Dropbox appears to be one of the cloud software companies benefiting from the pandemic-related remote work boom: It reported its first-ever quarterly profit during its Q1 earnings Thursday.
Dropbox expects to turn a profit for the full year and CEO Drew Houston said on the company's analyst call that he believes the coronavirus-related surge in remote work will "have lasting effects that will favor companies like ours in the long run and create added demand" for Dropbox's products.
Dropbox has had a "significant increase" in new trials for its products: 40% percent for business users and 25% for individual paid users, while it's e-signature service — a result of Dropbox's acquisition of HelloSign in February 2019 — has see three times more usage, too.
"The nature of remote work is kind of squarely what our value proposition is," Dropbox COO Olivia Nottebohm told Business Insider in an interview on Thursday.
While some of that increased interest will likely wane, Nottebohm said that Dropbox is seeing a "stable rate of churn," and that a sizable number of its new users seem to be sticking around. To help retain both old and new customers as businesses face unprecedented circumstances due to COVID-19, Dropbox is being flexible, Nottebohm said. In a few cases that's meant adjusting pricing or adding new user licenses more quickly than it usually would, in ways that won't impact the company's annual recurring revenue.
Giving customers flexibility amid the coronavirus uncertainty
Dropbox was used to serving many different types of customers and adapting to various needs even before the coronavirus hit. But it's had to be even more in-tune with what customers need as the pandemic hammers companies across industries, causing tightening purse strings that lead to layoffs or furloughs, as well as the need to cut costs through their cloud software contracts.
In many cases, what customers need is flexibility, Nottebohm said. As some struggle to meet the payment terms of their contracts, Dropbox is dealing with them on a case-by-case basis. In the most extreme cases, Dropbox has opted to extend net payment terms or change invoice frequency.
"I personally have been on calls where you know that, given the industry, it's the right thing — you know that they need it," Nottebhom said. "You also know that they desperately want to stay a customer of ours."
The goal is to meet customers where they are, allowing them to access the tools that their employees need to work while not breaking the bank. Companies typically spend a lot on long-term cloud software contracts from the likes of Dropbox, Salesforce, Okta, and others. Even though those tools may be critical to their customer management systems, loyalty programs, accounting, or employee productivity (in Dropbox's case), some customers are finding themselves unable to pay due to their own dramatic revenue drops.
For example, a media company that uses Dropbox had to furlough some workers before it was set to renew its Dropbox contract in June, Nottebhom said. To accommodate its financial situation, Dropbox lowered the price per user for those furloughed users and will maintain those lower prices until the furloughed workers return to work.
On another end of the spectrum, Dropbox dealt with a situation where a Boston hospital needed to add 100 users to its Dropbox account very quickly because it was using the service to help it manage hospital beds. In that case, Dropbox gave the customer the added capacity immediately and hammered out the pricing details over the next month.
Dropbox has also offered free usage to NGOs and K-12 schools.
"Again, they're kind of individual situations," Nottebohm said, "But we do want to make sure to be flexible and just have understanding for where our customers are."
Targeting a wide array of users while shifting the product
Nottebohm herself only joined the company as COO in early February, after holding sales and go-to-market roles at Google Cloud. One of the things that drew her to the company was its shift to a more diverse array of users.
Dropbox started off as a file sharing product, but in the last year, the company has been evolving its product to function more like a smart workspace that can be the central hub for users at work that integrates with all of the other apps people use to do their jobs. While it still has a freemium version of its product for regular consumers, it's targeted business users more than ever.
Nottebhom's main goal for her first year is to make sure that all the teams that she oversees are focused on customer needs, from free users to large corporations, especially given the uncertainty caused by the coronavirus pandemic, she said.
"It's great that the product speaks to all those customer segments," she said. "It's our job to make sure that we're bringing additional features and functionalities to the various segments, which are already present in the products."
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