A video collaboration tool that makes it easier to collect, manage, and respond to feedback, all in one place DocSend A video and presentation sharing platform with advanced analytics to see what your visitors are really watching & Dropbox 12 Shared team workspace Data governance and audit logs & Dropbox 13 Dropbox Business Teams Expansion Simplified team collaboration invites for shared content | --- | --- | --- | --- | --- | --- | |-------|------------------------------------------------------------------ ...

User Base and Growth - Dropbox serves over 700 million registered users across approximately 180 countries, with 18.17 million paying users as of September 30, 2023[203][204]. - The company has seen an increase in Total ARR due to a price increase for existing users and a higher mix of sales from premium subscription plans[226]. - As of September 30, 2023, the number of paying users increased to 18.17 million from 17.77 million as of December 31, 2022, and 17.55 million as of September 30, 2022[234]. - The growth rates of paying and registered users have declined, potentially impacting future revenue growth[340]. - The number of paying users has increased from 8.81 million as of December 31, 2016, to 18.17 million as of September 30, 2023[382]. Financial Performance - Total annual recurring revenue (Total ARR) increased to $2.525 billion as of September 30, 2023, compared to $2.514 billion at the end of 2022 and $2.431 billion at the end of September 2022[228]. - Revenue for the three months ended September 30, 2023, was $633.0 million, an increase from $591.0 million in the same period of 2022, and for the nine months ended September 30, 2023, revenue was $1,866.6 million compared to $1,726.1 million in 2022[262]. - Net income for the three months ended September 30, 2023, was $114.1 million, up from $83.2 million in the same period of 2022, and for the nine months ended September 30, 2023, net income was $226.3 million compared to $224.9 million in 2022[262]. - Free cash flow (FCF) for the nine months ended September 30, 2023, was $569.1 million, a decrease from $581.8 million in the same period of 2022, primarily due to workforce reduction payments[244]. - Average revenue per paying user (ARPU) for the three months ended September 30, 2023, was $138.71, up from $134.31 in the same period of 2022, and for the nine months ended September 30, 2023, it was $140.63 compared to $134.41 in 2022[239]. Expenses and Investments - Operating expenses for the three months ended September 30, 2023, totaled $382.7 million, a decrease from $392.0 million in the same period of 2022, and for the nine months ended September 30, 2023, operating expenses were $1,238.8 million compared to $1,136.0 million in 2022[262]. - The company plans to continue investing in research and development, with expectations for costs to decrease in the near term but increase in the long term as growth initiatives are pursued[254]. - Research and development expenses for the nine months ended September 30, 2023, increased by $61.0 million or 9.3% to $714.4 million compared to $653.4 million in the same period of 2022[281]. - Sales and marketing expenses for the nine months ended September 30, 2023, increased by $42.1 million or 13.8% to $346.4 million compared to $304.3 million in the same period of 2022[283]. Macroeconomic Impact - The impact of macroeconomic factors, including rising interest rates and market volatility, has affected customer behavior and performance in Teams plans and other services[215][216]. - Economic conditions, including inflation and geopolitical issues, could negatively affect consumer spending on the company's platform, potentially leading to reduced revenue[347]. - A hypothetical increase in interest rates by 100 basis points would have resulted in an $8.4 million reduction in the market value of the company's investment portfolio[315]. Security and Compliance Risks - The company faces significant risks from unauthorized access to its data and user content, which could lead to financial liabilities and reputational damage[341]. - Security threats from malicious third parties are expected to grow in complexity, impacting the company's ability to protect user data and maintain trust[342]. - The company has implemented systems and processes to enhance cybersecurity, but past incidents indicate that these measures may not fully prevent future breaches[343]. - The company faces challenges in maintaining compliance with international laws and regulations, which could increase operational costs[390]. Strategic Challenges - The competitive landscape for content collaboration platforms is intensifying, with major competitors like Microsoft and Google posing significant challenges[349]. - The demand for the company's platform is sensitive to pricing strategies, influenced by competitors offering lower-priced or free alternatives[351]. - The company must ensure interoperability across various devices and third-party applications, which is critical for maintaining user engagement and satisfaction[354]. - The company relies on third-party vendors for infrastructure, which exposes it to additional security risks and potential data breaches[344]. Future Outlook - The company expects free cash flow to generally increase in future periods as subscription sales grow and operating efficiencies are driven[243]. - The company anticipates that trends towards remote work will create market opportunities, but these may not materialize as expected[367]. - The ability to forecast future results is subject to uncertainties, including the effectiveness of planning for growth[371].

Financial Data and Key Metrics Changes - Total revenue in Q2 increased 8.7% year-over-year to $622 million, beating guidance of $612 million to $615 million [76] - Operating margin was approximately 34%, up roughly 200 basis points year-over-year, exceeding guidance by over 250 basis points [79] - Net income for Q2 was $174 million, up 26% versus the second quarter of 2022, with diluted EPS at $0.51 per share [80] Business Line Data and Key Metrics Changes - Total ARR for the quarter grew 7.2% year-over-year to $2.5 billion, with constant currency ARR growth at 10.9% [44] - Average revenue per paying user (ARPU) for Q2 was $138.94, flat compared to Q1 2023, but up over $5 year-over-year [45] - FormSwift outperformed expectations for the second consecutive quarter, driven by improved retention and increased account creation [73] Market Data and Key Metrics Changes - The company exited the quarter with 18 million paying users, adding approximately 140,000 net new paying users sequentially [77] - The macro environment remains challenging, particularly impacting Teams customers, while individual plans showed some improvement in retention [124][142] Company Strategy and Development Direction - The company is focused on building AI-powered product experiences, with initiatives like Dropbox Dash aimed at improving knowledge work [22][30] - There is a commitment to evolving the existing Dropbox file sync and share user experience to better address customer workflows around documents and videos [35] - The company plans to invest in AI talent and early-stage product development, leveraging savings from recent workforce reductions [126] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant headwinds from macroeconomic factors but remains focused on achieving long-term targets, including $1 billion in annual free cash flow by 2024 [10][54] - The company is maintaining its free cash flow guidance of $820 million to $840 million, despite raising revenue and operating margin guidance [85] - Management expressed optimism about the early engagement with new AI features and the potential for improved customer productivity [66] Other Important Information - The company has authorized an additional $1.2 billion share repurchase program, bringing total capacity to approximately $1.6 billion [86] - Cash flow from operations was $188 million in Q2, down from $210 million in the same quarter of 2022, primarily due to severance payments [48] Q&A Session Summary Question: Can you elaborate on the strategy around Dash and its use cases? - Management highlighted Dash as an AI-powered universal search product that connects various cloud tools, addressing the common pain point of scattered information across multiple platforms [63][115] Question: What is the monetization strategy for generative AI features? - The company plans to offer a portfolio of AI applications, with some features available only in higher-tier plans and others as explicit add-ons [94][121] Question: How is the company addressing churn and retention? - Management noted improvements in churn rates for individual plans due to product enhancements and better user experience, while Teams customers continue to face challenges [68][142]

Shared team workspace Data governance and audit logs Advanced security alerts & notifications Non-GAAP reconciliation Twelve Months Ended Note: % are rounded for presentation purposes Note: % are rounded for presentation purposes *Vault is only available in Plus, Family, and Professional. Size of Dropbox Transfer varies based on Dropbox plan: Basic (100MB), Plus, Family, & Standard (2GB), Professional, Advanced, and Enterprise (100GB). Professional, Advanced, and Enterprise plans also receive advanced Trans ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________to________ Commission File Number 001-38434 Dropbox, Inc. (Exact name of Registrant as specified in its charter) Indicate by check mark whether the regi ...

Summary of Dropbox, Inc. Conference Call Company Overview - **Company**: Dropbox, Inc. (NASDAQ: DBX) - **Annual Conference**: 51st Annual J.P. Morgan Global Technology, Media and Communications Conference - **Date**: May 22, 2023 - **Key Metrics**: - Annual Recurring Revenue (ARR): $2.5 billion - Registered Users: 700 million - Content Stored: Over 800 billion pieces [3][5][29] Core Business and Strategy - **Business Model**: Primarily focused on file sync and share, which remains the majority of revenue but is diversifying into other areas [5][9] - **Recent Acquisitions**: - **HelloSign** (2019): Rebranded to Dropbox Sign, an e-signature product [5] - **DocSend** (2021): A secure sharing and analytics platform [6] - **FormSwift** (Q4 2022): A templates company that offers a library of forms [6][41] - **Product Development**: Introduction of new products like Capture (screen sharing and video creation) and Replay (video editing tool) [7] Market Conditions and Performance - **Macro Environment**: Consistent with previous quarters, with heightened price sensitivity noted among team users, particularly in tech companies experiencing layoffs [9][10] - **User Trends**: - Individual sign-ups improved year-over-year due to enhancements in onboarding processes [10][14] - E-signature demand has decreased post-pandemic [11] - **ARR Growth**: Grew approximately 12% in constant currency in Q1, attributed to pricing changes and acquisitions [12][15] Financial Metrics - **Paid User Growth**: 120,000 new paid users in Q1, down from previous years' higher numbers [37] - **Cost Management**: Implemented a 16% reduction in workforce to improve efficiency and redirect resources towards AI and cloud organization initiatives [20][23] - **Pricing Strategy**: A 20% price increase on team plans was implemented in June 2022, which initially performed well but faced challenges due to economic conditions [55][56] AI and Future Initiatives - **AI Development**: Working on an AI-driven search product to enhance user experience by organizing cloud content and providing personalized search capabilities [25][26][32] - **Customer Trust**: Emphasizes the importance of customer trust and data privacy as a competitive advantage [34][36] - **Future Monetization**: Plans to potentially offer AI features as a standalone product while focusing on customer adoption first [30][32] Conclusion - **Strategic Focus**: Dropbox is positioning itself to leverage its existing user base and content while expanding its product offerings through acquisitions and new developments, particularly in AI and cloud organization [23][35] - **Growth Potential**: The company aims to enhance customer awareness of its diverse product suite to drive future growth in both paid users and ARR [52][53]

User Base and Revenue - Dropbox serves over 700 million registered users across approximately 180 countries[202] - The company has 17.90 million paying users as of March 31, 2023[203][232] - Total Annual Recurring Revenue (ARR) reached $2.468 billion as of March 31, 2023, up from $2.290 billion in March 2022[226] - Average Revenue Per User (ARPU) increased to $138.97 for Q1 2023, compared to $134.63 in Q1 2022[237] - Revenue grew by 8.7% to $611.1 million in Q1 2023, driven by an increase in paying users, the acquisition of FormSwift, and repricing of Dropbox plans[265] - Revenue is primarily generated from subscriptions to the platform, with 17.90 million paying users as of March 31, 2023, up from 8.81 million in December 2016[367] - Dropbox has paying users across approximately 180 countries, with approximately half of its revenue in 2022 generated from users outside the United States[369] Financial Performance - Free cash flow (FCF) increased to $138.0 million in Q1 2023, up from $130.7 million in Q1 2022, primarily due to a decrease in capital expenditures[242] - Gross profit increased by 10.0% to $494.3 million in Q1 2023, with gross margin improving to 81% from 80% in Q1 2022[266] - Net income decreased to $69.0 million in Q1 2023, down from $79.7 million in Q1 2022, primarily due to higher operating expenses and a provision for income taxes[261] - The company generated net income of $553.2 million and $335.8 million during the years ended December 31, 2022 and 2021, respectively[401] - The company had an accumulated deficit of $2,772.1 million as of March 31, 2023[401] - The company's revenue growth rate has declined and may continue to slow due to factors such as increased competition and slowing demand for its platform[400] Expenses and Costs - Cost of revenue rose by 3.5% to $116.8 million in Q1 2023, primarily due to increases in credit card fees, employee-related costs, and amortization of intangible assets[266] - Research and development expenses increased to $235.2 million in Q1 2023, up from $210.8 million in Q1 2022, driven by employee-related costs and stock-based compensation[261] - Sales and marketing expenses grew to $119.2 million in Q1 2023, compared to $95.7 million in Q1 2022, reflecting increased investment in user growth and brand awareness[261] - Research and development expenses increased by $24.4 million (11.6%) in Q1 2023 compared to Q1 2022, driven by $16.0 million in employee-related costs, $5.4 million in software licenses, and $3.0 million in overhead, partially offset by a $6.7 million reversal of stock-based compensation[268] - Sales and marketing expenses rose by $23.5 million (24.6%) in Q1 2023, primarily due to $15.3 million in advertising, $4.8 million in employee costs, $2.2 million in intangible asset amortization, and $1.0 million in app store fees[270] - General and administrative expenses increased by $2.3 million (4.3%) in Q1 2023, mainly from $4.8 million in employee costs, offset by a $3.9 million decrease in non-income taxes[271] - The company's research and development expenses may increase as it plans to hire more employees for engineering, product, and design teams[401] Cash Flow and Investments - The company had $332.7 million in cash and cash equivalents and $920.4 million in short-term investments as of March 31, 2023[275] - The company repurchased 8.1 million shares of Class A common stock for $176.5 million in Q1 2023, including a 1% excise tax under the Inflation Reduction Act[278] - Net cash provided by operating activities was $139.9 million in Q1 2023, driven by $69.0 million in net income, $76.0 million in stock-based compensation, and $42.5 million in depreciation and amortization[288] - Net cash provided by investing activities was $200.8 million in Q1 2023, primarily from $199.4 million in net investment inflows[291] - Net cash used in financing activities was $241.3 million in Q1 2023, including $175.4 million for share repurchases and $34.1 million for tax withholding on stock awards[293] - Cash and cash equivalents of $332.7 million and short-term investments of $920.4 million as of March 31, 2023[297] - A hypothetical 100 basis points increase in interest rates would reduce the market value of the investment portfolio by $13.0 million[299] Acquisitions and Strategic Moves - Dropbox acquired FormSwift in Q4 2022, contributing to ARR growth[224] - The company repackaged and increased prices for Dropbox Standard and Advanced plans, leading to higher ARR[224] - Dropbox acquired key assets from Boxcryptor in Q4 2022 to enhance data protection for paid customers and acquired FormSwift, a cloud-based service for business forms[381] - Dropbox's acquisitions may require significant management attention, incur debt, or dilute stockholder value, with potential integration challenges[382][386] Workforce and Operational Changes - Dropbox announced a 16% reduction in its global workforce on April 27, 2023, to streamline operations[220] - The company shifted to a Virtual First work model, resulting in cost savings in facilities and depreciation expenses[219] - The company operates under a Virtual First work model, which may impact productivity, employee retention, and operational efficiency[361][362] - The company recorded impairment charges related to unused office space due to the shift to a Virtual First model, impacting GAAP profitability[363] - The company's shift to a Virtual First work model may result in additional impairment charges or unanticipated expenses related to subleasing facilities[401] Market Competition and Risks - Pricing strategies are sensitive to competition, with some competitors offering lower-priced or free alternatives, potentially forcing the company to engage in price-cutting initiatives[335] - The company operates in a highly competitive market, facing competition from major players like Microsoft, Google, and Adobe, as well as smaller private companies offering point solutions[333] - The company faces risks from rapid technological changes and competition, requiring significant investments in AI-driven products and new features[349][351] - The content collaboration market is subject to rapidly changing user preferences, which could negatively impact demand for the platform[348] - The company may face challenges in scaling its business due to a limited outbound sales force, with over 90% of revenue generated from self-serve channels[365] - Sales to large organizations could lengthen sales cycles and increase deployment challenges, potentially impacting revenue growth[366] Cybersecurity and Data Protection - Unauthorized access to data or user content could result in significant liabilities, regulatory investigations, and reputational damage, potentially reducing revenue and increasing user acquisition costs[323] - The company faces ongoing and evolving cybersecurity threats, including malware, ransomware, and phishing attacks, which could compromise user data and harm its market position[325] - The company relies on third-party vendors and contractors for infrastructure, increasing exposure to security risks outside its direct control[327] - The company faces risks from third-party developers and partners who may fail to adopt adequate data security practices, potentially leading to unauthorized access to user data[328] International Operations and Compliance - Dropbox faces risks in international expansion, including compliance with laws, data protection, cybersecurity, and geopolitical conflicts[371][372] - Dropbox's international operations are subject to higher costs, including accounting, travel, infrastructure, and legal compliance[371] - 27% of sales were denominated in currencies other than U.S. dollars for the three months ended March 31, 2023[302] - Net foreign currency transaction gains of $0.8 million for the three months ended March 31, 2023[303] Legal and Regulatory Risks - A jury trial for a patent infringement case is scheduled for May 2023[312] - Dropbox's use of open source software may expose it to legal risks, including potential litigation and compliance with unfavorable licensing conditions[379] - The company's platform depends on interoperability with third-party devices, operating systems, and applications, which it does not control, posing risks to compatibility and functionality[339] - Service disruptions or loss of content on the platform could harm the company's brand, reputation, and ability to retain users[342] - Infrastructure capacity planning is critical, with overestimation leading to excess costs and underestimation risking service failures, compounded by global supply chain challenges[344] Debt and Financial Obligations - The company had an aggregate of $1,157.6 million in commitments to settle contractual obligations as of December 31, 2022[394] - The company may face challenges in servicing its 2026 Notes and 2028 Notes, which could require significant cash flow or alternative financing strategies[402] - The company's ability to refinance its indebtedness depends on capital market conditions and its financial condition at the time[402] - The company's leasing and credit obligations, if defaulted, could lead to operational interruptions and adverse effects on its financial condition[394][398] - The company's financial covenants include maintaining a consolidated leverage ratio incurrence covenant and a minimum liquidity balance[392] Product Development and Innovation - Dropbox launched new products in 2022, including Dropbox Replay for video workflows and Dropbox Capture for screen recordings and visual presentations[352] - Dropbox receives over 75 billion API calls per month and has nearly 1,000,000 developers registered on its platform as of December 31, 2022[377] - Dropbox's platform complexity may lead to defects or errors, potentially harming its reputation and financial condition[380] Economic and Geopolitical Risks - Economic downturns, inflation, and geopolitical issues could reduce discretionary spending by users, impacting the company's revenue and growth[330] - Dropbox relies on third-party datacenters, including Amazon Web Services, and any disruptions could harm user experience and increase costs[373][374]

Dropbox, Inc. (NASDAQ:DBX) Q1 2023 Earnings Conference Call May 4, 2023 5:00 PM ET Company Participants Karan Kapoor - Head of IR Drew Houston - Co Founder and CEO Tim Regan - CFO Conference Call Participants Richard Poland - RBC Capital Markets Mark Murphy - JPMorgan Steve Enders - Citi Matt Bullock - Bank of America Operator Good afternoon, ladies and gentlemen, and thank you for joining Drug Box's First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is ...

Dropbox, Inc. (NASDAQ:DBX) The JMP Securities Technology Conference 2023 March 6, 2023 5:00 PM ET Company Representatives Tim Regan - Chief Financial Officer Conference Call Participants Joey Marincek - JMP Securities Joey Marincek …Software here at JMP. Really excited to have Dropbox present today. With me is CFO, Tim Regan, and we're really excited. How are you doing today, Tim? Tim Regan I'm doing all right, Joey. Thanks for having us. Question-and-Answer Session Q - Joey Marincek So we have a number of ...

User Growth and Engagement - As of December 31, 2022, the company served over 700 million registered users but only 17.77 million paying users, indicating a significant conversion challenge [102]. - The growth rates of paying and registered users have declined, potentially due to increased market penetration and competition from lower-priced alternatives [103]. - The company has observed a trend of customers opting for monthly plans over annual plans, which could lead to fluctuations in subscription renewals [99]. - The number of paying users has grown from 8.81 million as of December 31, 2016, to 17.77 million as of December 31, 2022, indicating significant user growth [143]. - Approximately half of the company's revenue in the year ended December 31, 2022, was generated from paying users outside the United States, highlighting the importance of international operations [145]. Revenue Generation and Financial Performance - The company generates more than 90% of its revenue from self-serve channels, highlighting the importance of user satisfaction for revenue growth [101]. - The company generates revenue primarily from subscription sales to its platform, making widespread acceptance of content collaboration solutions critical for future growth [125]. - Dropbox, Inc. reported a revenue of $2,324.9 million for the year ended December 31, 2022, representing a 7.7% increase from $2,157.9 million in 2021 [399]. - The company's net income for 2022 was $553.2 million, compared to $335.8 million in 2021, reflecting a significant increase of 64.9% [399]. - Total operating expenses increased to $1,699.4 million in 2022, up from $1,439.3 million in 2021, primarily due to a rise in research and development costs [399]. Competition and Market Challenges - The company faces intense competition from major players like Microsoft, Amazon, and Google, which may affect its market position and pricing strategies [112]. - Revenue growth rates have declined and may continue to slow due to increased competition and market saturation [175]. - The company may need to engage in price-cutting initiatives or increase marketing expenses to remain competitive, which could adversely affect its financial results [115]. Operational Risks and Challenges - Unauthorized access and data security breaches pose significant risks to the company's reputation and financial condition [104]. - The reliance on third-party vendors for infrastructure exposes the company to additional security risks [108]. - The company is experiencing increased pressure on its customer support organization due to the significant growth in paying users, which could impact operational results [143]. - The company faces significant challenges in ensuring the interoperability of its platform with third-party services, which could adversely impact its business if compatibility is not maintained [119]. - The company’s technical infrastructure is crucial for reliable platform performance, and any disruptions could harm user retention and brand reputation [120]. Economic and Regulatory Environment - Economic factors such as inflation and rising interest rates may lead to reduced discretionary spending by users, impacting subscription renewals [111]. - The company is subject to various international risks, including regulatory compliance and economic volatility, as it expands operations in approximately 180 countries [146]. - The enactment of the EU Minimum Tax Directive requires member states to adopt a global minimum tax rate of at least 15% for multinationals with global revenue exceeding EUR750 million by December 31, 2023 [187]. - The company faces risks related to compliance with various U.S. and international laws, which could increase operational costs and subject it to claims [190]. Financial Position and Liabilities - The company has $1,157.6 million in commitments to settle contractual obligations as of December 31, 2022, primarily through leasing arrangements [170]. - The company's total liabilities rose to $3,419.5 million in 2022, compared to $3,385.2 million in 2021, indicating a growing debt load [397]. - The company may require additional financing in the future, and macroeconomic challenges have made financing terms less favorable [242]. Intellectual Property and Compliance - The company has over 1,550 issued patents and more than 300 pending patent applications, indicating a strong focus on intellectual property protection [210]. - The company is subject to ongoing litigation related to intellectual property rights, which could materially affect its financial condition [209]. - Compliance with various laws and regulations may limit the adoption and demand for the company's services [203]. Stockholder and Governance Matters - As of December 31, 2022, directors, executive officers, and holders of more than 5% of common stock held 79.3% of the voting power, with Mr. Houston holding approximately 74.4% [216]. - The company does not intend to pay dividends for the foreseeable future, focusing instead on financing operations and stock repurchase programs [231]. - A stock repurchase program was approved for up to $2.8 billion, but there is no guarantee of full implementation or enhancement of long-term stockholder value [229].