Specialist
Former executive at Dropbox Inc
Agenda
- Operating environment for Dropbox (NASDAQ: DBX) and broader file storage and workforce collaboration software space, including ex-US penetration
- Dropbox’s competitive landscape – dynamics vs Microsoft (NASDAQ: MSFT), Google (NASDAQ: GOOG), Apple (NASDAQ: AAPL) and Box (NYSE: BOX)
- Revenue growth potential, monetisation and user conversion strategy, plus operational inefficiencies
- Outlook for 2022 and beyond – CAPEX deployment, margin expansion and M&A scenarios
Questions
1.
Can you give an overview of Dropbox’s operating environment and the key trends or drivers we should track when assessing the business?
2.
Starting with Dropbox’s consumer side and broader IT spend, in what ways was coronavirus a pull-forward in demand? Do you think post-pandemic demand for file sync and short management solutions might begin to normalise? Is the business side differentiated in this?
3.
How should we size Dropbox’s market penetration within EMEA? Can you break down the growth opportunity across the consumer and business sides, and outline the company’s ability to continue penetrating EMEA and parts of APAC?
4.
What might be lacking in Dropbox’s go-to-market strategy in Europe vs North America? What’s the approach to land new customers and logos on the business and paid sides? What is the appropriate mix of landing a customer and upselling or cross-selling existing offers? How does that play out and what is the overall opportunity? Is there any customer differentiation between North America and EMEA?
5.
You mentioned Dropbox’s lack of an entry point – at the time, it came from Microsoft and Google. Can you explain how the channel plays into Dropbox’s overall sales model? Are there key sales partnerships to maintain? What future investment would you anticipate for its approach to channel sales?
6.
How would you rank Dropbox overall vs key competitors Box, Microsoft, Amazon, Apple and Google? How do competitive dynamics shift among these players across consumer vs business use cases?
7.
Which of Dropbox’s platform features drive retention and users to shift to paid from free? What typically encourages them to continue paying?
8.
How effective is Dropbox’s overall conversion engine? You alluded to price potentially decreasing and of the 700 million registered users in 2021, roughly 15.5 million are paying users, up slightly from 600 million free and 15 million paid in 2020. What might Dropbox have to invest in to increase the conversion rate, or what historical efforts could be improved?
9.
What do you think is the overall value-add of paying for Dropbox? Is enough of a solution built in to stand among Google and Apple, considering the pool of paid users? What is the overall robustness of the company’s solutions and the value-add of using them along with a competitor?
10.
Where might Dropbox deploy capital, moving forward? The company seems strong for cash flow, but what might be an interesting acquisition target or organic investment opportunity? How does it approach organic or inorganic growth?
11.
As you mentioned, free cash flow is historically fairly strong, typically allocated towards buybacks, repurchases and M&A, sitting around USD 700m-800m as of FY21. Do you think Dropbox is an acquisition target or potential take-out target from PE? Could this occur over the next 1-2 years and why?
12.
What overall top-line growth rate might be sustainable or achievable for Dropbox? 2021 total revenue was USD 2.158bn, representing roughly 12.7% YoY growth. Do you think low-teen double-digit growth is sustainable over the next 1-3 years? Is there anything else we should be benchmarking across?
13.
What margin expansion potential can we expect for Dropbox across its product suite and offerings? What is your overall outlook for the company’s margin expansion or contraction, and ability to grow or cut on the bottom line over the next 12-18 months?
14.
Are there any areas where existing cost inefficiencies haven’t been rooted out yet? Can you elaborate on Dropbox’s existing sales team efficiency – does it have the right headcount, incentive and quota mix to support future business growth? Alternatively, could it manage with a bare-minimum team? Is there room to continue margin expansion since the approximate 11% reduction in headcount in 2021?
15.
Is there anything additional to highlight or reiterate about Dropbox? What industry assumptions should be challenged or reconsidered?
