Tech

Dropbox shares jump on earnings beat

Key Points
  • Dropbox beat on the top and bottom lines.
  • CEO Drew Houston said the company now aims to be profitable by the end of 2020.
  • Dropbox stock jumped as much as 16% in after-hours trading.
VIDEO2:5002:50
Dropbox beats on top and bottom lines, announces buyback

Dropbox shares rose as much as 16% in extended trading on Thursday after the company reported better-than-expected fourth-quarter results. The stock exceeded the $21 price at which it sold shares in its initial public offering in 2018. It had not closed above $21 since September.

Here's how the company did:

  • Earnings: 16 cents per share, adjusted, vs. 14 cents per share as expected by analysts polled by Refinitiv.
  • Revenue: $446 million, vs. $443 million as expected by analysts polled by Refinitiv.

Revenue grew about 19% in the quarter that ended on December 31, the company said in a statement, roughly growing at the same speed as in the third quarter.

Dropbox reported 14.3 million paying users in the fourth quarter, up from 14 million users in the previous quarter and above the 14.2 million expected among analysts surveyed by FactSet. Average revenue per paying user totaled $125, up from $123.15 one quarter earlier and more than the FactSet consensus estimate of $123.81.

Deferred revenue at the end of the fourth quarter was $554.2 million, below the $555.6 million FactSet consensus estimate.

In the fourth quarter, Dropbox announced the departure of its chief customer officer, Yamini Rangan who has since joined HubSpot.

"App usage trends have worsened since our August initiation, with downloads declining ~20% in Q4 and in-app purchase rev. decelerating significantly," Bernstein analysts Zane Chrane and Michelle Isaacs, who have the equivalent of a sell rating on Dropbox stock, wrote in a note distributed to clients on Wednesday. "DAUs [Daily active users] are declining at a faster pace than in recent quartersMAU [Monthly active user] growth has also worsened, with MAUs declining ~20% y/y in Q4."

Cofounder and CEO Drew Houston joined the board of Facebook earlier this month.

Dropbox's goal is to be profitable by the end of the year, Houston said on a conference call with analysts on Thursday.

With respect to guidance, Dropbox is forecasting $452 million to $454 million in first-quarter revenue. The middle of the range, $453 million, is above the $448.4 million consensus among analysts polled by Refinitiv.

For 2020, Dropbox is calling for revenue of $1.89 billion to $1.905 billion, or $1.898 billion at the middle of that range. That's just slightly below the $1.90 billion Refinitiv consensus. The company sees $475 million to $485 million in free cash flow for the full year, above the FactSet consensus of $436 million.

Dropbox expects to generate over $1 billion in free cash flow by 2024, finance chief Ajay Vashee said on the call.

Shares were up 13% after the conference call.

Dropbox's board has authorized up to $600 million in share buybacks.

The company's stock is up 4% since the beginning of 2020.

WATCH: Short sellers take aim at Dropbox ahead of its fourth-quarter earnings report

VIDEO1:3301:33
Short sellers take aim at Dropbox ahead of its fourth-quarter earnings report