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BenzingaEditorial

Remote Work Had Several Implications for Dropbox

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Despite its increased importance in the new ‘home office’ normal, the document storage and cloud company has been ignored compared to Zoom Video (NASDAQ: ZM), DocuSign (NASDAQ: DOCU) and Fastly (NYSE: FSLY). Last Thursday, Dropbox (NASDAQ: DBX) showed how much it benefited from the work-from-home trend as it reported better-than-expected fourth-quarter revenue. Quarterly sales topped $500 million for the first time as revenue improved 13% but Dropbox suffered a $400 million real estate hit as it sought to make remote work more permanent.

Fourth quarter

Revenue of $504.1 billion brought in adj anusted net income of $117.9 million, or 28 cents a share. In the same period a year ago, earnings were 16 cents a share on sales of $446 million.

The remote work trend

Before Dropbox committed to having its people work remotely, technology companies including Twitter (NYSE: TWTR) had said they would allow employees to continue working from home even after the pandemic subsides. Earlier this month, San Francisco’s biggest employer, Salesforce (NYSE: CRM) said that most of its employees will be in offices one to three days per week once it’s safe enough to return, In October, after thousands of its employees had gotten used to working without being next to their colleagues, Pinterest (NYSE: PINS) said it had agreed to pay $89.5 million to stop a lease for 490,000 square feet of office space near its San Francisco headquarters to avoid paying at least $440 million in rent.

Dropbox’s “virtual first”

Last quarter, Dropbox announced is “Virtual First” strategy that makes remote work primary. At the end of third quarter, the company had over $1 billion in total lease liabilities on its balance sheet which includes assets other than just office space, so from an investment perspective, the cost savings could significantly boost profit margins. Dropbox stated that trimming 11% of its workforce was part of the “Virtual First” strategy to increase operational efficiency.

The impairment charge

The one-time impairment charge of “right-of-use and other lease related assets”amounted to $398.2 million.  Dropbox is known for its lavish office space in San Francisco’s South of Market neighborhood but going forward, only the tasks that require collaboration between team members will be executed in Dropbox Studios.

During the first three quarters of 2020, Dropbox generated a net income ending its years-long losing streak. But the impairment charge that Dropbox disclosed reverses that streak, resulting in a nearly $346 million loss, compared to third quarter’s profit of $33 million. The charge was excluded from non-GAAP results which showed an annualized increase in profit.

Dropbox ended the year with strong margin expansion, free cash flow, and more than $2 billion in ARR as itcontinued to make progress toward its long-term financial targets.

Customers

Putting all those millions that downloaded Dropbox aside, the company’s revenue depends on users that pay for its premium services. A big concern is the potential for those individuals and businesses to churn to the titans such as Google (NASDAQ: GOOG) or Microsoft, (NASDAQ: MSFT) that can easily undercut them on price. But a steady march up in customer count should continue to alleviate these concerns and Dropbox’s average revenue per user (ARPU) is a good indicator of the company’s pricing power.

Dropbox ended the quarter with 15.48 million paying users, compared to 14.31 million for the same period last year, up 8.2% on a YoY basis. In the previous, third, quarter that ended last September, paying customers grew to 15.25 million as they were 14 million in Q3 of 2019. Increases in paying users drove growth as ARPU stood at $130.17 for the quarter, up 4.14% YoY.

Cash flow

Dropbox’s measures profitability with free cash flow or more precisely, by deducting capital investments from cash generated from business operations. Management’s long-term goal is $1 billion in annual free cash flow by the fiscal year 2024. In the fourth quarter, free cash flow was $158.4 million compared to third quarter’s $187 million.

From operations, Dropbox generated cash flow of $570.8 million in 2020 compared to $528.5 million in 2019. Free cash flow for 2020 was $490.7 million compared to $392.4 million reported in 2019. The company will have to continue working hard if it is to hit its 2024 free cash flow guidance.

New products

Dropbox has integrated several new products such as HelloSign, a digital signature company it acquired in 2019 for $230 million. Notably, HelloSign witnessed strong traction in the fourth quarter as it witnessed a 70% increase in end user signature requests.

Perhaps the most important updates released in November with the progress of Dropbox Spaces 2.0. that aims to provide users a virtual workspace in a home office environment. Spaces is Dropbox’s key tool in winning customers in a post-pandemic world.

Outlook

Overall, the next year will be crucial for for the cloud-based storage and  workflow management company. The company is sitting on an increase in demand for its cloud-based management tools due to the global transition to distributed work environments.. Going into 2021, the company is focused on executing its strategy and building essential products for the new era of distributed work. Dropbox shares have risen about 20% since the company last reported earnings on November 5th. But only time will tell if it can succeeded winning new customers over its many strong competitors.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

BenzingaEditorial

Johnson & Johnson’s Vaccine Is on Hold But lts Businesses Emerged Healthier From the Pandemic

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On Tuesday, Johnson and Johnson (NYSE: JNJ) reported $100 million in first-quarter sales of its single shot Covid-19 vaccine that’s on hold in the U.S. due to a rare and potentially life-threatening blood clotting disorder which has been also related to AstraZeneca (NASDAQ: AZN) vaccine which still hasn’t been approved for emergency use in the U.S. But on the financial side, the company exceeded Wall Street estimated both in terms of revenue and earnings.

First quarter figures

Adjusted EPS amounted to $2.59 per share, exceeding the expected $2.34. Revenue amounted to $22.32 billion, also topping the expected $21.98 billion.

The pharmaceutical business behind the vaccine generated $12.19 billion in revenue. Sales sales of the company’s multiple myeloma drug and a treatment for Crohn’s disease also did their part in fueling the 9.6% YoY increase.

The consumer unit which makes products such as Neutrogena face wash and Listerine mouth wash, generated $3.5 billion in revenue. The drop of 2.3% from a year earlier was due to an “unfavorable comparison” to last year when people were stockpiling on over-the counter- products due to the pandemic-induced lockdowns.

The medical device unit was hit hard last year as hospitals were forced to postpone elective surgeries but it now generated $6.57 billion, a 7.9% increase, as the pandemic recovery is underway.

The FDA halts JNJ’s vaccine production

On Wednesday, The US Food and Drug Administration put the production of Johnson & Johnson’s vaccine on pause at the Emergent BioSolutions facility where millions of potential doses were contaminated.

Already manufactured vaccines will undergo additional testing to ensure their quality hasn’t been compromised before any potential distribution. According to the report, the emergent facility is deeply flawed as written procedures to prevent cross-contamination weren’t followed during production or documented. Components and product containers were not handled or stored in a way to prevent contamination whereas written procedures to assure drug substances are manufactured at the appropriate quality, strength and purity were found inadequate. The report also notes that employees weren’t properly trained and that the facility is of inadequate size or design to allow adequate cleaning and sanitization. Besides unsuitable equipment, the inspection noted peeling paint, unsealed bags of medical waste, residue on walls and damaged floors and rough surface all of which prevent pursuing the intended protocol.

Meanwhile, JNJ is confident about emerging stronger from the pandemic

The CFO, Joseph Wolk told CNBC on Tuesday that the three business segments are “healthier” than they were before COVID-19 shaped our reality last year. The company slightly raised its earnings and revenue guidance for the year as it now expects full-year profit in the range between $9.42 to $9.57 per share with revenue between $90.6 billion and $91.6 billion.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

It Seems Netflix Has Been Dethroned

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Netflix (NASDAQ: NFLX) shares fell as much as 11% in after-hours trading after the streaming giant reported a large miss in subscriber numbers in its first-quarter earnings report. The facts that revenue still grew on a YoY basis along with a strong beat on earnings were not enough to offset the weak number of subscriber additions, especially as management only expects 1 million new subscribers in the undergoing quarter.

First quarter figures

Revenue amounted to $7.16 billion, slightly topping $7.13 billion expected, resulting in earnings per share of $3.75 that exceed the expected $2.97, as gathered by Refinitiv. Global paid net subscriber additions came at 3.98 million which is significantly below the 6.2 million expected, according to FactSet. This figure seems even more pessimistic compared to a quarterly record of 15.8 million new paying users it gathered during the first three months of 2020.

Still, the company’s revenue grew 24% YoY and was in line with its beginning of quarter forecast. Netflix also delivered a strong beat on earnings compared to Street estimates. Operating income for the quarter came in at $1.96 billion which is more than double $958 million in the year-earlier period. Moreover, as content spending was lower, it resulted in a 27% operating margin which is an all-time high for the first quarter.

Netflix is losing subscribers

Netflix believes that the shortfall subscriber numbers could be blamed on the ongoing pandemic or more precisely on its smaller pipeline of originals as COVID-19 restrictions forced the company to delay some of its big-name shows and films. It doesn’t believe that competition from Walt Disney Company’s (NYSE: DIS) Disney+ and Hulu, AT&T’s (NYSE: T) HBO Max, Apple’s (NASDAQ: AAPL) Apple TV+ , Amazon’s (NASDAQ: AMZN) Prime video and Comcast Corporation’s (NASDAQ: CMCSA) NBCUniversal’s Peacock played a factor in the weak subscriber numbers. But the reality is that Netflix is facing an increasing set of competitors in the streaming space with HBO Max having reached 41 million U.S. subscribers two years ahead of schedule in January this year and Disney+ topping 100 million global subscribers as of early March, ballooning to about half of Netflix’s 208 million worldwide subscribers only within a year-and-a-half of its launch.

The key is the business remains healthy and that it keeps growing

To respond its competitors, Netflix expects to spend more than $17 billion in cash on content this year. Production is up and running in nearly all of its major markets and While ramping up content spending more than 44% compared with $11.8 billion last year, Netflix is also trying to combat password sharing. Historically, it wasn’t concerned about this issue as subscriber growth and stock price were easily offsetting concerns around lost revenue. But, things changed as Netflix has found itself amid intense ‘streaming wars’.

Netflix’s board approved a buyback program to repurchase up to $5 billion in common stock, beginning in 2021 with no fixed expiration date. The program is expected to begin during the quarter.

The winner of the streaming wars is still unknown

While Netflix matures in terms of subscriber growth, its business has also become increasingly efficient from an operating standpoint, despite channeling billions into content creation. After posting its first full-year of positive free cash flow since 2011 last year, it believes it is “very close to being sustainably” free cash flow positive.  As for 2021, it expects free cash flow to be around breakeven while no longer having to raise external financing for its day-to-day operations.  In other words, it’s been more than a year that streaming wars intensified and all players are investing heavily to be on the winning side even after the world successfully combats COVID-19.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

Coca Cola Made a Sparkling Recovery

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Coca-Cola’s (NYSE: KO) business was hit extra hard during the COVID-19 pandemic as people avoided gatherings with events being cancelled across the globe. As its business model is heavily reliant on these point-of-sale drinks, the pandemic translated into sharp volume drops for fiscal 2020 while peers like PepsiCo (NASDAQ: PEP) enjoyed booming demand at supermarkets and warehouse retailers. However, on Monday, the beverage giant showed it rebounded by beating on earnings with demand in March hitting pre-pandemic levels.

Fiscal first-quarter

Net sales rose 5% as they amounted to $9.02 billion, exceeding estimates of $8.6 billion. Organic revenues grew 6%, but unit case volume was flat compared to a year earlier. Demand improved every month of the quarter, driven by markets like China where uncertainty concerns around the virus eased.

Coca Cola reported a net income of $2.25 billion, or 52 cents per share. This is a drop compared to last year’s $2.78 billion, or 64 cents per share. Excluding items, earnings amounted to 55 cents per share, exceeding the 50 cents per share expected by analysts surveyed by Refinitiv.

Coca Cola has done a great job focusing on what it can control

Through the pandemic, executives slashed costs by finding ways to cut supply chain, marketing, production and packaging expenses, leading to rising profitability even as peer PepsiCo’s margins fell.

At the beginning of the year, management said the first quarter would be the hardest of the year, but that the scale of the recovery that follows would depend on big variables like the pace of vaccine distribution.

Unchanged demand

Quarterly demand was unchanged from a year earlier as North America and Western Europe take longer to recover from the pandemic but global unit case volume in March returned to 2019 levels.

While the central North American business is still under pressure, growth in India, China and Latin America managed to offset those declines. Nutrition, juice, dairy and plant-based beverage segment experienced a 3% volume growth as it was fueled by higher demand in China and India. Hydration, sports, coffee and tea segment was the hardest hit with volumes shrinking 11%. The coffee business declined 21% as Costa cafeswere heavily impacted by the lockdowns. The hydration category that includes Dasani and Smartwater reported volume declines of 12% as consumers across the globe bought less single-use water bottles. Demand for tea products fell 6%, whereas sports drinks saw volume decline slightly by 1%.

Uncertainty still remains

Back in February, management stated that the giant has positioning itself to come out of the crisis targeting faster growth and higher margins compared to its pre-pandemic figures.

The company restated its full-year forecast, with organic revenue growth expected in high single digits and adjusted earnings growth expected in the range between high single digits to low double digits. India and parts of Europe are reintroducing lockdowns due to spikes in new Covid-19 cases, while Latin America and Africa are expecting slower vaccine distribution and embracing for new waves. While vaccinations are rising in many countries such as the U.S., U.K., the flip side is there’s actually a new high in terms of cases as the weekly number of new cases has just hit an all-time peak.

Although April has started well for Coke, the looming risk of new lockdowns threatens to reverse that progress.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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