Dropbox Inc (Nasdaq: DBX) reported better-than-anticipated fiscal 2021 fourth-quarter earnings and revenues. However, the company’s 1Q 2022 non-GAAP operating profit margin and FY 2022 revenue outlook did not impress the market. This triggered a sell-off causing the stock to slide 2.37% or $0.56 to close at $23.02.
The San Francisco, California-based company reported 4Q 2021 revenues of $565.50 million, an increase of 12.2% from $504.10 million in the similar period last year.
The cloud file storage posted Q4 2021 net income of $124.60 million, or $0.32 per share, compared with a net loss of $345.80 million, or $0.84 a share in Q4 2020. The loss in 4Q 2020 was primarily due to an impairment charge related to the company’s plan to change to a Virtual First working pattern and also an income tax benefit.
Excluding stock-based compensation, acquisition-related expenses, amortization of acquired intangible assets, impairment related to real estate assets, and net gains on lease termination, among others, the non-GAAP net income for the quarter ended December 31, 2021 was $159.90 million, or $0.41 per share, up from $117.90 million, or $0.28 a share, in the quarter ended December 31, 2020.
Wall Street analysts anticipated the company to report earnings of $0.37 per share on revenues of $557.70 million.
Dropbox is a familiar brand in the domain of cloud file storage solutions, and there isn’t a single corporate employee who doesn’t understand how to leverage its capabilities to store documents online, synchronize them with some other gadget, or distribute them to some other individual. As a result, Dropbox is utilized by thousands of businesses to manage massive amounts of data and paperwork.
As of late, Dropbox has been working to enhance its features, including the addition of analytics tools that allow customers to monitor how documents are shared inside a company. Security-wise, it has incorporated password protection for important papers, and users may at any moment revoke passwords, minimizing the possibility of data breaches whenever a document is transferred to unwarranted parties. Dropbox has steadily gained new users in the last year, indicating that the recent changes were well received.
The company ended the quarter with 16.79 million paying clients, an increase from 15.48 million in the same period last. Dropbox also stated that the average revenue per user also increased to $134.78, from $130.17 in the prior-year period.
By increasing the paying subscriber count and drawing a little more cash from them, Dropbox was able to boost its annual recurring revenue to $2.261 billion, an increase of 11.80% from the earlier year.
Non-GAAP gross margin was 80.90% in 4Q 2022, compared with 80.10% last year. Net cash provided by operating activities was $162.70 million, including $32 million paid for Dropbox’s real estate lease termination, compared with $170.70 million in the comparable period of fiscal 2020. Likewise, free cash flow rose to $161.40 million, from $158.40 million. The company ended the quarter with cash, cash equivalents, and short-term investments of $1.718 billion. Non-GAAP operating margin was 29.70%, up from 25.30% last year.
Based on the strong quarterly performance, Dropbox’s board of directors cleared a proposal for additional share repurchases worth $1.20 billion. At the end of the fourth quarter, the company had approximately $344 million remaining on the previous $1 billion share repurchase program.
During the quarterly earnings call, the company issued the revenue outlook for the 1Q 2022 and FY 2022.
For the current quarter, Dropbox forecasts revenue of between $557 million and $560 million. This is based on a minimal currency conversion benefit of about $1 million. Wall Street analysts are anticipating the company to report revenues of $562 million. The company also forecasts a non-GAAP operating margin in the range of 27.50% to 28%.
For FY 2022, Dropbox forecasts revenue of between $2.320 billion and $2.330 billion, including roughly $16 million negative impact from currency conversion rates. While the gross margin is anticipated to be about 81%, the non-GAAP operating margin is expected to be roughly 29%. Furthermore, free cash flow is projected to be between $760 million and $790 million.
The quarterly earnings beat and slightly weak FY 2022 revenue outlook are expected to keep the stock of Dropbox range-bound with a slight bearish bias in the short term.
The historical price chart indicates that the stock of Dropbox has broken the support at 28. The next major support is anticipated only near 19. Additionally, the stock is trading below its 50-day moving average, while the MACD indicator has a negative reading. Therefore, we are anticipating the stock to remain in a downtrend in the short term.
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