Cloud storage and e-signature company Dropbox (Nasdaq: DBX) reported results in line with analyst expectations in Q4 FY2022 quarter, with revenue up 5.89% year on year to $598.8 million. Dropbox made a GAAP profit of $328.3 million, improving on its profit of $124.6 million, in the same quarter last year.
Is now the time to buy Dropbox? Access our full analysis of the earnings results here, it's free.
Dropbox (DBX) Q4 FY2022 Highlights:
- Revenue: $598.8 million vs analyst estimates of $593.3 million (0.92% beat)
- EPS (non-GAAP): $0.40 vs analyst estimates of $0.39 (1.57% beat)
- Free cash flow of $181.7 million, down 25.9% from previous quarter
- Customers: 17,770,000, up from 17,550,000 in previous quarter
- Gross Margin (GAAP): 80.7%, up from 79.5% same quarter last year
"2022 was a solid year for Dropbox amidst a challenging macroeconomic environment,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston.
Founded by the long-serving CEO Drew Houston and Arash Ferdowsi in 2007, Dropbox (NASDAQ:DBX) provides a file hosting cloud platform that helps organizations collaborate and share documents.
The catch phrase "digital transformation" originally referred to the digitization of documents within enterprises. The growth of digital documents has spurred an explosion of collaboration within and between businesses, which in turn is driving the demand for e-signature and content management platforms.
As you can see below, Dropbox's revenue growth has been unremarkable over the last two years, growing from quarterly revenue of $504.1 million in Q4 FY2020, to $598.8 million.
Dropbox's quarterly revenue was only up 5.89% year on year, which might disappoint some shareholders. But the growth did slow down compared to last quarter, as the revenue increased by just $7.8 million in Q4, compared to $18.3 million in Q3 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
You can see below that Dropbox reported 17,770,000 customers at the end of the quarter, an increase of 220,000 on last quarter. That is a little better customer growth than last quarter but while it is still a bit below what we have typically seen over the last year, it is suggesting that the company may be reinvigorating growth.
Key Takeaways from Dropbox's Q4 Results
With a market capitalization of $8.51 billion Dropbox is among smaller companies, but its more than $1.34 billion in cash and positive free cash flow over the last twelve months give us confidence that Dropbox has the resources it needs to pursue a high growth business strategy.
It was good to see Dropbox beat slightly on revenue and EPS. The company’s customer growth is also accelerating. On the other hand, revenue growth was quite weak. Guidance will be provided later on the earnings call. The company is down 1.13% on the results and currently trades at $23.7 per share.
Should you invest in Dropbox right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.