SEC Comment Letter for DROPBOX, INC. (DBX) (CIK 0001467623) (DBX) — Dec 20, 2017
DROPBOX, INC. (DBX) (CIK 0001467623)
Date: Dec. 20, 2017 · CIK: 0001467623 · Accession: 0000000000-17-044543
AI Filing Summary & Sentiment
Letter
Mail Stop 4561 December 20, 2017 Andrew W. Houston Chief Executive Officer Dropbox, Inc. 333 Brannan Street San Francisco, CA 94107
Re: Dropbox, Inc. Amendment No. 1 to Draft Registration Statement on Form S -1 Submitted December 4 , 2017 CIK No. 0001467623
Dear Mr. Houston :
We have reviewed your amended draft registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter by providing the requested information and either submitting an amended draft registration statement or publicly filing your registration statement on EDGAR. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in re sponse to these comments and your amended draft registration statement or filed registration statement, we may have additional comments. Unless we note otherwise, our references to prior comments are to comments in our November 7, 2017 letter.
Prospect us Summary
Our Growth Strategy, page 4
1. In response to prior comment 1, you state that you do not believe disclosing active registered users is necessary to give more context to your disclosure. We note, however, that the 500 million registered user m etric that you reference throughout the prospectus accounts for every user that ever registered regardless of whet her or not the user has used your platform in any recent period. Likewise, your estimate of 300 million registered users encompasses all regi stered users with at least one of three characteristics that make them more likely to pay over time, none of which accounts for utilization levels. As it appears that the level of activity on your platform among the registered user base would necessarily bear on the scale of your paid conversion opportunity, please disclose the
Andrew W. Houston Dropbox, Inc. December 20, 2017 Page 2
number of active registered users or other information to help investors understand your consideration of this issue. Your disclosure may explain the limitations of this metric such as seasonal fluctuations and the effect of marketing campaigns, as you advise in your response .
2. As you indicate in response to prior comment 2, please revise to state that you derive your estimate of 300 million registered users from your observation that “substantially all of [your] paying users have at least one” of the listed characteristics. Further, clarify that this subset of registered users is more likely “than other registered users” to become paying users over time.
Risk Factors
“We are s ubject to export and import control laws and regulation . . . ,” page 26
3. In response to prior comment 6 , you state that you discovered that your platform had been accessed by users with IP addresses in Iran, Syria, Sudan and North Korea. North Korea was designated as a state sponsor of terrorism on November 20, 2017. Please describe to us your contacts wit h Iran, Syria, Sudan and North Korea. Your description should include any contacts related to Dropbox Plus, Dropbox Professional, Dropbox Business, and other products, services, technology or software that may not involve personal communications as set fo rth in OFAC general licenses. Please also discuss the materiality of your contacts with those countries, in quantitative terms and in terms of qualitative factors that a reasonable investor would deem important in making an investment decision. You shoul d address the potential impact of the investor sentiment evidenced by divestment and similar initiatives that have been directed toward companies with operations associated with U.S. -designated state sponsors of terrorism.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Business, page 56
4. We note your response to prior comment 10. Please, however, address the recent changes to your Dropbox Business subscription plans if they are reasonably likely to have a material impact on your liquidity, capital resources, or results of operations. Further, to the extent material, address the opportunities, challenges and risks presented by your plan to pursue enterprise businesses as well as the actions that you are taking to address them. Refer to Sections III.A and III.B.3 of SEC Release No. 33 -8350.
Our Subscription Plans, page 63
5. Please refer to prior comment 13 and clarify the extent to which you derive your paying users from the enterprise market ver sus the consumer market. In this regard, we note that you have been targeting the enterprise market since 2013 and that you launched Dropbox
Andrew W. Houston Dropbox, Inc. December 20, 2017 Page 3
Enterprise to address the requirements of large organizations in 2015. Please disclose the number of customers th at are organizations and the percentage of paying users that derive therefrom. Disclose this information with respect to large organizations as well. In addition, in order to understand the opportunity available to you to grow your enterprise business, d isclose the number of organizations and, more specifically, large organizations within which Dropbox is being used. In this regard, we note your website states that “52% of the Fortune 500 use Dropbox Business to run their companies,” that “200,000 organi zations rely on Dropbox to grow and secure their businesses,” and that “4 million businesses use Dropbox to work smarter.”
You may contact Melissa Walsh, Staff Accountant, at (202) 551 -3224 or Stephen Krikorian, Accounting Branch Chief, at (202) 551 -3488 if you have questions regarding comments on the financial statements and related matters. Please contact Bernard Nolan, Attorney -Adviser, at (202) 551 -6515 or, in his absence, Jan Woo , Legal Branch Chief, at (202) 551-3453 with any other questions. If yo u require further assistance, you may contact me at (202) 551 -3735.
Sincerely,
/s/ Barbara C. Jacobs for
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Mail Stop 4561 December 20, 2017 Andrew W. Houston Chief Executive Officer Dropbox, Inc. 333 Brannan Street San Francisco, CA 94107 Re: Dropbox, Inc. Amendment No. 1 to Draft Registration Statement on Form S -1 Submitted December 4 , 2017 CIK No. 0001467623 Dear Mr. Houston : We have reviewed your amended draft registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter by providing the requested information and either submitting an amended draft registration statement or publicly filing your registration statement on EDGAR. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response. After reviewing the information you provide in re sponse to these comments and your amended draft registration statement or filed registration statement, we may have additional comments. Unless we note otherwise, our references to prior comments are to comments in our November 7, 2017 letter. Prospect us Summary Our Growth Strategy, page 4 1. In response to prior comment 1, you state that you do not believe disclosing active registered users is necessary to give more context to your disclosure. We note, however, that the 500 million registered user m etric that you reference throughout the prospectus accounts for every user that ever registered regardless of whet her or not the user has used your platform in any recent period. Likewise, your estimate of 300 million registered users encompasses all regi stered users with at least one of three characteristics that make them more likely to pay over time, none of which accounts for utilization levels. As it appears that the level of activity on your platform among the registered user base would necessarily bear on the scale of your paid conversion opportunity, please disclose the Andrew W. Houston Dropbox, Inc. December 20, 2017 Page 2 number of active registered users or other information to help investors understand your consideration of this issue. Your disclosure may explain the limitations of this metric such as seasonal fluctuations and the effect of marketing campaigns, as you advise in your response . 2. As you indicate in response to prior comment 2, please revise to state that you derive your estimate of 300 million registered users from your observation that “substantially all of [your] paying users have at least one” of the listed characteristics. Further, clarify that this subset of registered users is more likely “than other registered users” to become paying users over time. Risk Factors “We are s ubject to export and import control laws and regulation . . . ,” page 26 3. In response to prior comment 6 , you state that you discovered that your platform had been accessed by users with IP addresses in Iran, Syria, Sudan and North Korea. North Korea was designated as a state sponsor of terrorism on November 20, 2017. Please describe to us your contacts wit h Iran, Syria, Sudan and North Korea. Your description should include any contacts related to Dropbox Plus, Dropbox Professional, Dropbox Business, and other products, services, technology or software that may not involve personal communications as set fo rth in OFAC general licenses. Please also discuss the materiality of your contacts with those countries, in quantitative terms and in terms of qualitative factors that a reasonable investor would deem important in making an investment decision. You shoul d address the potential impact of the investor sentiment evidenced by divestment and similar initiatives that have been directed toward companies with operations associated with U.S. -designated state sponsors of terrorism. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our Business, page 56 4. We note your response to prior comment 10. Please, however, address the recent changes to your Dropbox Business subscription plans if they are reasonably likely to have a material impact on your liquidity, capital resources, or results of operations. Further, to the extent material, address the opportunities, challenges and risks presented by your plan to pursue enterprise businesses as well as the actions that you are taking to address them. Refer to Sections III.A and III.B.3 of SEC Release No. 33 -8350. Our Subscription Plans, page 63 5. Please refer to prior comment 13 and clarify the extent to which you derive your paying users from the enterprise market ver sus the consumer market. In this regard, we note that you have been targeting the enterprise market since 2013 and that you launched Dropbox Andrew W. Houston Dropbox, Inc. December 20, 2017 Page 3 Enterprise to address the requirements of large organizations in 2015. Please disclose the number of customers th at are organizations and the percentage of paying users that derive therefrom. Disclose this information with respect to large organizations as well. In addition, in order to understand the opportunity available to you to grow your enterprise business, d isclose the number of organizations and, more specifically, large organizations within which Dropbox is being used. In this regard, we note your website states that “52% of the Fortune 500 use Dropbox Business to run their companies,” that “200,000 organi zations rely on Dropbox to grow and secure their businesses,” and that “4 million businesses use Dropbox to work smarter.” You may contact Melissa Walsh, Staff Accountant, at (202) 551 -3224 or Stephen Krikorian, Accounting Branch Chief, at (202) 551 -3488 if you have questions regarding comments on the financial statements and related matters. Please contact Bernard Nolan, Attorney -Adviser, at (202) 551 -6515 or, in his absence, Jan Woo , Legal Branch Chief, at (202) 551-3453 with any other questions. If yo u require further assistance, you may contact me at (202) 551 -3735. Sincerely, /s/ Barbara C. Jacobs for Jan Woo Legal Branch Chief Office of Information Technologies and Services cc: Tony Jeffries Rezwan D. Pavri Wilson Sonsini Goodrich & Rosati, P.C.