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Dropbox Files for IPO Three Years After $10 Billion Private Valuation
Web-storage company stands to be one of the largest tech IPOs in 2018
Jan. 11, 2018 5:00 p.m. ET
Web-storage company Dropbox Inc. has filed confidentially to go public, in what stands to be one of the largest tech IPOs in the past few years, according to multiple people familiar with the matter.
The offering, expected in the coming months, would mark a rare move among a class of richly valued tech startups that have put off IPOs with ample amounts of capital still flowing in from giant investment firms such as Japanese firm SoftBank Group Corp.
Last year, 26 U.S. venture-backed tech companies held IPOs, according to Dow Jones VentureSource, and few of them aside from social-media company Snap Inc. involved prominent startups. More than 100 U.S. companies valued at $1 billion or more privately are still on the sidelines, including ride-hailing firm Uber Technologies Inc. and home-rental company Airbnb Inc. Bloomberg News reported Dropbox’s IPO filing earlier Thursday.
Eleven-year-old Dropbox, which lets users and businesses store and manage files online, has struggled to meet the expectations of its lofty $10 billion valuation reached when it raised private capital in 2014. Investors from top venture-capital firms such as Sequoia Capital and Accel Partners as well as mutual funds including Fidelity Investments and T. Rowe Price collectively pumped more than $600 million into the business, viewing the company as having enormous potential to dominate the consumer business of file storage.
But over the past few years, Dropbox has been outflanked by tech giants like Google Inc. and Apple Inc. that rushed into the consumer-storage space, forcing it to shift its focus to offering storage for businesses.
This shift has allowed Dropbox to build a large business—Chief Executive Drew Houston said early last year it had passed $1 billion in annualized revenue with more than 200,000 business customers. While it continues to face competition from tech giants, Dropbox is among the leaders in the category along with Google, Microsoft Corp. and Box Inc., according to market-research firm Gartner Inc.
Still, investors say the expectations for growth are lower than a few years ago, when the consumer business held more promise.
Back in 2013 and 2014, the company opened up new lines of business in attempts to barge into disparate areas such as photo-sharing with an app called Carousel, and email with an app dubbed Mailbox. Euphoria ran high as it signed a lease for a giant new office in San Francisco marked by a flashy chrome panda statue.
Soon after, Dropbox changed its approach, realizing it needed to focus on making revenue from corporations. The company shut down Carousel and Mailbox, and mutual funds that invested in Dropbox marked down the value of the private stock significantly, some by as much as 50%.
A key question among Silicon Valley observers is whether Dropbox can meet or surpass its February 2014 valuation of $10 billion. The Nasdaq Composite Index has climbed more than 70% since then.
Some of the high-profile startups that have gone public in the past year, such as Snap and meal-kit company Blue Apron Inc., have been disappointments, further dampening demand.
Business-software and hardware startups such as Dropbox have generally been amenable to IPOs because their big corporate customers tend to view publicly traded firms as more stable than privately held ones.
Web-storage company Dropbox Inc. raised the curtain Friday on its long-awaited initial public offering, which is set to be one of the biggest tech debuts of the past few years.
The 11-year-old company’s financials, revealed in a public filing, paint a picture of a firm with more than $1 billion in revenue, shrinking losses and roughly 11 million paying users. Still, revenue growth has slowed and the vast majority of its more than 500 million users don’t pay.
The San Francisco-based company, which lets users and businesses store and manage files online, is expected to seek a valuation of roughly $7 billion to $8 billion, according to people familiar with the offering. At that level, it would the largest tech IPO since Snap Inc.’s debut in March 2017, according to Dealogic.
While the company and its underwriters can change pricing up until the night before trading starts, at that valuation, Dropbox’s IPO would land well below the $10 billion valuation where the company had raised private capital in 2014.
Dropbox, which had previously filed IPO papers confidentially with the Securities and Exchange Commission, made its S-1 filing public Friday ahead of a share sale that could take place as early as the week of March 19.
The filing revealed that Dropbox posted revenue last year of $1.11 billion and a net loss of $111.7 million.
Its revenue growth has slowed recently: from 2016 to 2017, growth was 31%, slower than the 40% at which revenue grew from 2015 to 2016. Yet its losses have gotten smaller — shrinking from $325.9 million in 2015 to $210.2 million in 2016 to $111.7 million last year.
The company said it has never turned a yearly profit since its inception, which isn’t uncommon for investment-heavy tech startups seeking to go public.
Dropbox said in the filing that it expects costs to increase in the near term, and its operating expenses have jumped recently — they rose 28% from 2015 to 2016 and 31% from 2016 to 2017.
Dropbox is among the older of the so-called billion-dollar startups. The company was founded by MIT computer-science students Drew Houston and Arash Ferdowsi in 2007. It now has more than 500 million registered users, most of whom use its free, basic service with limited storage. The company said it has more than 11 million paying users. The company also has more than 300,000 teams using its Dropbox Business service, which offers more storage as well as management tools, and starts at $12.50 a month for groups of three users.
Investors from top venture-capital firms such as Sequoia Capital and Accel Partners as well as mutual funds including Fidelity Investments and T. Rowe Price have collectively pumped more than $600 million into Dropbox, viewing the company as having enormous potential to dominate the consumer business of file storage.
But over the past few years, Dropbox has been outflanked by tech giants like Google and Apple that rushed into the consumer-storage space, forcing it to shift its focus to offering storage for businesses.
Dropbox Sets IPO Target Valuation at $7 Billion to $8 Billion
March 12, 2018
Dropbox Inc. set a valuation target between $7 billion and nearly $8 billion ahead of its initial public offering, which is set to be one of the biggest tech IPOs in the past few years.
In a filing Monday, the web-storage and collaboration company said it expects its shares to price in a range of $16 to $18. At the midpoint of that range, based on a fully diluted share count, its valuation would be $7.4 billion, well below the $10 billion valuation where the company had raised private capital in 2014.
The Dropbox IPO will seek to raise $612 million of capital at the midpoint of its range, and the company said it would receive proceeds of $529.7 million at that midpoint.
The company also revealed in its filing that the corporate investment group of Salesforce.com Inc., which has been an investor in the company, will serve as a so-called anchor in the IPO and will buy $100 million worth of the shares being offered when the IPO closes in a private placement.
The San Francisco-based company and its underwriters will set a final IPO price based on feedback from investors in a roadshow that is about to begin. IPOs aren’t guaranteed to price within companies’ expected ranges.
Dropbox is expected to start trading on Nasdaq under the symbol “DBX” late next week.
Dropbox, which lets users store, share and collaborate on documents, photos and other files online, is among the older of the so-called billion-dollar startups. The company was founded by MIT computer-science students Drew Houston and Arash Ferdowsi in 2007. It now has more than 500 million registered users, most of whom use its free, basic service with limited storage.
Mr. Houston, Dropbox’s CEO, and Mr. Ferdowsi are each selling 2.3 million shares in the offering, which would generate proceeds of about $39 million at the midpoint of the range.
Ahead of the IPO, in December 2017, Dropbox’s board granted the co-founders stock awards that give Mr. Houston the potential to earn as much as $930 million over the next decade if Dropbox’s share price reaches $60; Mr. Ferdowsi could earn as much as $396 million.
Over the past few years, Dropbox has faced intense competition from tech giants like Alphabet Inc.’s Google and Apple Inc., which have pushed into the consumer-storage space. Dropbox also has begun offering storage for businesses.
While Dropbox’s losses have been shrinking, its revenue growth has also slowed. It has roughly 11 million paying users, but the vast majority of its 500 million users don’t pay.
Despite a pushback against dual-class shares from index funds and the SEC in recent months, Dropbox will have a dual-class structure that gives the founders and some investors 10 votes a share, compared with one vote a share for investors buying shares in the public markets.
Dropbox raises its IPO price range by $2, now sees valuation up to $7.85 billion
Mar. 21, 2018
Cloud storage firm Dropbox raised the price range for its initial public offering by $2 on Wednesday as investors bid strongly for the first big tech IPO this year ahead of final pricing expected on Thursday.
The company now expects the offering to be priced between $18 and $20 per share, up from its previous range of $16 to $18.
The new price range suggests the San Francisco company, co-founded in 2007 by Andrew Houston and Arash Ferdowsi, will hit the public market valued at up to $7.85 billion and the IPO will raise up to $720 million.
The order book for the offering closes at midday on Wednesday and the pricing is expected on Thursday.
Sources told Reuters on Monday that the offering was oversubscribed.
The company has 500 million users and competes with Alphabet's Google, Microsoft, and Amazon. Box is its main rival.
The stock will start trading on the Nasdaq on Friday.
Dropbox will price IPO at $21 per share, source says
Dropbox priced its IPO above expectations at $21 per share on Thursday night, a source told CNBC, setting the stage for the technology company's stock to hit the public market on Friday.
The company is likely to offer 36 million shares, a source said, and shares are in demand. The offering is 25-times oversubscribed, the source said.
The pricing gives the company a valuation of over $8.2 billion, lower than the $10 billion valuation it received in a 2014 private funding round. Dropbox's IPO will raise $756 million, the biggest tech IPO since Snap started trading last year.
Nomura Instinet puts Reduce rating on Dropbox with $21 price target
Nomura Instinet analyst Christopher Eberle last night initiated Dropbox (DBX) with a Reduce rating and $21 price target. The shares closed yesterday up 95c to $33.27.
Dropbox's "consistently low" penetration rates, "extremely low" conversion rates, and lack of enterprise salesforce creates little room for upside potential, Eberle tells investors in a research note. If trends do not improve, the shares have "significant downside," the analyst argues.
Eberle admits, however, that Dropbox has positioned itself as a top player in the backup storage and workplace collaboration space. The company is a "staunch competitor" to Microsoft's (MSFT) OneDrive, Google's (GOOG, GOOGL) Drive and Apple's (AAPL) iCloud, Eberle contends.
Dropbox earnings: After big IPO, big expectations for first report
May 8, 2018
Set to reveal its first-quarter results Thursday after the bell, investors are looking for Dropbox to cement its well-received initial public offering with results that will handily beat sell-side analyst estimates.
Earnings: On average, analysts polled by FactSet model first-quarter adjusted earnings of 4 cents a share and GAAP losses of $2.16 a share. Contributors to Estimize predict earnings of 4 cents a share. GAAP earnings are typically weighed by vesting stock in the first quarter a company reports its results after an IPO, such as when Snap lost $2.2 billion in its first quarter as a public company.
Revenue: For Dropbox’s first quarter, analysts model Dropbox sales of $309.2 million. Estimize contributors expect revenue of $308.9 million. Dropbox reported $305 million in free cash flow for 2017, something of a rarity for companies so close to their IPO.
What to look for
As with many technology companies, a key data point to watch is average revenue per user. RBC Capital Markets analyst Mark Mahaney wrote in a note to clients last week that his team expects Dropbox ARPU to grow 2% to $113.20, compared with the year-earlier quarter. Overall, Mahaney wrote that he expects the company to add 140,000 new users, which would bring its total paying user count to 11.12 million.
Mahaney rates the company the equivalent of a hold with a $33 price target.
EPS of $0.08 per share vs $0.04 (FactSet, Estimize) estimate -- beat
Revenue of $316.3 million vs $309.2 million (Factset) , $308.9 million (Estimize) estimates . . . up from $247.9 million a year ago -- beat
Paying users: 11.5 million vs 11.12 million estimate -- beat
Total revenue was $316.3 million, an increase of 28% from the same period last year.
Paying users totaled 11.5 million, as compared to 9.3 million for the same period last year. Average revenue per paying user was $114.30, as compared to $110.79 for the same period last year.
GAAP gross margin was 61.9%, as compared to 62.3% in the same period last year. Non-GAAP gross margin was 74.2%, as compared to 63.5% in the same period last year.
GAAP operating margin was (147.3%), as compared to (13.5%) in the same period last year. Non-GAAP operating margin was 10.9%, as compared to 2.2% in the same period last year.
GAAP net loss was ($465.5) million, as compared to ($33.1) million in the same period last year. Non-GAAP net income was $30.9 million, as compared to $5.2 million in the same period last year.
GAAP operating margin and net loss for the first quarter of 2018 included a $418.7 million stock-based compensation charge due to the achievement of the liquidity event-related performance condition in connection with our initial public offering ("IPO") for two-tier restricted stock units that met their service-based vesting condition as of the end of the first quarter of 2018, and a $13.9 million employer payroll tax charge related to these restricted stock units.
Net cash provided by operating activities was $61.8 million, as compared to $61.6 million in the same period last year. Free cash flow was $51.9 million, as compared to $56.5 million in the same period last year.
GAAP basic and diluted net loss per share was ($2.13), compared to ($0.17) in the same period last year. Non-GAAP diluted net income per share was $0.08, compared to $0.02 in the same period last year. (1)
Cash, cash equivalents and short-term investments were $846.0 million at the end of the first quarter of 2018.
(1) Non-GAAP diluted net income per share is calculated based upon 373.1 million and 342.3 million diluted weighted-average shares of common stock for the three months ended March 31, 2018 and 2017, respectively.
May 14, 2018 11:00 AM ET By: Brandy Betz, SA News Editor Salesforce.com (CRM-0.6%) discloses buying 4.9M shares of Dropbox (DBX-2%) in Q1, which is about 1.3% of outstanding shares.
That's old news and was already a known event. From post #7
The company also revealed in its filing that the corporate investment group of Salesforce.com Inc., which has been an investor in the company, will serve as a so-called anchor in the IPO and will buy $100 million worth of the shares being offered when the IPO closes in a private placement.
4.9 million shares x $21 IPO price = $102.9 million
01-16-2018, 02:59 PM
