Battle of the Boxes: Dropbox vs. Box
In its recent IPO filing, Dropbox describes itself as "a collaboration platform where digital content is created, accessed, and shared with the world." In Box's most recent annual report, the company describes itself as “a leading cloud content management platform that enables organizations of all sizes to securely manage their content while allowing easy, secure access and sharing of this content from anywhere, on any device.” If we focus in: Dropbox emphasizes facilitating collaboration, while Box focuses on content management.
To begin, we compare key financials and operating metrics for both companies in the table below.
Summary Profit and Loss
We can see that Dropbox is roughly double the size of Box in terms of Revenue and Gross Profit. However, Dropbox has only 1.6X Box’s Operating Expenses, which means that Dropbox has a higher Operating Margin than Box does.
Summary Cash/Debt Position
Dropbox has double the cash of Box on its balance sheet and no debt, which gives them a net cash balance of $430 million. This is much higher in comparison to Box’s net cash of $168 million.
The companies have similar gross profit margins, as well as R&D and General and Admin expenses as % of sales. However, Box spends a significantly higher percentage of revenues on Sales and Marketing, 60%, compared to only 28% for Dropbox.
Looking at how Operating Expenses are allocated, Dropbox is investing 45% of its total Operating Expenses in Research & Development, while Box is only investing 26%. Meanwhile, Box is investing 58% of its Operating Expenses in Sales & Marketing, whereas Dropbox is only investing 37%.
After comparing financial metrics and ratios, we look at the human capital metrics of the two companies, specifically their headcount.
The companies are very similar in size of team, each with close to 1,800 employees.
The following table shows some of the principle operating metrics of the two companies.
Dropbox has almost 10x Box’s registered users. However, for Dropbox, only 2.2% of its users are paying, whereas 17% of Box users are paying (whether part of an enterprise account or a paying individual account).
Dropbox held its IPO in March 2018 with an initial share price of $21. Since then, its share price has increased 42% to $29.83 and today Dropbox has a market value of $12.3 Billion.
If we deduct Net Cash currently on the Balance Sheet of each company, we get the Enterprise Value. For Box this is: $2.5 Billion and for Dropbox $11.8 Billion.
Comparing Enterprise Value to Last Year Revenue, we see that the stock market is valuing Box at approximately 5.0X last year’s Revenue, whereas it values Dropbox significantly higher, at 10.7X Revenue.
The following two graphs shows the evolution in share price of Box and Dropbox since their IPO:
- Box and Dropbox operate in the same sector, however, the execution paths of the two companies have been different. On many key metrics, Dropbox is outperforming Box by a factor of 2:1.
- Looking at how the companies allocate resources, Box is significantly heavier on Sales & Marketing, whereas Dropbox is allocates proportionally more to Research & Development.
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