On February 21st, Beijing time, cloud storage company Dropbox announced the fourth quarter earnings results. According to the financial report, Dropbox revenue was 446 million US dollars, an increase of 19% year-on-year, exceeding market expectations of 443 million US dollars; net loss narrowed to 6.6 million US dollars, compared with a loss of 9.5 million US dollars in the same period last year. Affected by the release of the financial report, Dropbox rose by 15% in after hours.
As a company that provides retail cloud storage services, Dropbox mainly provides network file synchronization tools for individuals and SME users. Users can use Dropbox for cloud storage, sharing and content collaboration of files. Providing users with paid product services has also become an important driving force for the rapid development of Dropbox's performance.
Dropbox ’s share price performance was not satisfactory last year, with a decline of 35.6% in 2019. After the release of the new financial report, the stock price rose by more than 10%, which is a good boost to the performance of the stock price. Why did the performance of this financial report exceed market expectations? Which core data has been recognized by the outside world?
Revenue increased by 19% year-on-year and net loss narrowed by 30.5% year-on-year
Prior to the release of the financial report, for the quarter, the company expected revenues between $ 442 million and $ 444 million. Zacks Consensus revenue is estimated to be $ 443.2 million, an increase of 17.9% from the number reported in the same period last year. In comparison, revenue in the fourth quarter of last year was $ 375.9 million and earnings per share were 10 cents.
According to the financial report, in the fourth quarter, Dropbox's total revenue was 446 million US dollars, an increase of 19% year-on-year, and also exceeded market expectations of 443 million US dollars, compared with 375.9 million US dollars in the same period last year. If calculated at a constant exchange rate, the annual growth rate will reach 20%.
GAAP's net loss narrowed to US $ 6.6 million in the fourth quarter, compared with a loss of US $ 9.5 million in the same period last year. Non-GAAP net profit was US $ 67.4 million, compared with US $ 42.3 million in the same period last year.
Because the financial report performed better than market expectations, as of press time, the stock price of Dropbox was $ 20.73 after-hours, up 10.77% after-hours, and the market value was $ 7.773 billion.
In the fourth quarter, GAAP's diluted loss per share was US $ 0.02, which was consistent with the loss of US $ 0.02 in the same period last year. Non-GAAP diluted net income per share was US $ 0.16, compared with US $ 0.10 in the same period last year. Adjusted diluted earnings per share were $ 0.16, exceeding analysts ’average expectations of $ 0.14, compared with $ 0.10 in the same period last year.
The financial report also shows that Dropbox's paid users in the fourth quarter was 14.3 million, higher than the 12.7 million in the same period last year, and higher than the 14.2 million expected by analysts. The average revenue per paying user is US $ 125, higher than the US $ 119.61 in the same period last year, and also higher than the analyst's expectation of US $ 123.81.
The gross profit margin was 76.5%, compared with 74.9% in the same period last year. Non-GAAP gross profit margin was 77.6%, compared with 75.7% in the same period last year. Operating margin was -1.5%, compared with -3.2% in the same period last year. Non-GAAP operating margin was 15.6%, compared with 11.0% in the same period last year.
The basic and diluted net loss per share was US $ 0.02, compared with US $ 0.02 in the same period last year. Non-GAAP diluted net income per share was $ 0.16, compared to $ 0.10 in the same period last year. The net loss was US $ 6.6 million, compared with US $ 9.5 million in the same period last year. Non-GAAP net income was $ 67.4 million, compared with $ 42.3 million in the same period last year. Net cash generated from operating activities was US $ 186.8 million, compared with US $ 123.7 million in the same period last year. Free cash flow was US $ 161.3 million, compared with US $ 88.3 million in the same period last year.
FY2019 annual results
Total revenue was US $ 1.661 billion, an increase of 19% year-on-year. At constant exchange rates, the year-on-year growth will be 21%. The net loss was US $ 502.7 million, compared with US $ 484.9 million in the same period last year. Non-GAAP net income was US $ 207 million, compared with US $ 166.2 million in the same period last year. The average income of each paying user was 123.07 dollars, compared with 117.64 dollars in the same period last year.
The gross profit margin was 75.3%, compared with 71.6% in the same period last year. Non-GAAP gross profit margin was 76.4%, compared with 75.1% in the same period last year. Operating margin was 4.8%, compared with 35.5% in the same period last year. Non-GAAP operating margin was 12.3%, compared with 12.2% in the same period last year.
Net cash generated from operating activities was US $ 528.5 million, compared with US $ 425.4 million in the same period last year. Free cash flow was US $ 392.4 million, compared with US $ 362.4 million in the same period last year. The basic and diluted net loss per share was US $ 0.13, compared with US $ 1.35 in the same period last year. Non-GAAP diluted net income per share was $ 0.50, compared with $ 0.41 in the same period last year.
Compared with the financial results of the last quarter, Dropbox's chain growth has its own bright spots. Total revenue was US $ 428.2 million, an increase of 19% from US $ 360.3 million in the same period last year. Dropbox ’s third-quarter net loss was $ 17 million, or a combined loss of $ 0.04 per share; last year ’s net loss was $ 5.8 million, or a combined loss of $ 0.01 per share.
Not in accordance with US GAAP, Dropbox ’s third-quarter net profit reached US $ 55.9 million, a year-on-year increase of 24.2%, and diluted earnings per share of US $ 0.13. Dropbox revenue and earnings per share in the third quarter exceeded market expectations. As of the end of the third quarter, Dropbox had 14 million subscribers. Dropbox's average revenue per user in the third quarter reached $ 123.15.
Judging from this financial report, Dropbox's performance in terms of revenue and net loss is remarkable, which has also become an important reason for its stock price rise this time. In the end, what is the overall performance of this financial report? Let's take a closer look at the financial report data for specific analysis.
The year-on-year loss limit has been narrowed and better control of customer acquisition costs is critical
In this quarter, Dropbox ’s net loss narrowed to $ 6.6 million, compared with a loss of $ 9.5 million in the same period last year. Non-GAAP net profit was US $ 67.4 million, compared with US $ 42.3 million in the same period last year. The loss has narrowed, which also shows that Dropbox has improved in cost control.
Compared with the previous quarter, this time the amount of losses is still much lower than the previous month. Under US GAAP, Dropbox's net loss in the third quarter was US $ 17 million, much higher than the US $ 5.8 million in the same period last year. The diluted net loss per share was US $ 0.04, which was also higher than US $ 0.01 in the same period last year.
Although the loss has been reduced, it has not yet achieved profitability, and maintaining a very stable profit growth path still has a big impact. Among them, the reason for the net profit is still the cost of customer acquisition. In order to increase the growth of registered users, especially paying users, Dropbox has invested a lot of costs in acquiring customers, but the current increase in the cost of acquiring customers far exceeds the cost of acquiring customers.
In recent years, Dropbox's cost of acquiring customers has not been low. According to Fengyun's report: In 2016, the marketing expenses paid by Dropbox for each new paying user was US $ 109, while in 2017 it had risen to US $ 142.7, a year-on-year increase of 31%. In 2018, the fee further increased to US $ 258.6, a year-on-year increase of 81%. With the increase in marketing costs, this directly affects Dropbox's net profit space, which is also the main reason why the loss limit will expand.
The growth of paying users is higher than market expectations but the growth rate has slowed down
During the quarter, Dropbox ’s fourth-quarter paid users were 14.3 million, higher than the 14 million in the previous quarter and higher than the 14.2 million expected by analysts. The average revenue for each paying user is $ 125, higher than the previous quarter ’s $ 123.15 and also higher than analysts ’expectation of $ 123.81.
Judging from the growth of this data, its performance in this quarter has improved somewhat, but the growth of this data cannot be taken lightly. Compared with the growth rate of the previous quarters, its chain growth decreased, compared with 14 million in the previous quarter, the chain growth was only 2.14%. Although the growth of paying users was higher than expected, this quarter-on-quarter growth rate was also the lowest since the second quarter of 2018. In the second quarter of 2019, the number of paying users was 1360 to play, a month-on-month increase of 3.03%.
In order to attract registered users to become paying users, Dropbox provides registered users with a free trial function. It is estimated that only 2% -3% of registered users will be converted into paying users. For investors, what they value is Dropbox's growth upside, and the growth of the data of paying users is a key indicator. Once the growth rate declines in the future, this will make investors question their ability to monetize their businesses.
For Dropbox, how to continue to increase the growth of paying users is particularly critical in the future, which is also the key to stabilizing investor trust. How to make better products on the product side is still the focus of attracting more paying users to choose.
Core products need to establish higher barriers to competition. Giants push free storage to affect their revenue
Previously, the core of Dropbox was as a medium for storing and sharing documents. By raising this product, it earned service fees from paying users. In the rapidly growing retail cloud storage market in the past 10 years, Dropbox is one of the first companies to enter this field. Taking advantage of the early development, this also allows Dropbox to quickly gain a foothold in the cloud storage industry with this product service.
In the future, if you want to use this product to achieve greater revenue growth, Dropbox still has to increase investment in technology. Previously, the short-selling agency SP thought that Dropbox was a slow-growing low-value-added enterprise, and its business had almost no network effects or barriers to entry. How to enhance competitiveness on the product side in the future is also an important move to consolidate revenue growth
At present, industry giants such as Google, Microsoft and Apple have begun offering cheap or free storage plans as part of their broader cloud software solutions, which will affect Dropbox's revenue growth to a certain extent. According to Dropbox's official website, its annual members' monthly payment prices range from $ 9.99 to $ 20. In contrast, Google ’s cloud solution, Google One, provides free cloud storage services up to 15GB, and a fee-based package that provides greater storage space has a monthly minimum price of only $ 1.99.
From a price point of view, which company's price-performance ratio is better at a glance, which also allows the technology giant to seize many paying users. Providing free or cheap file storage and sharing services to individual users has become the new normal in the industry. Giants such as Google, Apple, and Microsoft are financially strong and can subsidize customers, but Dropbox is clearly difficult to compete with.
Conclusion
Judging from the financial report released by Dropbox, its performance in core data is higher than market expectations, which also boosted its stock price performance and to a large extent consolidated investors' confidence in its future development. But for Dropbox, it still can't be taken lightly. The current stock price performance is still a little bit worse than last year's performance. It is important to maintain the growth momentum.
As the competition in the cloud storage industry intensifies, the entry of many technology giants has undoubtedly accelerated the fierce competition in the industry. For Dropbox, the current main product revenue is still facing the impact of external free mode. This situation will inevitably affect its revenue growth. How to improve the competitiveness of the product in the future and attract more paying users, perhaps It is the key to driving a rebound in stock prices.
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