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Dropbox Inc (NASDAQ:DBX) Shares Launch on Nice Beat and Raise

Dropbox Inc (NASDAQ:DBX) just hit the wires with its Q3 (Sep) earnings of $0.11 per share, excluding non-recurring items, $0.05 better than the S&P Capital IQ Consensus of $0.06; revenues rose 25.7% year/year to $360.3 mln vs the $352.74 mln S&P Capital IQ Consensus. Non-GAAP operating margin was 12.8% vs 8.2% last year and vs prior guidance of 7.5-8.5%.

“We delivered another quarter of strong execution in Q3, driving healthy top line growth and expanding free cash flow margins,” said Dropbox Co-founder and Chief Executive Officer Drew Houston. “We’re shipping product features and updates our users love, based on a deep understanding of our customers and the tools they need to do their best work. Combined with our ecosystem of best-in-class partners, Dropbox is becoming an even more central part of our customers’ workflows.”

Dropbox Inc (NASDAQ:DBX) shares have blasted off in response. This was a nice beat-and-raise special for shareholders in the stock. The reaction has taken shares well back above the stock’s 50-day simple moving average.

On the call, the company guided to Q4 revenue of $367-370 mln vs CapitalIQ consensus of $363.7 mln, and also guided to Q4 non-GAAP operating margin of 9-10%.

We also took the following notes:

Co is operating at scale with healthy margins, which should continue to improve as co builds up efficiencies with scale.

Users love our new product updates. Machine intelligence (DBXI) is a key innovation. In Q3, co introduced two MI initiatives (Nautilus delivers personalized search experience, surfaces most relevant results; second co has made strides in making images searchable. Most tools cannot find text and images, but customer use images a lot. DBX has been scanning these docs to make them searchable.

Operating margin expansion was driven by gross margin expansion and higher revenue in the quarter.

From Q&A, ARPU drivers? ARPU trend is driven by business generally and by higher priced SKUs, driven by better functionality. Co also got a tailwind from grandfathering in old accounts and seeing a tailwind from higher attach rates, higher ASPs.

Net adds? Co is improving net revenue retention, churn rates have been stable over past few quarters.

Q4 guidance, any changes in October, being conservative? Co has healthy and steady and predictable business; co does not include benefits form initiatives until they are more clear.


Birds Eye View

Dropbox Inc (NASDAQ:DBX) bills itself as a company that provides a collaboration platform worldwide. Its platform allows individuals, teams, and organizations to create, access, and share content online.

The company was formerly known as Evenflow, Inc. and changed its name to Dropbox, Inc. in October 2009. Dropbox Inc. has strategic partnership with Zoom Video Communications, Inc.

Dropbox Inc. was founded in 2007 and is headquartered in San Francisco, California.

According to company materials, “Dropbox is a leading global collaboration platform that’s transforming the way people work together, from the smallest business to the largest enterprise. With more than 500 million registered users across more than 180 countries, our products are designed to help unleash the world’s creative energy and establish a more enlightened way of working. Headquartered in San Francisco, CA, Dropbox has 12 offices around the world.”

Dropbox Inc (NASDAQ:DBX) managed to rope in revenues totaling $339.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 42.5%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($981.8M against $793.3M).

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