Dropbox: Fiscal 3Q19 Financial Results

(in $ million)	3Q18	3Q19	9 mo. 18	9 mo. 19
Revenue	360.3	428.2	1,016	1,215
*Growth*		19%		*20%*
GAAP net income (loss)	(5.8)	(17.0)	(475.4)	(46.1)

Dropbox, Inc. announced financial results for its third fiscal quarter ended September 30, 2019.

“We had a strong Q3 highlighted by 19% top line growth and margin expansion,” said co-founder and CEO Drew Houston. “We’re excited about the early momentum we’ve seen with our new desktop app – millions are already using it since it was made available on September 25. Together with the launch of Dropbox Spaces, we’re making great progress towards building the world’s first smart workspace where people can focus on the work that matters.”

3FQ19 Results
• Total revenue was $428.2 million, an increase of 19% from 3FQ18.
• Paying users totaled 14.0 million, as compared to 12.3 million for 3FQ18 . Average revenue per paying user was $123.15, as compared to $118.60 for 3FQ18.
• GAAP gross margin was 75.5%, as compared to 75.0% 3FQ18. Non-GAAP gross margin was 76.7%, as compared to 75.9% in 3FQ18.
• GAAP operating margin was (4.3)%, as compared to (2.5)% in 3FQ18. Non-GAAP operating margin, which excludes stock-based compensation, acquisition-related and other expenses, and amortization of acquired intangible assets, was 13.1%, as compared to 12.8% in 3FQ18.
• GAAP net loss was ($17.0) million, as compared to ($5.8) million in 3FQ18. Non-GAAP net income was $55.9 million, as compared to $45.0 million in 3FQ18.
• Net cash provided by operating activities was $149.7 million, as compared to $128.0 million in 3FQ18. Free cash flow was $102.5 million, as compared to $120.0 million in 3FQ18.
• GAAP basic and diluted net loss per share was ($0.04), as compared to ($0.01) in 3FQ18. Non-GAAP diluted net income per share was $0.13, as compared to $0.11 in 3FQ18. (1)
• Cash, cash equivalents and short-term investments were $1.031 billion at the end of 3FQ19.

(1) Non-GAAP diluted net income per share is calculated based upon $418.7 million and $420.0 million diluted weighted-average shares of common stock for the three months ended September 30, 2019 and 2018, respectively.

Comments

Dropbox records $446 million in revenue for the quarter, more than guidance ($442-$444 million) and $1,661 for FY, also more than expected $1.659 billion) putting the firm ≠11 position of the WW storage companies.

Millions of users are active in its desktop experience and with rollout to just a portion of its user base it has seen early adoption over 450,000 business teams.

80% of subscribers use Dropbox for work, but a substantial portion of over 600 million registered users - in its first 2 years as a public company - depend on the company to address personal used cases as well. Over 40% of its business team includes a member who is formally an individual subscriber, highlighting the importance of investing in personal users as they're an integral part of its customer journey and driver of business adoption.

ARR for the quarter was $1.820 billion up 19% from the year ago period, ending 4FQ19 with 14.3 million paying users, and ARPU was $125 in the period.

But the vendor never was profitable for each of his quarters since its inception in 2007 and then $756 million IPO in March 2018.

1FQ20 and FY20 guidance for revenue is $452-$454 million (up 6% Q/Q) and $1,890-$1,905 million (up 14-15% Y/Y), respectively.

Co-founder and CEO Drew Houston said: "By the end of this year, our goal is to become a profitable business on a GAAP basis."

Revenue
in $ million

Y/Y growth

Net loss
in $ million

2015

603.8

(352.9)

2016

844.8