Financial Data and Key Metrics Changes - Total revenue for Q1 2024 increased by 3.3% year-over-year to $631 million, slightly above guidance [8] - Total ARR grew to $2.556 billion, up 3.6% year-over-year, with a constant currency growth rate of 2.8% [8] - Gross margin was 84.6%, benefiting from an increase in the useful life of servers, resulting in approximately $10 million of benefit in Q1 [9] - Operating expenses decreased by approximately 8% year-over-year to $303 million, leading to an operating margin of 36.5%, ahead of guidance [9] - Net income for Q1 was $197 million, up 35% year-over-year, with diluted EPS of $0.58 [31] Business Line Data and Key Metrics Changes - The core FSS business is focused on improving Teams offerings, with higher net revenue retention rates and opportunities for license expansion [4] - The Document Workflow group, including Form Swift, Sign, and DocSend, performed better than anticipated, indicating a positive trend [24] - The mobile channel has not fully recovered, but there have been improvements in top funnel metrics [25] Market Data and Key Metrics Changes - The company added approximately 35,000 net new paying users in Q1, bringing the total to 18.16 million users [8] - There is observed pressure in the SMB market, particularly in tech and manufacturing verticals, affecting demand [19] Company Strategy and Development Direction - The company is focused on enhancing product experiences for core FSS users while investing in AI-enabled products like Dash [28] - There is a strategic emphasis on reducing friction in onboarding processes and improving customer feedback integration into product development [5][6] - The company is committed to returning a significant portion of free cash flow to shareholders through share repurchases [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing macroeconomic challenges and an uncertain demand environment, particularly in the SMB space [24] - The company remains disciplined in operations and capital allocation, focusing on efficiency and long-term value creation [34] - There is optimism about the potential of AI-enabled experiences and the evolution of the core FSS business [79] Other Important Information - The company repurchased over 11 million shares for $279 million in Q1, with approximately $1.1 billion remaining under the current repurchase authorization [10] - The company is monitoring a recent security incident related to its Sign business, which represents a low single-digit percentage of total revenue [33] Q&A Session Summary Question: Feedback on AI products in Dash - Early feedback indicates positive engagement and improvements in search latency and onboarding success [14] Question: Bundling opportunities and pricing changes - The company is focused on optimizing the bundling strategy and addressing price sensitivity in the market [16][57] Question: Health of SMBs and its impact on demand - Management notes that SMBs are more price-sensitive post-downturn, impacting top-of-funnel metrics [18][59] Question: Document Workflow business performance - The Document Workflow business showed stability, with increased usage driven by seasonal factors like tax season [64] Question: Security incident response - The company has taken proactive measures to address the security incident and expects limited impact on revenue [76]

[First Quarter Fiscal 2024 Results Highlights](index=1&type=section&id=First%20Quarter%20Fiscal%202024%20Results%20Highlights) Dropbox reported solid Q1 2024 results, achieving $631.3 million revenue, 3.3% YoY growth, strong profitability, and robust cash flow Q1 2024 Key Financial Metrics | Metric | Value (Millions) | YoY Change (%) | | :--- | :--- | :--- | | Revenue | $631.3 | +3.3 | | GAAP Operating Margin | 22.7% | N/A | | Non-GAAP Operating Margin | 36.5% | N/A | | Net Cash Provided by Operating Activities | $175.5 | N/A | | Free Cash Flow | $166.3 | N/A | [CEO Statement and Business Outlook](index=1&type=section&id=CEO%20Statement%20and%20Business%20Outlook) CEO Drew Houston noted Q1 revenue met expectations, profitability exceeded forecasts, and emphasized investing in AI-powered product experiences - The core business delivered **in-line revenue** and **better-than-anticipated profitability** in Q1[3](index=3&type=chunk) - The company recently launched product updates to enhance content security, organization, and sharing across various platforms[3](index=3&type=chunk) - Future strategy involves maintaining operational discipline while investing in AI-powered product experiences to improve distributed work[3](index=3&type=chunk) [Detailed Financial Performance](index=1&type=section&id=First%20Quarter%20Fiscal%202024%20Results) Dropbox achieved steady Q1 2024 growth with revenue up 3.3% to $631.3 million, ARR up 3.6% to $2.556 billion, and significant profitability gains Q1 2024 Performance vs. Q1 2023 | Metric | Q1 2024 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue (Millions) | $631.3 | $611.1 | +3.3% | | Total ARR (Billions) | $2.556 | N/A | +3.6% | | Paying Users (Millions) | 18.16 | 17.90 | +1.45% | | Avg. Revenue per Paying User ($) | $139.59 | $138.97 | +0.45% | | GAAP Gross Margin (%) | 83.2 | 80.9 | +2.3 p.p. | | Non-GAAP Gross Margin (%) | 84.6 | 82.4 | +2.2 p.p. | | GAAP Operating Margin (%) | 22.7 | 13.8 | +8.9 p.p. | | Non-GAAP Operating Margin (%) | 36.5 | 28.6 | +7.9 p.p. | | GAAP Net Income (Millions) | $132.3 | $69.0 | +91.7% | | Non-GAAP Net Income (Millions) | $196.7 | $146.1 | +34.6% | | Free Cash Flow (Millions) | $166.3 | $138.0 | +20.5% | | GAAP Diluted EPS ($) | $0.39 | $0.20 | +95.0% | | Non-GAAP Diluted EPS ($) | $0.58 | $0.42 | +38.1% | - The company increased the useful lives of certain infrastructure assets from four to five years, which reduced depreciation expense by **$10.4 million** in Q1 2024[6](index=6&type=chunk) - Cash, cash equivalents, and short-term investments stood at **$1.176 billion** at the end of the quarter[6](index=6&type=chunk) [Financial Outlook and Corporate Events](index=3&type=section&id=Financial%20Outlook) Dropbox will provide forward-looking guidance during its Q1 earnings call, and CFO Tim Regan will attend the Jefferies Software Conference - Forward-looking guidance will be provided on the company's conference call and investor relations website[7](index=7&type=chunk) - CFO Tim Regan will participate in the Jefferies Software Conference on **Wednesday, May 29th, 2024**[9](index=9&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents Dropbox's condensed consolidated statements of operations, balance sheets, and cash flows for the reported period [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Dropbox's Q1 2024 revenue grew to $631.3 million, with income from operations increasing to $143.5 million and net income nearly doubling Q1 2024 Statement of Operations (in millions) | Line Item | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--- | :--- | :--- | | Revenue | $631.3 | $611.1 | | Gross Profit | $525.5 | $494.3 | | Total Operating Expenses | $382.0 | $410.2 | | Income from Operations | $143.5 | $84.1 | | Net Income | $132.3 | $69.0 | | Diluted Net Income per Share | $0.39 | $0.20 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, Dropbox reported total assets of $2.798 billion, a decrease from year-end 2023, and an increased total stockholders' deficit Balance Sheet Highlights (in millions) | Account | March 31, 2024 (Millions) | Dec 31, 2023 (Millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $548.9 | $614.9 | | Short-term investments | $627.0 | $741.1 | | **Total Assets** | **$2,797.7** | **$2,983.5** | | Deferred revenue | $741.8 | $725.0 | | Convertible senior notes, net | $1,378.7 | $1,377.8 | | **Total Liabilities** | **$3,074.9** | **$3,149.3** | | **Total stockholders' deficit** | **($277.2)** | **($165.8)** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2024, Dropbox generated $175.5 million in operating cash flow, with financing activities using $352.7 million, leading to a net decrease in cash Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $175.5 | $139.9 | | Net cash provided by investing activities | $113.7 | $200.8 | | Net cash used in financing activities | ($352.7) | ($241.3) | | **Change in cash and cash equivalents** | **($66.0)** | **$99.9** | | Cash and cash equivalents - end of period | $548.9 | $332.7 | - Common stock repurchases significantly increased to **$279.4 million** in Q1 2024 from **$175.4 million** in Q1 2023, driving the higher cash outflow from financing activities[18](index=18&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section provides a reconciliation of Dropbox's GAAP financial results to its non-GAAP measures, including operating income, net income, and free cash flow [Reconciliation of GAAP to Non-GAAP Results](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20results) In Q1 2024, Dropbox's GAAP income from operations of $143.5 million was adjusted to a Non-GAAP income of $230.7 million, yielding a 36.5% Non-GAAP operating margin Q1 2024 GAAP to Non-GAAP Reconciliation (in millions) | Item | GAAP (Millions) | Adjustments (Millions) | Non-GAAP (Millions) | | :--- | :--- | :--- | :--- | | Gross Profit | $525.5 | $8.3 | $533.8 | | Income from Operations | $143.5 | $87.2 | $230.7 | | Operating Margin (%) | 22.7 | 13.8 | 36.5 | [Reconciliation of GAAP Net Income to Non-GAAP Net Income](index=10&type=section&id=Reconciliation%20of%20GAAP%20net%20income%20to%20Non-GAAP%20net%20income) In Q1 2024, GAAP net income of $132.3 million was reconciled to Non-GAAP net income of $196.7 million, resulting in a Non-GAAP diluted EPS of $0.58 Net Income Reconciliation (in millions, except per share data) | Item | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--- | :--- | :--- | | GAAP net income | $132.3 | $69.0 | | Stock-based compensation | $78.0 | $76.0 | | Acquisition-related and other expenses | $3.0 | $7.4 | | Amortization of acquired intangible assets | $6.2 | $7.0 | | Income tax effects of non-GAAP adjustments | ($22.8) | ($13.3) | | **Non-GAAP net income** | **$196.7** | **$146.1** | | **Non-GAAP diluted net income per share ($)** | **$0.58** | **$0.42** | [Reconciliation of Free Cash Flow](index=10&type=section&id=Reconciliation%20of%20free%20cash%20flow) Free cash flow for Q1 2024 was $166.3 million, a 20.5% increase from Q1 2023, with the free cash flow margin improving to 26.3% Free Cash Flow Reconciliation (in millions) | Item | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $175.5 | $139.9 | | Less: Capital expenditures | ($9.2) | ($1.9) | | **Free cash flow** | **$166.3** | **$138.0** | | Free cash flow margin (%) | 26.3 | 22.6 | [About Non-GAAP Financial Measures](index=11&type=section&id=About%20Non-GAAP%20Financial%20Measures) Dropbox uses non-GAAP financial measures to provide investors with additional insight into operational performance, excluding certain non-recurring or non-cash expenses - Non-GAAP measures are used to supplement GAAP results by excluding expenses not reflective of ongoing operations, such as **stock-based compensation**, **amortization of acquired intangibles**, and other **acquisition-related costs**[27](index=27&type=chunk) - Management utilizes these non-GAAP figures for internal budgeting, forecasting, and evaluating financial performance against previous periods and peer companies[28](index=28&type=chunk) - Free Cash Flow (FCF) is defined as net cash from operating activities minus capital expenditures and is considered a key indicator of **long-term liquidity**[27](index=27&type=chunk)[30](index=30&type=chunk)

For new and old investors, taking full advantage of the stock market and investing with confidence are common goals. Zacks Premium provides lots of different ways to do both.Featuring daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, the research service can help you become a smarter, more self-assured investor.Zacks Premium also includes the Zacks Style Scores.What are the Zacks Style Scores?Developed alongsid ...

Shares of Dropbox (DBX) have gained 0% over the past four weeks to close the last trading session at $23.49, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $30.11 indicates a potential upside of 28.2%.The mean estimate comprises nine short-term price targets with a standard deviation of $4.57. While the lowest estimate of $24 indicates a 2.2% increase from the current price lev ...

Investors and founders are busier, showing significant quarterly and yearly growth in future dealmaking metricsSAN FRANCISCO, April 11, 2024 /PRNewswire/ -- DocSend, a secure document sharing platform and Dropbox (NASDAQ: DBX) company, today released a data analysis showing that investor pitch deck engagement was higher for most of Q1 than all six previous years tracked — including record-breaking 2021 — according to its Pitch Deck Interest (PDI) metrics. Investor activity hit a weekly Q1 record high, spiki ...

NEW YORK--(BUSINESS WIRE)--Half Moon Capital, LLC is releasing its open letter to the Board of Directors of Dropbox (Nasdaq:DBX) and seeks to engage constructively on corrective course. February 28, 2024 Members of the Board, Half Moon Capital, LLC, is a long-term investor in Dropbox, Inc. (“Dropbox” or the “Company”). We have engaged in meaningful discussions with the Company since initiating our investment in June 2022. As paying users of the recently “deemphasized” Family Plan, and shareholders of D ...

Key PointsShares have been plummeting since their earnings report showed further signs of revenue growth slowing. However, the stock is now well below all the refreshed analyst price targets and is looking extremely oversold. Much work remains to be done to turn things around, but in the meantime, this is a bargain worth taking a risk on.5 stocks we like better than DropboxWhen does a falling knife become just too tempting not to try and catch? With the broader equity market surging to record highs on the b ...

Shares of cloud storage company Dropbox (DBX -23.92%) fell as much as 23.1% on Friday after the company reported earnings results. Shares were hitting their low around 3 p.m. ET. Results weren't all that bad for the fourth quarter, but investors are focused on guidance and analyst reactions today. Results and guidance for Dropbox Dropbox reported a 6% increase in revenue to $635 million and net income of $227.3 million, or $0.66 per share. Non-GAAP (adjusted) earnings per share were $0.50. This topped analy ...

Dropbox (DBX) reported fourth-quarter 2023 non-GAAP earnings of 50 cents per share, beating the Zacks Consensus Estimate by 4.17% and increasing 25% year over year.Revenues of $635 million increased 6% year over year and beat the consensus mark by 0.67%.Total annual recurring revenues came in at $2.523 billion, up 0.3% year over year.Quarter DetailsDropbox exited the fourth quarter of 2023 with 18.12 million paying users, marking a sequential decline of roughly 0.05 million. The average revenue per paying u ...

Financial Data and Key Metrics - Total revenue for Q4 2023 increased 6% year-over-year to $635 million, beating the guidance range of $629 million to $632 million [69] - The company exited Q4 with 18.12 million paying users, reflecting a sequential decline of roughly 50,000 paying users due to factors such as the de-emphasis of the family plan and macro headwinds [70] - Non-GAAP operating margin for Q4 was 32.2%, up 200 basis points year-over-year, driven by efficiency in spending [128] - Free cash flow for Q4 was $190 million, compared to $182 million in Q4 2022 [72] - The company repurchased nearly 4 million shares in Q4, spending approximately $106 million [129] Business Line Data and Key Metrics - The File Sync and Share (FSS) business saw seasonally low activity in Q4, with FormSwift also experiencing a seasonal low point [70][24] - The Teams business faced challenges due to macro headwinds, with customers reducing licenses and showing higher price sensitivity [55][70] - Dropbox Dash, the AI-powered universal search product, is still in its early stages, with the company focusing on product-market fit and adoption before monetization [75][64] Market Data and Key Metrics - The company noted a challenging macroeconomic environment, particularly for SMBs, with customers becoming more price-sensitive and reducing licenses [55][70] - The tech sector, in particular, saw headcount reductions, which impacted Dropbox's Teams business [55][70] - The company expects to add paying users in 2024, but at lower levels than prior years due to continued headwinds [105] Company Strategy and Industry Competition - Dropbox is focusing on improving the user experience, particularly in the FSS business, by streamlining workflows and improving team onboarding [60][61] - The company is investing in AI-powered products like Dash, aiming to solve challenges related to cloud-based content organization and search [63][64] - Dropbox is also iterating on pricing and packaging for its Teams plans, with a focus on multi-product bundles and improving customer awareness of its capabilities beyond storage [58][59] Management Commentary on Operating Environment and Future Outlook - Management acknowledged a challenging Q4, with some expected headwinds such as seasonality and macro pressures, but also noted progress in improving profitability and investing in long-term growth initiatives [84][85] - The company is optimistic about the potential of AI-powered products like Dash, but expects it will take time before these initiatives contribute meaningfully to top-line results [67][75] - Dropbox is committed to returning a significant portion of its free cash flow to shareholders through share repurchases, with the intention of reducing share count [102] Other Important Information - The company executed a buyout of approximately 40% of its remaining sublease space in San Francisco, resulting in a $159 million gain in Q4 2023 [100][71] - Dropbox expects finance lease additions to increase in 2024, driven by a hardware refresh cycle and one-time storage quota grants for advanced plan customers [106][181] - The company announced a partnership with McLaren Formula 1 racing to drive awareness of its platform's capabilities, including secure file sharing and video collaboration [95] Summary of Q&A Session Question: How is Dropbox measuring the success of Dash? - Dropbox is measuring Dash's success through product quality, onboarding success, engagement, retention, and eventually monetization [112][113][114] Question: What are the learnings from the pricing and packaging changes? - The company learned that while some changes led to higher attachment rates for multiple products, others resulted in decreased new subscriptions for Teams SKUs [147][148] Question: How is the macro environment impacting Dropbox's business? - The macro environment has led to increased price sensitivity and reduced license counts, particularly in the tech sector, with SMBs facing down-sell pressure [150][151][163] Question: What is the outlook for M&A? - Dropbox sees M&A as an opportunity to accelerate its roadmap, particularly in AI, but remains disciplined in its approach due to the current market environment [138][139][140] Question: What is the guidance for free cash flow in 2024? - The company expects free cash flow to be in the range of $910 million to $950 million, below its long-term target due to slower billings growth, FX headwinds, and investments in Dash [175][134]