Dropsuite Limited (ASX: DSE) is a cloud software platform which enables the firm with easy backup capabilities, recover and protect fundamentals for important company information. The company provides more than two billion backups in a day and it also has partnership with several web hosting and IT service providers. It has partnership with GoDaddy, UOL, D&H, Ingram Micro etc, which enables the company to protect businesses from the threat of unexpected data loss.
On 8 February 2019, the company provided the update on the planned migration of users by the largest website backup partner of the company, as first reported in April’18 then last month.
The original plan of the partner was to undertake the migration over a twelve-month or a longer period but has now decided to migrate all users by early April 2019, because they have added more resources to manage the migration.
The total impact by the end of this migration will be approximately AUD$115,000 of monthly revenue. This will be first reflected in the company’s cash receipts in the second quarter of 2019. Also, ARR will decline, and cash burn will increase in the short-term as the company aggressively increase existing partners and launches new partnerships as well. Hence, the company expects to still record positive year-on-year ARR growth (Dec’18 vs Dec’19). Dropsuite is well-funded with a strong cash balance, diversified revenue streams and low-cost base to execute on its growth strategy and comfortably absorb this migration.
The migration took place faster than anticipated. However, the company maintains an excellent relationship with the partner with continuing business and further joint product development initiatives, despite this early migration. As flagged, the company is very rapidly de-risking its revenue base, so ARR comprises of revenue contributions from a diversified partner and product base.
The impact of this migration can be mitigated by healthy month-on-month growth in paid users from recently added partners that are successfully selling Dropsuite’s market-leading email backup and archiving product, diversification of the revenue base with further focus on larger size end clients and solid growth in the sales pipeline with Dropsuite in advanced negotiations with various new partners, which will contribute strongly to ARR once they go live progressively from this quarter onwards.
Now let us quickly have a look at Dropsuite Limited’s stock performance and the return it has posted over the last few months. The stock is currently trading at a price of $0.032 (AEST 2:14) and sharply declined by almost 8.571% during the day’s trade, with a market capitalisation of $17.28 million. The stock opened at $0.033 with its day’s high at the same price and a day’s low price of $0.030. The stock has generated a YTD return of 25.00% and posted negative returns of 75.0%, 20.45% over the last six months and three months period respectively, however over the last month it generated a return of 29.63%. It has a 52-week high price of $0.162 and a 52-week low of $0.025, with an average trading volume of 996,568 approximately.
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