Sales and marketing(1) 10,421 9,454 General and administrative(1) 18,040 21,665 Total operating expenses 50,863 50,596 Net income (loss) from operations 3,254 (12,487) Other (income) expense 5,597 3,698 Loss before income taxes (2,343) (16,185) Income tax expense 996 748 Net loss attributable to common stockholders$ (3,339) $ (16,933)
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(1) Includes stock-based compensation as follows:
Three Months Ended March 31, 2021 2020 (in thousands) Cost of revenue $ 196$ 24 Research and development 2,636 2,221 Sales and marketing 1,137 226 General and administrative 2,655 6,911 Total$ 6,624 $ 9,382
Stock-based compensation for the three months ended
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The following table sets forth our results of operations as a percentage of revenue for the periods presented:
Three Months Ended March 31, 2021 2020 Revenue 100 % 100 % Cost of revenue 42 48 Gross profit 58 52 Operating expenses: Research and development 24 27 Sales and marketing 11 13 General and administrative 19 30 Total operating expenses 54 70 Net income (loss) from operations 4 (18) Other (income) expense 6 5 Loss before income taxes (2) (23) Income tax expense 1 1 Net loss attributable to common stockholders (3) % (24) % Comparison of the Three Months EndedMarch 31, 2021 and 2020 Revenue Three Months Ended March 31, 2021 2020 $ Change % Change (in thousands) Revenue$ 93,661 $ 72,792 $ 20,869 29 %
Revenue increased
Three Months Ended March 31, 2021 2020 $ Change % Change (in thousands) Cost of revenue$ 39,544 $ 34,683 $ 4,861 14 %
Cost of revenue increased
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` Operating Expenses Three Months Ended March 31, 2021 2020 $ Change % Change (in thousands) Research and development$ 22,402 $ 19,477 $ 2,925 15 % Sales and marketing 10,421 9,454 967 10 General and administrative 18,040 21,665 (3,625) (17) Total operating expenses$ 50,863 $ 50,596 $ 267 1 % Research and development expenses increased$2.9 million , or 15%, for the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 , primarily due to higher personnel costs to support our growing operations and lower capitalization of internal-use software costs, partially offset by a decrease in restructuring costs. Sales and marketing expenses increased$1.0 million , or 10%, for the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 , primarily due to an increase in advertising costs and stock-based compensation, partially offset by lower restructuring and severance costs. General and administrative expenses decreased$3.6 million , or 17%, for the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 , primarily due to higher stock-based compensation including secondary sales of our common stock in the prior year and a decrease in bad debt expense, partially offset by an increase in professional services and payment processing fees. Other (Income) Expense Three Months Ended March 31, 2021 2020 $ Change % Change (in thousands) Other (income) expense$ 5,597 $ 3,698 $ 1,899 51 % Other (income) expense increased$1.9 million , or 51%, for the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 , primarily due to the loss on extinguishment of debt related to our payoff of the Term Loan and notes payable. Income Tax Expense Three Months Ended March 31, 2021 2020 $ Change % Change (in thousands) Income tax expense $ 996$ 748 $ 248 33 % Income tax expense increased$0.2 million , or 33%, for the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 , primarily due to income taxes related to international jurisdictions in which we conduct business. Liquidity and Capital Resources We have funded our operations since inception primarily with cash flow generated by operations, private offerings of our securities, borrowings under our existing credit facility and capital expenditure financings. InMarch 2021 , we consummated our initial public offering of 16,500,000 shares of our common stock at an offering price of$47.00 per share resulting in aggregate net proceeds to us of$723.1 million after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We believe that our existing cash and cash equivalents and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. 24
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The following table summarizes our cash flows for the periods presented:
Three Months Ended March 31, (In thousands) 2021 2020 Net cash provided by operating activities $ 19,791$ 1,320 Net cash used in investing activities (23,687) (28,227) Net cash provided by financing activities 463,638 84,459 Net increase in cash and cash equivalent 459,742 57,552 Operating Activities Our largest source of operating cash is cash collections from sales to our customers. Our primary uses of cash from operating activities are for personnel expenses, data center co-location expenses, marketing expenses, payment processing fees, bandwidth and connectivity, server maintenance and software licensing fees. For the three months endedMarch 31, 2021 , we generated positive cash flows through our public offering of securities. For the three months endedMarch 31, 2020 , we generated negative cash flows and supplemented working capital requirements through net proceeds from borrowings under our Credit Facility. Net cash provided by operating activities was$19.8 million and$1.3 million for the three months endedMarch 31, 2021 and 2020, respectively, primarily driven by an increase in cash collections from higher revenues offset by an increase in cash expenses from personnel related costs. Investing Activities Net cash used in investing activities was$23.7 million and$28.2 million for the three months endedMarch 31, 2021 and 2020, respectively, primarily as a result of decreases in capitalization of internal-use software development costs and acquired intangibles related to our IP addresses. Financing Activities Net cash provided by financing activities of$463.6 million for the three months endedMarch 31, 2021 was primarily due to net proceeds from our IPO of$723.1 million , partially offset by repayments on the Credit Facility and notes payable of$259.7 million . Net cash provided by financing activities of$84.5 million for the three months endedMarch 31, 2020 was primarily due to$78.4 million in net additional borrowings under the Term Loan and Credit Facility and$7.1 million of proceeds from third-party equipment financings, partially offset by$3.3 million in repayment of notes payable associated with financed equipment purchases. Contractual Obligations and Commitments During the three months endedMarch 31, 2021 , we paid the remaining obligations on the Credit Facility and all outstanding notes payable. With the exception of the aforementioned debt repayment, there have been no material changes to our obligations under our operating leases and purchase commitments as compared to those disclosed in the Final Prospectus. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Critical Accounting Policies and Estimates Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States . The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions. 25
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` There have been no material changes to our critical accounting policies as compared to those disclosed in the Final Prospectus. Recently Adopted Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, in our Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements. Emerging Growth Company Status We are an emerging growth company, as defined under the JOBS Act. The JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act until the earlier of the date we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
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