Dropbox Sales, Profit Top Estimates in First Post-IPO Report

(Bloomberg) -- Dropbox Inc.’s sales and profit topped estimates in its first quarter as a public company, lifted by growing corporate demand for paid versions of its cloud-based file-sharing software.

First-quarter profit, excluding some costs, was 8 cents a share, compared with the 4-cent average prediction of analysts polled by Bloomberg. Sales rose 28 percent to $316.3 million, Dropbox said Thursday in a statement. Analysts were projecting revenue of $309.3 million. The company also gave an upbeat forecast for second-quarter sales. Still, shares slipped about 4 percent in extended trading, after surging more than 50 percent since the company’s initial public offering in March.

Dropbox, based in San Francisco, is the leading maker of programs that let users share and synchronize digital files. To maintain revenue growth, Dropbox, which has more than 500 million total registered users, must woo customers to pay for its premium products, which offer more storage and business management features. Paying users in the recent period rose 24 percent to 11.5 million, and the company generated more revenue on average for each one, Dropbox said.

"Over the past year or so we have launched higher tiers of individual and business plans," Chief Executive Officer Drew Houston said in an interview following the report. "So average revenue per user increases are driven both by more people shifting from individual to business plans, and people shifting to higher-tier plans." That’s because some popular new features like SmartSync, which lets customers quickly see all their files without having to store them locally on a computer, are only available in the higher levels, he said.

Sales in the second quarter may reach $331 million, Chief Financial Officer Ajay Vashee said on a conference call. Analysts had projected sales of $325.1 million. For the full year sales will rise to as much as $1.36 billion, above the average estimate of $1.34 billion.

Dropbox shares closed at $32 in New York. The company, founded by Houston and Arash Ferdowsi in 2007, was valued at $10 billion in its last private funding round four years ago.

Including a one-time expense related to restricted stock, the company’s net loss widened to $465.5 million from $33.1 million a year ago.

Since 2015, when several investors wrote down the value of their Dropbox stakes, the company has taken pains to focus its business and work toward profitability rather than simply pushing for growth at all costs.

Dropbox now has the potential to expand into markets related to its core business -- such as managing corporate content and workflows, wrote John DiFucci, an analyst at Jefferies LLC, in a note last month. The company’s technique of selling to most of its customers via word of mouth and self-service signups, rather than via pricey salespeople, is also a benefit. Still, the cash the company will gain from this new-market expansion is already priced into the stock, he said.

"We expect the company will continue to expand its unique, viral approach to subscriber acquisition and expansion to adjacent product markets," he wrote. "The resulting cash flow generation, while unique for a company of this size and growth, is valued appropriately at this time."

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