Dropsuite reveals contained costs and growing revenues in strong quarterly report

Dropsuite ASX DSE contained costs revenues quarterly report
Dropsuite achieved a year-on-year growth in cash receipts of 62% and a 230% increase in paid users.

Cloud technology provider Dropsuite (ASX: DSE) has provided a quarterly performance update in relation to its activities, with “solid” cash receipts of A$1.06 million helping the company to record a quarter-on-quarter growth rate of 21%. On a year-on-year basis, Dropsuite achieved a 62% growth rate in its cash receipts.

According to its figures, Dropsuite ended Q2 2018 with around $4 million in cash, with a “contained” cost base and solid revenue growth in each quarter.

Furthermore, Dropsuite also reported strong growth in paid user numbers, two new partnerships and says its cost base is now “maintained”.

The increase in customer receipts has been driven by the further uptake of its cloud data backup platform by small and medium businesses (SMBs) across multiple markets.

Most notably, the company swelled its user numbers by a further 50% this month alone, having announced 400,000 users in early July, then ending Q2 with around 600,000 paid users, representing a 230% year-on-year growth rate.

Improved performance

According to Dropsuite, much of the growth in paid users is generated from a partnership secured in April with a “large IT service provider” which undertook an extensive marketing campaign to attract paid users.

However, the company admitted that average revenue per new user (ARPU) from this partnership is expected to be lower than normal due to favourable sign-on terms associated with the marketing program.

From a cost perspective, Dropsuite has struggled to attain cashflow positivity with quarterly cash burn for the past quarter totalling $318,000 – a significant improvement from $610,000 reported in the previous quarter but still a negative figure which adds a slightly sour note to its quarterly update.

A further positive factor was the addition of two new partnerships.

In the past quarter, Dropsuite added two new reseller/distribution partnerships around Office 365 Backup and Archiving – The Squalio Group, a large cloud provider in Eastern Europe and the Tarsus Technology Group, an IT and cloud distributor in South Africa, were both onboarded over the past quarter.

One of the company’s key targets is to diversify its sales revenue base and to “de-risk” its revenue profile. Locking in more partnerships to broaden its geographical reach could potentially spell larger growth multiples for Dropsuite.

“Ensuring a more diversified partnership base will help Dropsuite de-risk its revenue profile, ensuring sales are not concentrated within a small number of partnerships,” the company said.

“We expect that our new email product will show promising growth in 2018 and beyond. The size of the addressable market is huge, with hundreds of millions of email applications requiring the protection of our world-class backup solution, and multi-billion-dollar markets especially when counting the archiving market that caters to regulated industries such as healthcare, manufacturing, finance and others,” according to Dropsuite.

This morning’s news helped Dropsuite shares reach a high of $0.02 per share in morning trade, up around 17% on the day.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.