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Cloud and file sharing firm Dropbox reported better than expected third quarter earnings after the close Thursday. $DBX was one of the most anticipated IPO's this year and was up 47% quickly but has pulled back like many tech stocks. 

DropBox IPO

Dropbox Inc NASDAQ: DBX · Reported Earnings After Close Thursday

$0.11 Beat Exp $0.06 EPS and $360.3 Beat $352.2 million forecast in revenue 

Earnings

Dropbox Inc. (DBX) released third-quarter fiscal 2018 results on Nov 8 with adjusted earnings of 11 cents per share, beating analyst estimates for 6 cents. Dropbox reported revenue of $360.3 million, up 26% from the year-ago period. That beat predictions of $352 million. In the last reported quarter, the company reported loss of 1 cent per share on revenues of $339 million.

Partnerships

Dropbox has also announced various partnership programs recently. The company recently entered into a partnership with Moovly Media Inc. and Zoom Video Communications. The alliance is making it easier for people and organizations to work with files on the go.  DBX also partners with Hewlett Packard Enterprise Company, Ingram Micro and Adobe Systems.   Dropbox’s extended partnerships and strong focus on product innovation and expansion is likely to favor third-quarter results.

Dropbox Inc NASDAQ: DBX ·

Market Reaction  > After hours $26.34 +$1.60 (+6.49%)

Highlights

  • Paying users (PU) in the third quarter totaled 12.3 million, up from 10.4 million for the same period last year
  • A 6% increase in average revenue per user (ARPU)
  • The company ended the quarter with cash and equivalents of $1 billion.
  • ARPU rose to $118.60 from $112.05 for the same period last year.

DBX Earnings Q3 18

"We delivered another quarter of strong execution, driving healthy top line growth and expanding free cash flow margins," Dropbox Chief Executive Drew Houston said in prepared remarks.

Dropbox IPO Recap

The day started with markets roiled by America putting $60 billion of tariffs on China as CEO Drew Houston and co-founder Arash Ferdowsi rang the opening bell at Nasdaq. They had to wait for a while before Dropbox opened for trading at 11:35 ET but no doubt it was worth the wait for them.

  • Dropbox IPO Opening Day NASDAQ
  • $DBX AT CLOSE 4:00 PM EDT 03/23/18 $28.48 USD +$7.48 +35.62%
  • Volume 55,737,937
  • Opening Day Range $27.84 - 31.60

Shares of Dropbox opened strongly with the symbol $DBX at $29,00, up from the company’s IPO price of $21. There were concerns with technology this week as the Facebook $FB data scandal continued to lurch from one pillar to the next. 

About Dropbox

Dropbox is a collaboration software company known for its cloud and file-sharing tools. $DBX was founded back in 2007 by Houston and Ferdowsi. The firm exploded out of the blocks, reaching a multi billion valuation in just four years and a $10 billion valuation in 2014. Dropbox reported revenue of $1.1 billion for 2017, up  nearly a third from the year before. At its opening price of $29, Dropbox’s market capitalization is aroundt $11 billion.

Chief operating officer Dennis Woodside said in an interview. “What’s interesting to them is, we built this enduring business that combines the best of consumer tech in its virality and ability to scale—with hundreds of millions of people using it around the world—with the predictability of a subscription business.”

Dropbox in its regulatory S-1 filing for the IPO disclosed it had more than 500 million registered users, the majority of whom use the product for free: 11 million users pay for the service, paying an average of $9.33 per month.

It has been said the IPO sold itself and that's because the software product mostly sells itself. Dropbox reported sales and marketing costs of $314 million in 2017, less than it spent on research and development. That is a novelty in the unicorn kingdom sales cost LESS than R&D. The company the most compared to Dropbox is Box, another enterprise collaboration company, it reported sales and marketing of $303 million for its fiscal year ending in January, on revenue of $506 million.

Read: Most Anticipated Brands to IPO in 2018

Who Profited From The DBX IPO?

Aside from the flounders one of the biggest winners in Dropbox’s IPO is venture capital firm Sequoia Capital, which owned an unusually large 25% position in the company. This is a an oversized bet that paid off for the group. Other venture capital firms that took part in the intital funding include Accel Partners, Index Ventures and Greylock Partners.

The quick success of Dropbox allowed the founders to limit its rounds of funding over the years. Indeed there were three years separating its Series A and Series B rounds, and then more than two years until its Series C. Over that period, its valuation soared from $25 million to $10 billion. Not bad and even more significantly DBX founders and early investors are not as heavily diluted as at other software companies.

Founders Houston owned 24.3% and Ferdowsi 9.8% of the company at the time of its offering, giving Houston a fortune of $3.1 billion and making Ferdowsi a billionaire with a net worth of $1.2 billion at the closing share price of around $31 on day one.

Dropbox’s successful first day on the market augers well for the next batch of tech unicorns expected to go public in upcoming months.

"Dropbox is going public at the right time It has an attractive story to justify its need for financing and the market dynamics are good, but at the same time the environment is also competitive." said Josh Lerner, professor of Investment Banking at Harvard Business School.

Notably competitor Box shares, they went public in 2015, were down 6% in mid-day trading on Friday, possibly some adjusting to the sectors exposure but probably also affected by the Facebook and China carnage. $BOX still has a market capitalization of just under $3 billion.

“Congrats @drewhouston and @dropbox on the epic IPO! Welcome to the neighborhood!” Box CEO Aaron Levie tweeted.

The next big IPO was music streaming service Spotify, which was valued at roughly $19 billion in the private market. It has also filed for a direct listing and will start trading on the New York Stock Exchange on April 3. 

From The Traders Community Research Desk

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