UPDATED 19:59 EDT / MAY 06 2021

CLOUD

Dropbox raises full-year guidance after another solid earnings beat

Cloud file-sharing company Dropbox Inc. has gotten off to a solid start in the first quarter of its fiscal 2021, beating expectations on both profit and revenue.

The company reported a profit before certain costs such as stock compensation today of 35 cents per share on revenue of $511.6 million, up 12% from the same period one year ago. That comfortably exceeded Wall Street’s model of 30 cents per share in earnings and $505.18 million in revenue.

Dropbox Chief Executive Drew Houston (pictured) waxed about the company’s various achievements during the quarter.

“We kicked off the year with a profitable Q1, along with strong revenue growth and free cash flow,” Houston said in prepared remarks. “We welcomed DocSend to the team, saw great momentum with HelloSign, and continued to make meaningful progress against our 2021 priorities.”

Dropbox, which sells cloud-based file storage services that are popular among enterprises, has like many other cloud technology firms benefited enormously from the increased need for tools that enable remote work during the COVID-19 pandemic. The company has now beaten expectations in its previous four quarters.

“The pandemic has been an unspeakable calamity for millions of people and families, and and enormous challenge for countless companies,” said analyst Charles King of Pund-IT Inc. “Vendors like Dropbox have assisted commercial organizations of every sort to keep operating by helping them learn and adapt to new ways of doing business.”

During the first quarter, Dropbox saw total annual recurring revenue hit $2.112 billion, up 13% from a year ago. Its paying user base grew too, ending the quarter at 15.83 million, up from 14.59 million one year ago. Dropbox also reported average revenue per paying users of $132.55, versus $126.30 last year, showing that it has been successful in its efforts to squeeze more out of its existing customer base.

With any luck, Dropbox will be able to add even more new customers later in the year when it closes on its recently announced acquisition of DocSend Inc. Although similar to Dropbox in many ways, DocSend has a few useful capabilities that set it apart, including its analytics tools that allow users to track how the files they share are being used by their colleagues. That can be useful in a range of scenarios, for instance when a startup’s leadership shares a financial presentation with potential investors and may want to know if they viewed the file.

Further, DocSend also has some interesting security tools that should benefit Dropbox. With DocSend, it’s possible to protect documents with a password that is only shared with the intended recipients. Users can revoke access any time, which helps reduce the risk of data leaks in scenarios where a sensitive file is accidentally shared in a way it’s not supposed to.

Constellation Research Inc. analyst Holger Mueller said Dropbox is pushing forward nicely, though he believes the company is capable of delivering stronger growth than it currently has done.

“In this digital economy, Drobox needs to find a better share for its future of work-changing document centric offerings that will soon be enhanced by the acquisition of DocSend,” Mueller said. “Very good cost management has lead to an increase of profitability, which is always a good sign and gives the vendor more breathing room on the operations and maybe also on the acquisition side.”

Dropbox said on a call with analysts it’s expecting second-quarter revenue of $522 million to $525 million, the midpoint of which is well above the analyst’s consensus of $517.65 million. The company has also raised its full-year revenue forecast. Officials said the company is now expecting total revenue of $2.118 billion to $2.13 billion, up from its earlier range of $2.095 billion to $2.115 billion.

Dropbox’s stock rose by about 2.5% following the earnings call.

“The strong guidance for the next quarter and full year suggests that remote working processes, and the vendors that can successfully support them, will continue to grow,” King said. “As the world slowly returns to a semblance of normality, many companies are likely to continue using those solutions, including Dropbox’s.”

Photo: Christophe Pelletier/Flickr

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