We’re healthy enough to IPO but we’re not going to just yet — that was the subtext of an interview that Dropbox CEO Drew Houston had on Bloomberg earlier this afternoon. Houston asserted, for the first time, Dropbox is profitable on an EBITDA basis.
EBITDA (earnings before interest, tax, depreciation and amortization) is a financial metric typically used to compare businesses. It strips away financial variables like taxes to give a clearer picture of performance.
Dropbox has repeatedly dropped financial breadcrumbs to set the tone for conversations about the unicorn’s health in advance of an S-1 filing for IPO. Back in January, Houston claimed a $1 billion revenue run rate and even bragged that an analyst report showed Dropbox’s growth outpacing that of Salesforce.
A late-2017 Dropbox IPO has been rumored for some time now, though 2018 would not be out of the question. Bloomberg reported back in March that Dropbox had secured a $600 million credit line from JPMorgan, Bank of America, Deutsche Bank, Goldman Sachs, Macquarie and Royal Bank of Canada.
Taking on debt was yet another healthy financial sign for the cash flow positive company. Houston was able to get cash without giving up equity, a statement of financial confidence from all of the banks involved.
Adding profitability on an EBITDA basis is a good thing, but the company still has a pretty big mountain to summit. Dropbox was valued at $10 billion back in 2014, a figure that is universally contentious. Even at $1 billion in revenue, that valuation is difficult to justify.
Healthy financial milestones sugarcoat the conversation temporarily, but eventually Houston is going to have to step into the public markets. At that point nobody will care how fast Dropbox grew its revenue back in the day. The question will be whether Dropbox is a company that can eventually sustain $10 billion in yearly revenue.