Dropbox Reaches Key Profit Milestone, CEO Says

Dropbox Inc.'s chief executive officer said the company is now generating a profit excluding interest, taxes, depreciation and amortization, a key metric that investors are watching as the file-sharing software maker moves closer to becoming a public company.

"It's rare for software companies to be operating at our scale with our level of profitability and to be growing at the rate that we are," Dropbox CEO and co-founder Drew Houston said in an interview with Bloomberg Television. The measure does include compensation costs, such as stock or options issued to employees as part of their salary.

Dropbox in the past year has been touting milestones that mark the company's long march to greater financial maturity. Last June at the Bloomberg Technology Conference, Houston said Dropbox was free cash-flow positive, and earlier this year he announced revenue had topped $1 billion on an annualized basis. Dropbox said it was the fastest any software-as-a-service company had ever reached that mark. 

Free cash flow and earnings before interest, taxes, depreciation and amortization, or Ebitda, are both measures that public-market investors use to analyze a company's financial stability. Positive free cash flow means a company is generating enough money to have cash left over after spending to run its business. Ebitda, which is often used to compare companies, is a profit number that strips out expenses that aren't central to operating performance. Dropbox, which competes in a fierce market alongside Microsoft Corp., Alphabet Inc. and Box Inc., has been working to woo corporate customers to boost sales while taking steps to rein in costs.

The San Francisco-based startup, founded in 2007, has been meeting with bankers to discuss plans to sell shares in an initial public offering, people familiar with the talks said in March. While the company hasn't set specific timing, potential advisers think it will be ready to go public by the end of this year.

"We are certainly charting a path to being a thriving public company, but one of the things that's nice about being cash-flow positive and having a strong balance sheet is we can do that when the timing is right for us," Houston said. "Right now we are focused on building, keeping our heads down and keeping our customers happy, but that's certainly the path we are charting in the long term."

Last month, Dropbox opened a $600 million credit facility from six banks led by JPMorgan Chase & Co., people familiar with the matter said at the time.  

"You need to control your own destiny,'' Houston said Wednesday. ``That's why we pay so much attention to these financial milestones because they're an indicator of health."

--With assistance from Alex Barinka and Candy Cheng.