Dropbox Inc.’s stock took a tumble Thursday after initially riding high following a second-quarter earnings report that beat Wall Street estimates.
But the company, which provides cloud-based file sharing and collaboration tools, also announced that Chief Operating Officer Dennis Woodside (pictured) will be stepping down, with no replacement for the foreseeable future.
Dropbox reported earnings before certain costs such as stock compensation of 11 cents per share on income of $48 million. Net revenue for the quarter came in at $339.2 million. Wall Street analysts had earmarked earnings of just 7 cents per share on revenue of $330.9 million.
But the company’s stock went on a roller-coaster ride, initially rising by 9 percent in the regular trading session before the report, then falling by more than 8 percent after-hours.
Crunchbase speculated the initial stock surge may have been because Dropbox announced two new executive hires: former Wealthfront Inc. Chief Executive Adam Nash as its new vice president of product and former Salesforce.com Inc. Vice President of Product Marketing Naman Khan, who will take on a similar role at his new employer.
But any excitement over these new hires was rapidly quelled when Dropbox Chief Executive Drew Houston announced that Woodside would be departing the company in early September, though he’ll continue to serve as an adviser until the end of the year.
Woodside’s departure is significant because he’s believed to have been one of the key players behind Dropbox’s rapid growth over the last few years. He originally joined the firm back in April 2014, having previously served as the CEO of Motorola Mobility, owned by Lenovo Group Ltd. Prior to that, he served as president of the Americas and senior vice president at Google LLC.
At the time he joined Dropbox, the company was busy trying to balance its business around free users and the adoption of paid enterprise customers. Woodside helped the company grow to more than 500 million registered users and more than 1,800 employees. Houston acknowledged Woodside’s efforts, saying in a statement that he “helped transform Dropbox into a publicly traded company with over $1 billion in annual revenue and 12 offices around the world.”
Houston said Dropbox won’t be hiring a new COO for the time being, but will instead elevate two of its senior executives to handle Woodside’s responsibilities. The company’s vice president of business strategy and operations, Yamini Rangan, is being promoted to chief customer officer, where he’ll be tasked with handling customer-focused business functions. Vice President of Communications Lin-Hua Wu has also been promoted and will report directly to Houston.
Back to the numbers, Dropbox said it had 11.9 million paying customers in the second quarter, up 20 percent from the year before. The company also reported net cash from operating activities of $111.9 million, which came in below analysts’ estimates of $119.3 million. Average revenue per user grew to $116.6 million, up from $111.2 million in the previous quarter.
Constellation Research Inc. analyst Alan Lepofsky said the stock drop could also have been the result of the company’s failure to mention any specifics around Dropbox Enterprise, which competes with the likes of Box Inc., Google Drive and Microsoft OneDrive.
“I would also like to see more about the growth and momentum of their business partner ecosystem,” Lepofsky said, noting that information on that was also lacking.
Still, whatever the reasons for the after-hours stock performance, JMP Securities analyst Greg McDowell told MarketWatch that he wasn’t too concerned: “You can’t look at it in isolation,” he said. “Over a three-month period, it’s been an extremely volatile stock — I personally am not reading too much into it.”
In any case, Dropbox had positive news for investors with third-quarter guidance that came in above estimates. The company said it’s expecting revenue of between $350 million and $353 million, compared with the $345.9 million forecast by analysts.
Dropbox also raised its full-year guidance, saying it hopes to hit revenue of between $1.366 billion and $1.372 billion, above analysts’ average forecast of $1.357 billion.
Dropbox’s stock remains up more than 20 percent since its initial public offering in March.
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