Más contenido relacionado


Dropbox S1 Analysis

  1. Dropbox (DBX) S1 Analysis INTRODUCTION In 2007, Dropbox was started with a simple idea: “Life would be a lot better if everyone could access their most important information anytime from any device” with a mission, “Unleash the world’s creative energy by designing a more enlightened way of working.” Being Product First and not Sales First thinking have been a motto of Dropbox. A simple and intuitive design, open ecosystem that allows user to integrate with variety of third party tools, viral and bottom-up approach have help them set apart from rest of the players. The sales and marketing expenditure of Dropbox have been decreasing every year. Since 2007, industry trends have been growing in favour of Dropbox. The traditional decision makers in purchasing softwares in an organisation are changing from IT department to individual users who are going to be actual users of the tool thus creating an quick adoption curve as a individual user to a business user. The other reasons being data and content being scattered as captive centers of an organisation are present globally. As technology have made modern workforce increasingly fluid and mobile, and so the business partnerships which gives rise to the need for an unified home of content. An unified content, global sharing network, new product experience along with machine learning that improves user experience by enabling more intelligent search and better utility of information results in the flywheel effect thereby increasing user base and content resulting in the need (or want) of additional services that converts the user from a freemium user to a paying user. The company has raised about $1.7B of total funding amount in 7 rounds. The first 5 fundings (2 seed, 3 series) were equity rounds.The 5 lead investors are JP Morgan Chase & Co., JPMorgan Investment, Blackrock, Index Ventures and Sequoia Capital. Subodh | Product Team 1
  2. In 2014, Dropbox raised $500M of debt financing from JPMorgan Investment. A debt financing shows that the existing investors as well as founders didn’t want to share the ownership pie with any more stakeholders which can be confirmed again when Dropbox raised the 7th round of $600M funding from JP Morgan Chase & Co as debt financing. The IPO is led by Goldman Sachs Group Inc. and JPMorgan Chase & Co. Subodh | Product Team 2
  3. The Dropbox Dropbox’ freemium model have fostered an organic adoption.They have generated 90% of the revenue from the self-serve channels i.e. the users who purchase a subscription directly from an app or website. Also, as millions of devices like computer, phone and tablet are actively connected to Dropbox platform, they have multiple options to inform them about their new product experiences, subscriptions through an in-product with minimal marketing spend. Of the 11 millions paying users, ~30% use Dropbox Business Team plan. Over 40% of the new Dropbox Business Teams included a member who was previously was a subscriber to the individual paid plan​. Subodh | Product Team 3
  4. Subodh | Product Team 4
  5. ● Create ○ Paper. Dropbox introduced Paper in January 2017 as a collaborative surface to bring people and ideas together. With Paper, users can co-author content, tag others, assign tasks with due dates, embed and comment on files, tables, checklists, code snippets, and rich media—all in real-time. Paper is designed to be simple and beautiful so users can focus on the most important ideas and tasks at hand. ○ Doc scanner ● Access and organize ○ Search ○ Rich previews. Rich previews allow users to easily interact with files across any device without having to open different applications. Users can comment on, annotate, review, and present files, and see who viewed and edited them. ○ Smart Sync ○ Version history ○ Third-party ecosystem: As of December 31, 2017, Dropbox was receiving over 50 billion API calls per month and over 500,000 developers had registered and built applications on our platform. In addition, more than 75% of Dropbox Business teams have linked to one or more third-party applications. ● Share ○ Folders. There are three types of folders in Dropbox: private, shared, and team folders. ○ Shared links. ○ Showcase: Showcase gives users a way to present their work to clients and business partners through a customizable, professionally branded webpage. Users can display visual previews of multiple files on the same page and add relevant context with introductory text and captions and an introduction. Showcase also lets users track how recipients engage with their content, including analytics on who has viewed, commented, or downloaded content on a per-person and per-file basis. ○ File requests. With file requests, users can invite anyone to submit files into a specific Dropbox folder through a simple link—regardless of whether the recipient has a Dropbox account. File requests are ideal for tasks such as collecting bids from Subodh | Product Team 5
  6. contractors or requesting submissions from coworkers and clients. All submitted files are organized into a Dropbox folder that’s private to the requesting user. ● Collaborate ○ Comments and annotations ○ File activity stream ○ Notifications ● Secure ○ 256-bit Advanced Encryption Standard ○ File recovery ○ Administrator controls ○ Sharing permissions ○ Remote Device Wipe ○ Audit Log ○ Device Approvals ○ Tiered Administrator roles ○ Network control ○ Third-party security integrations ○ Data migration and on-premises backup ○ Digital rights management ○ eDiscovery and legal hold Subodh | Product Team 6
  7. The Metrics Registered Users: 500Mn+ Paying Users: 11Mn+ Revenue: 1.1Bn+ Content: 400Bn+ 2015 2016 2017 Analysis Paying Users (in millions) 6.5 8.8 11 Average Revene Per Paying User ARPU $113.54 $110.54 $111.91 ARPU declined for the year ended December 31, 2016, compared to the year ended December 31, 2015, primarily due to foreign currency fluctuations related to the sales that are denominated in foreign currencies. ARPU increased for the year ended December 31, 2017, compared to the year ended December 31, 2016, primarily due to an increased mix of sales towards the higher priced subscription plans, including our new Dropbox Business Advanced plan Free Cash Flow (FCF) Net cash provided by operating activities 14.8 252.6 330.3 An increase in net cash provided by operating activities, primarily due to the Infrastructure Optimization, increased sales in the given periods. The Infrastructure Optimization efforts include an initiative that focused on migrating the vast majority of user data stored on the infrastructure of third-party service providers to Dropbox' own lower cost, custom-built infrastructure in co-location facilities that are directly leased and operated. In order to host user data on their own infrastructure, they leased or purchased infrastructure that is depreciated within the 'cost of revenue' header. (Capex) -78.7 -115.2 -25.3 A decrease in capital expenditures relating to infrastructure equipment and leasehold improvements for the office spaces. Infra. Optimization reduced unit costs and helped limit capital expenditures and associated depreciation. Subodh | Product Team 7
  8. FCF( in millions) -63.9 137.4 305 Combined with the concurrent increase in the base of paying users, there has been reduction in the cost of revenue, an increase in the gross margins, and thus resuling an improvement in the free cash flow FCF Sales & Marketing Approach: Dropbox have developed an efficient marketing function that’s focused on building brand awareness and reinforcing their self-serve model. Dropbox rapidly demonstrate the value of our platform to their users in order to convert them to paying users and upgrade them to our premium offerings. Dropbox reach their users through: ● In-product prompts and notifications ● Time-limited trials of paid subscription plans ● Email and lifecycle marketing. Technology Infrastructure and Operations More than 90% of the users’ data is stored on own custom-built infrastructure, which has been designed from the ground up to be reliable and secure, and to provide annual data durability of at least 99.999999999%. And AWS, for the remainder of Dropbox users’ storage needs. Incremental backups are performed hourly and full backups are performed daily. In addition, as a default, redundant copies of content are stored independently in at least two separate geographic regions and replicated reliably within each region. Data centers co-location facilities are in Texas, Virginia and California and AWS in USA & Europe. Subodh | Product Team 8
  9. Research and Development Approach Research and development department consists of engineering, product, and design teams, representing 47% of the total employees. Security and Privacy ● ISO 27001 (Information Security Management) ● ISO 27017 (Cloud Security) ● ISO 27018 (Cloud Privacy and Data Protection) ● ISO 22301 (Business Continuity Management) ● CSA STAR Level 1 and Level 2 certifications from the Cloud Security Alliance ● Dropbox supports HIPAA and HITECH compliance. Dropbox signed agreements with the customers who require them in order to comply with the Health Insurance Portability and Accountability Act, or HIPAA, and the Health Information Technology for Economic and Clinical Health Act, or HITECH ● Dropbox is certified under the EU-U.S. and Swiss-U.S. Privacy Shield and is working towards compliance with the EU General Data Protection Regulation, or GDPR framework Intellectual Property 600 issued patents that have a large number of inbound licenses to key patents in the file collaboration, storage, syncing, and sharing markets. Subodh | Product Team 9
  10. The Cohort Stickiness The cohort is defined as all registered users who signed up for Dropbox in a given period of time. The chart reflects the monthly subscription amount from January 2013 to December 2017 of all paying users in each quarterly cohort,including those who signed up for our platform prior to 2013. Now from the above graph, it can be observed that the new user generates higher subscription amounts over time. Subodh | Product Team 10
  11. Comparing January cohorts from the last three years, at virtually every point in time after signup, the January 2017 cohort generated a higher monthly subscription amount than the January 2016 cohort, which in turn generated a higher monthly subscription amount than the January 2015 cohort. ALso, no customer accounted for more than 1% of the revenue, shows that the customer based of the Dropbox is highly diversified, reducing the customer dependency risk. Subodh | Product Team 11
  12. Revenue Generation Trend The subscription revenue model, consistent cohort trends, self-serve monetization engine, and large and diversified global customer base resulted in linear and predictable revenue generation over the duration of the quarters Subodh | Product Team 12
  13. As of December 31, 2017, more than 80% of the annualized revenue came from existing individual users and Dropbox Business teams who were on the platform as of December 31, 2016. As of December 31, 2017, the Annualized Net Revenue Retention for paying Dropbox Business customers was approximately 100%. As of December 31, 2017, the blended Annualized Net Revenue Retention across the entire business, including individuals and Dropbox Business customers, was over 90%. Annualized Net Revenue Retention is the percentage of annualized revenue retained over a 365-day period, inclusive of changes in price, changes in number of licenses, upgrades and downgrades to different subscription plans, and churn. Annualized Net Revenue Retention is calculated by aggregating the annualized revenue from all paying Dropbox Business customers subscribing to a Dropbox Business plan at the beginning of the period, then aggregating the annualized revenue from those same Dropbox Business customers at the end of the period. For customers whose renewal is pending at the end of the period, their annualized revenue is included at the end total if they resume payment within 30 days from the end of that period. Annualized Net Revenue Retention is equal to ending annualized revenue divided by beginning annualized revenue. Consolidated Statement of Operation Financial Statements Year ended December 31, (in million USD) 2015 2016 2017 $Diff (2015-16 ) %change 2015-16 $Diff (2016-1 7) %chang e 2016-17 Analysis Revenue 603.8 844.8 1,106.80 $241.00 39.91% $262.00 31.01% An annual growth rate of ~35% between 2015-2017. For 2016-2017, revenue increased $262.0 million or 31% during 2017, as compared to 2016. This increase was primarily due to a 25% increase in the number of paying users between periods. The ARPU also increased slightly between periods primarily due to an increased mix of sales towards our higher priced subscription plans, including the new Dropbox Business Advanced plan. Subodh | Product Team 13
  14. For 2015-2016, revenue increased due to 35% increase in paying users. The ARPU decreased between 2015-2016. Cost of revenue(1) 407.4 390.6 368.9 -$16.80 -4.12% -$21.70 -5.56% COR consist primarily of expenses associated with the storage, delivery, and distribution of the Dropbox platform including depreciation of servers, human capital expenditure, amortization of develped technologies,Infra.OptimisationPlan, etc... Excluding stock-based compensation, COR shall increase as Dropbox plan to enahce the capability, reliability and capacity to support the inccrease user growth. Gross profit 196.4 454.2 737.9 $257.80 131.26% $283.70 62.46% Gross margin increased year-on-year. 32%, 54%,66% respectively. It was mainly due increase in revenue and Infrastructure Optimisation. Operating expenses(1): Research and development 201.6 289.7 380.3 $88.10 43.70% $90.60 31.27% Increase in R&D cost due to increase in overhaed related costs, internal development-related 3rd party hosting fees, etc. Sales and marketing 193.1 250.6 314 $57.50 29.78% $63.40 25.30% For 2016-2017, 25% increase in S&M, due to to an increase in variable spend related to brand campaign fees, lead generation fees, and third-party sales representative fees, app store related cost as a result of increase in sales, and other overheads.. For 2015-2016, 30% increase in S&M is due to increase in employee-related expenses was primarily due to an increase in stock-based compensation of $24.8 million, which included a charge of $18.8 million due to the modification of an executive stock grant, headcount growth, and an increase in commission and bonus expenses. Subodh | Product Team 14
  15. General and administrative(2) 107.9 107.4 157.3 -$0.50 -0.46% $49.90 46.46% Other non-income based taxes, employee-related expenses, Dropbox Charitable Foundation, etc. Total operating expenses 502.6 647.7 851.6 $145.10 28.87% $203.90 31.48% Loss from operations -306.2 -193.5 -113.7 $112.70 -36.81% $79.80 -41.24% Interest expense, net -15.2 -16.4 -11 -$1.20 7.89% $5.40 -32.93% For 2016-2017, it decrease by $5.4M, as fewer assets were acquired under capital leasing, and interest income from money market funds increased. For 2015-2016, it increase by $1.2M, due to increase in assets in capital leasing ($1.9M) and offset by $0.7M from money market funds. Other income (expense), net -4.2 4.9 13.2 $9.10 -216.67% $8.30 169.39% For 2016-2017, Other income (expense), net increase by 170% or $8.3M due to an increase in foreign currency gains related to monetary assets and liabilities denominated in euros and British pound sterling Loss before income taxes -325.6 -205 -111.5 $120.60 -37.04% $93.50 -45.61% Provision for income taxes -0.3 -5.2 -0.2 -$4.90 1633.33% $5.00 -96.15% Coz Dropbox was subjected to Alternative Min.Tax in 2016, and not in 2017 due to some Tax Reform Act. Net loss -325.9 -210.2 -111.7 $115.70 -35.50% $98.50 -46.86% Net loss per share attributable to common stockholders, basic and diluted -1.18 -0.74 -0.38 $0.44 -37.29% $0.36 -48.65% Subodh | Product Team 15
  16. Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 276.8 283.7 293.9 $6.90 2.49% $10.20 3.60% Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited) -0.21 Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited) 537.9 The Conclusion The negative churn or sticky subscription cohort, a free cash flow of over $300M, revenue growth rate of 35% for 2015-2017 annual compounded, gross margin of 67% in 2017, a flat ARPU of ~$111 in 2017 shall put Dropbox on the public market sentiment test. Dropbox have set a price range of $16 to $18 per share, which would raise up to $648 million in the highly anticipated public offering, for 36,000,000 shares. Subodh | Product Team 16
  17. Subodh | Product Team 17
  18. Subodh | Product Team 18
  19. Subodh | Product Team 19
  20. Subodh | Product Team 20