Company Performance - Dropbox closed at $31.68, reflecting a -1.52% change from the previous day, underperforming the S&P 500 which lost 0.1% [1] - Prior to this trading session, Dropbox shares had increased by 13.72%, outperforming the Computer and Technology sector's gain of 5.94% and the S&P 500's gain of 2.57% [1] Upcoming Earnings Expectations - Analysts expect Dropbox to report earnings of $0.64 per share, indicating a year-over-year growth of 6.67% [2] - Revenue is anticipated to be $621.66 million, representing a 2.68% decline compared to the same quarter last year [2] Annual Forecasts - Zacks Consensus Estimates project earnings of $2.68 per share and revenue of $2.49 billion for the year, reflecting changes of +7.63% and -2.24% respectively compared to the previous year [3] - Recent revisions to analyst forecasts are crucial as they often indicate shifts in short-term business dynamics, with positive revisions suggesting analyst optimism [3] Valuation Metrics - Dropbox has a Forward P/E ratio of 11.99, which is a discount compared to the industry average Forward P/E of 25.17 [6] - The company currently has a PEG ratio of 2.83, while the average PEG ratio for Internet - Services stocks is 1.69 [7] Industry Context - The Internet - Services industry is part of the Computer and Technology sector, holding a Zacks Industry Rank of 100, placing it in the top 41% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Group 1: Company Buyback Announcements - Dropbox announced a $1.5 billion share buyback program, representing 18% of its market capitalization, and has reduced its outstanding share count by approximately 35% since April 2021 [4][2] - Nutanix increased its buyback authorization by $350 million, bringing its total buyback capacity to $461 million, which is 2.2% of its market capitalization [8][6] - Salesforce raised its buyback authorization by $20 billion, totaling $50 billion, with a current buyback capacity of approximately $25.7 billion, equating to 11.1% of its market capitalization [14][12] Group 2: Company Performance and Market Position - Dropbox's stock has increased by around 28% over the past 52 weeks, despite facing significant competition in the cloud storage market [3][2] - Nutanix's shares have gained over 31% in the past year, benefiting from competitive advantages against VMware [6][7] - Salesforce has added 6,000 paying customers to its AI offering, Agentforce, in just three quarters, highlighting its growth in the enterprise software sector [13][12] Group 3: Financial Metrics and Implications - The buyback programs of these companies are expected to positively impact key metrics like earnings per share (EPS), which often correlates with rising share prices [1] - Salesforce has reduced its outstanding share count by approximately 4.7% since November 2022, with an average quarterly buyback spending of around $2 billion [15][14] - Nutanix's share count has increased by less than 1% in 2025, indicating a slowdown in dilution, which may allow for future reductions in share count as free cash flow improves [9][8]

Core Insights - Dropbox is increasingly relying on direct lenders for financing, reflecting a broader trend among public companies [1][4] - Blackstone Inc. has expanded its private credit line for Dropbox to $2.7 billion, following an initial $2 billion deal [2][3] - Dropbox has increased its leverage by $700 million and authorized a new $1.5 billion stock buyback plan [3][5] Financing Details - The new financing includes a $700 million delayed draw secured term loan, which may be used to repay outstanding convertible senior notes due in 2026 [3] - The expanded credit line maintains a $1 billion delayed-draw feature and is structured similarly to the original loan [5] Market Context - Dropbox's stock has risen less than 3% this year, while the broader market has increased by approximately 10%, indicating competitive pressures [5]

Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional returns. But finding a growth stock that can live up to its true potential can be a tough task.In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.However, it's pretty easy to find cutting-edge growth stocks with the he ...

Industry Overview - The Internet - Services industry is influenced by macroeconomic factors such as inflation, interest rates, labor markets, and supply chain issues, with a generally positive outlook in a stronger economy [1][6] - Companies in this industry rely on substantial software and hardware infrastructure to deliver services globally, accessible via personal connected devices [5] - The industry operates under two primary models: ad-based and ad-free, with major players including Alphabet, Baidu, and Akamai, alongside emerging companies like Dropbox and Crexendo [6] Investment Opportunities - Dropbox (DBX) and Crexendo (CXDO) are highlighted as attractive investment options due to their growth prospects, AI adoption, and cost-cutting measures [2][17] - The Zacks Internet - Services industry has improved its rank, now positioned in the top 40% of 245 Zacks-classified industries, indicating several opportunities [9][11] Financial Performance - The industry has experienced a net gain of 29.9% over the past year, outperforming the broader Technology sector's 22.2% gain and the S&P 500's 15.6% gain [12] - The forward 12-month price-to-earnings (P/E) ratio for the industry is currently at 21.24X, which is a premium to its median value of 19.76X over the past year but a discount to the S&P 500's 22.8X [15] Company-Specific Insights Dropbox (DBX) - Dropbox has integrated AI into its business to enhance customer experience, leading to a 15.6% increase in share price over the past year [20] - The company beat earnings estimates by 19.5% in the last quarter, with 2025 revenue and earnings growth expected at -2.2% and 7.6%, respectively [20] Crexendo (CXDO) - Crexendo operates in a niche market, providing cloud communication solutions and has seen significant growth opportunities through AI integration [23][24] - The company topped revenue estimates by 2.2% and earnings by 75% in the last quarter, with expected revenue and earnings growth of 10.9% and 9.1% for the following year [26]

Group 1 - The core viewpoint is that Dropbox (NASDAQ: DBX) may be experiencing a structural decline, leading to a previous sell rating [1] - Recent results from Dropbox did not alter the perception of its long-term investment potential [1] - The investment strategy focuses on long-term investments while also considering short-term opportunities to uncover alpha [1] Group 2 - The investment approach is based on bottom-up analysis, emphasizing the fundamental strengths and weaknesses of individual companies [1] - The investment duration is medium to long-term, aiming to identify companies with solid fundamentals and growth potential [1]

Core Viewpoint - Growth investors are increasingly focused on stocks with above-average financial growth, which can lead to solid returns, but identifying such stocks is challenging due to inherent risks and volatility [1] Company Analysis - Dropbox is currently highlighted as a recommended growth stock due to its favorable Growth Score and a top Zacks Rank [2] - The historical EPS growth rate for Dropbox stands at 34.6%, with projected EPS growth of 7.7% this year, significantly outperforming the industry average of 1.5% [5] - Year-over-year cash flow growth for Dropbox is reported at 16.2%, compared to an industry average of -5.8%, indicating strong cash flow performance [6] - The annualized cash flow growth rate for Dropbox over the past 3-5 years is 29.5%, while the industry average is 13% [7] - Current-year earnings estimates for Dropbox have been revised upward, with the Zacks Consensus Estimate increasing by 1.7% over the past month [8] - Dropbox has achieved a Growth Score of A and a Zacks Rank of 2, positioning it well for potential outperformance in the market [10]

Group 1 - The online data storage industry has transitioned from a rapidly growing sector to a commonplace service in daily life, indicating its massive scale and integration into everyday activities [1] - The industry is characterized by significant growth potential, although it is often taken for granted by consumers [1] Group 2 - The article emphasizes the importance of identifying underappreciated companies within the investment landscape, focusing on those that can deliver value to investors [1]

[Forward-Looking Statements](index=2&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines forward-looking statements regarding future events and financial performance, subject to substantial risks and uncertainties [Overview of Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements%20Overview) This section outlines statements about future events or financial/operating performance that involve substantial risk and uncertainties - Forward-looking statements relate to future events or financial/operating performance and involve substantial risk and uncertainties[5](index=5&type=chunk) - Key areas covered include ability to retain/upgrade paying users, attract new users, prevent security breaches, future financial performance (revenue, costs, profit, ARPU, FCF), economic/market trends, competition, technological changes (including AI), profitability, capital allocation, and impacts of the Virtual First model[5](index=5&type=chunk) - Investors are cautioned not to rely on these statements as predictions, as actual results may differ materially due to risks described in the 'Risk Factors' section[7](index=7&type=chunk) [Summary of Risk Factors](index=4&type=section&id=SUMMARY%20OF%20RISK%20FACTORS) This section summarizes principal risks that could materially harm the business, including user retention, security, competition, and debt servicing [Key Risk Factors Summary](index=4&type=section&id=Key%20Risk%20Factors%20Summary) This section provides a concise overview of the principal factors that could materially harm the company's business, operating results, financial condition, future prospects, or stock price - Business depends on retaining and upgrading paying users; any decline in renewals or upgrades could adversely affect future results of operations[12](index=12&type=chunk) - Future growth could be harmed if the company fails to attract new users or convert registered users to paying users[12](index=12&type=chunk) - The company has experienced and may continue to experience privacy and data security breaches or incidents[12](index=12&type=chunk) - The company operates in competitive markets and must continue to compete effectively, including responding to rapid technological changes[12](index=12&type=chunk) - The Virtual First workforce model's long-term impact on financial results and business operations remains uncertain[12](index=12&type=chunk) - Servicing indebtedness under the term loan facility, 2026 Notes, and 2028 Notes may require a significant amount of cash, and the company may not have sufficient cash flow[12](index=12&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents unaudited condensed consolidated financial statements and management's discussion of financial condition [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents unaudited condensed consolidated financial statements, highlighting asset decreases, revenue decline, and improved net income [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show a decrease in cash and total assets, alongside an increase in total liabilities and stockholders' deficit Condensed Consolidated Balance Sheets (Unaudited) - Key Figures (in millions) | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Cash and cash equivalents | $1,328.3 | $736.3 | $(592.0) | | Total current assets | $1,738.4 | $1,113.5 | $(624.9) | | Total assets | $3,325.2 | $2,779.4 | $(545.8) | | Total current liabilities | $1,210.8 | $1,855.2 | $644.4 | | Total liabilities | $4,077.6 | $4,084.9 | $7.3 | | Total stockholders' deficit | $(752.4) | $(1,305.5) | $(553.1) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations show a slight revenue decline but improved net income due to reduced operating expenses Condensed Consolidated Statements of Operations (Unaudited) - Key Figures (in millions, except per share data) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | YoY Change ($) | YoY Change (%) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | YoY Change ($) | YoY Change (%) | | :---------------------- | :-------------------------- | :-------------------------- | :------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | :------------- | | Revenue | $625.7 | $634.5 | $(8.8) | (1.4)% | $1,250.4 | $1,265.8 | $(15.4) | (1.2)% | | Cost of revenue | $123.7 | $107.0 | $16.7 | 15.6% | $240.4 | $212.8 | $27.6 | 13.0% | | Gross profit | $502.0 | $527.5 | $(25.5) | (4.8)% | $1,010.0 | $1,053.0 | $(43.0) | (4.1)% | | Total operating expenses | $333.6 | $400.5 | $(66.9) | (16.7)% | $657.8 | $782.5 | $(124.7) | (15.9)% | | Income from operations | $168.4 | $127.0 | $41.4 | 32.6% | $352.2 | $270.5 | $81.7 | 30.2% | | Net income | $125.6 | $110.5 | $15.1 | 13.7% | $275.9 | $242.8 | $33.1 | 13.6% | | Basic net income per share | $0.46 | $0.34 | $0.12 | 35.3% | $0.98 | $0.74 | $0.24 | 32.4% | | Diluted net income per share | $0.45 | $0.34 | $0.11 | 32.4% | $0.96 | $0.73 | $0.23 | 31.5% | Stock-Based Compensation (in millions) | Expense Category | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cost of revenue | $5.6 | $6.0 | $10.5 | $11.2 | | Research and development | $53.8 | $64.2 | $100.5 | $119.6 | | Sales and marketing | $5.7 | $6.2 | $10.7 | $11.3 | | General and administrative | $12.6 | $14.1 | $23.1 | $26.4 | | Total stock-based compensation | $77.7 | $90.5 | $144.8 | $168.5 | - Net loss on real estate assets was **$2.6 million** for both the three and six months ended June 30, 2025, compared to zero in the prior year periods[18](index=18&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income increased due to higher net income and positive foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Key Figures (in millions) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | YoY Change ($) | YoY Change (%) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | YoY Change ($) | YoY Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | :------------- | | Net income | $125.6 | $110.5 | $15.1 | 13.7% | $275.9 | $242.8 | $33.1 | 13.6% | | Change in foreign currency translation adjustments | $6.5 | $(1.0) | $7.5 | N/A | $7.5 | $(2.1) | $9.6 | N/A | | Change in net unrealized gains and losses on short-term investments | $1.6 | $2.8 | $(1.2) | (42.9)% | $3.7 | $5.0 | $(1.3) | (26.0)% | | Total other comprehensive income | $8.1 | $1.8 | $6.3 | 350.0% | $11.2 | $2.9 | $8.3 | 286.2% | | Comprehensive income | $133.7 | $112.3 | $21.4 | 19.1% | $287.1 | $245.7 | $41.4 | 16.8% | [Condensed Consolidated Statements of Stockholders' Deficit](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit) Stockholders' deficit increased significantly due to common stock repurchases and accumulated deficit Condensed Consolidated Statements of Stockholders' Deficit (Unaudited) - Key Figures (in millions) | Metric | Dec 31, 2024 (Balance at beginning of period for 6 months) | Jun 30, 2025 (Balance at end of period for 6 months) | Change | | :-------------------------------------- | :------------------------------------------------------- | :--------------------------------------------------- | :----- | | Additional paid-in-capital | $2,404.2 | $2,181.0 | $(223.2) | | Accumulated deficit | $(3,146.5) | $(3,487.6) | $(341.1) | | Accumulated other comprehensive income (loss) | $(10.1) | $1.1 | $11.2 | | Total stockholders' deficit | $(752.4) | $(1,305.5) | $(553.1) | - Common stock repurchases for the six months ended June 30, 2025, amounted to **$907.0 million**, compared to **$543.8 million** in the same period of 2024[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show increased operating cash, decreased investing cash, and significant cash usage in financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures (in millions) | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | YoY Change ($) | YoY Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------- | :------------- | | Net cash provided by operating activities | $414.3 | $406.1 | $8.2 | 2.0% | | Net cash provided by investing activities | $48.2 | $176.9 | $(128.7) | (72.8)% | | Net cash used in financing activities | $(1,066.3) | $(679.4) | $(386.9) | 56.9% | | Change in cash, cash equivalents, and restricted cash | $(591.3) | $(99.8) | $(491.5) | 492.5% | | Cash, cash equivalents, and restricted cash - end of period | $769.2 | $515.1 | $254.1 | 49.3% | - Common stock repurchases were **$909.1 million** for the six months ended June 30, 2025, up from **$539.6 million** in the prior year[25](index=25&type=chunk) - Capital expenditures decreased to **$2.1 million** for the six months ended June 30, 2025, from **$15.1 million** in the prior year[25](index=25&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes on accounting policies, financial instruments, assets, debt, leases, and other financial disclosures [Note 1. Description of the Business and Summary of Significant Accounting Policies](index=11&type=section&id=Note%201.%20Description%20of%20the%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) Dropbox, Inc. reincorporated in Nevada in March 2025 and operates as a single segment, deriving revenue from subscription fees - Dropbox reincorporated in Nevada in March 2025[26](index=26&type=chunk) - The company manages its operations as a single operating segment[32](index=32&type=chunk) - Revenue is derived from subscription fees and recognized ratably over the contractual term, typically monthly or annually[35](index=35&type=chunk) - In October 2024, the company announced a global workforce reduction of approximately **20%**, incurring **$1.2 million** and **$3.5 million** in related expenses for the three and six months ended June 30, 2025, respectively[46](index=46&type=chunk)[47](index=47&type=chunk) - Total impairment charges of **$2.6 million** were recorded during the three and six months ended June 30, 2025, related to real estate assets due to the Virtual First work model[68](index=68&type=chunk) [Note 2. Cash, Cash Equivalents and Short-Term Investments](index=19&type=section&id=Note%202.%20Cash%2C%20Cash%20Equivalents%20and%20Short-Term%20Investments) Cash and cash equivalents decreased to **$736.3 million** as of June 30, 2025, with short-term investments also declining, primarily due to interest rate changes Cash, Cash Equivalents and Short-Term Investments (in millions) | Category | Jun 30, 2025 (Fair Value) | Dec 31, 2024 (Fair Value) | Change | | :------------------------ | :------------------------ | :------------------------ | :----- | | Cash | $110.6 | $98.3 | $12.3 | | Money market funds | $625.7 | $1,230.0 | $(604.3) | | Total cash & cash equivalents | $736.3 | $1,328.3 | $(592.0) | | Corporate notes and obligations | $99.9 | $130.0 | $(30.1) | | U.S. Treasury securities | $83.8 | $82.4 | $1.4 | | Municipal securities | $20.8 | $29.3 | $(8.5) | | Asset backed securities | $8.4 | $18.9 | $(10.5) | | U.S. agency obligations | $3.7 | $3.6 | $0.1 | | Supranational securities | $1.8 | $1.7 | $0.1 | | Total short-term investments | $218.4 | $265.9 | $(47.5) | | Total | $954.7 | $1,594.2 | $(639.5) | - Short-term investments had unrealized losses of approximately **$3.5 million** as of June 30, 2025, primarily due to changes in interest rates[94](index=94&type=chunk) - Interest income from cash, cash equivalents, and short-term investments was **$8.7 million** for the three months and **$21.4 million** for the six months ended June 30, 2025[95](index=95&type=chunk) [Note 3. Fair Value Measurements](index=21&type=section&id=Note%203.%20Fair%20Value%20Measurements) The company measures financial instruments at fair value using a three-level hierarchy, with most investments and debt categorized as Level 1 or Level 2 Fair Value Measurements (in millions) as of June 30, 2025 | Category | Level 1 | Level 2 | Level 3 | Total | | :------------------------ | :------ | :------ | :------ | :---- | | Money market funds | $625.7 | — | — | $625.7 | | Corporate notes and obligations | — | $99.9 | — | $99.9 | | U.S. Treasury securities | — | $83.8 | — | $83.8 | | Municipal securities | — | $20.8 | — | $20.8 | | Asset backed securities | — | $8.4 | — | $8.4 | | U.S. agency obligations | — | $3.7 | — | $3.7 | | Supranational securities | — | $1.8 | — | $1.8 | | Total | $625.7 | $218.4 | — | $844.1 | - The estimated fair value of the 2026 Notes was **$681.9 million** and the 2028 Notes was **$699.2 million** as of June 30, 2025, both categorized as Level 2[101](index=101&type=chunk) - The fair value of the term loan approximated its carrying value of **$970.6 million** as of June 30, 2025, categorized as Level 2[102](index=102&type=chunk) [Note 4. Property and Equipment, Net](index=22&type=section&id=Note%204.%20Property%20and%20Equipment%2C%20Net) Property and equipment, net, increased slightly to **$362.2 million** due to datacenter equipment additions, partially offset by depreciation Property and Equipment, Net (in millions) | Category | Jun 30, 2025 | Dec 31, 2024 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Datacenter and other computer equipment | $852.3 | $830.2 | $22.1 | | Total property and equipment | $966.9 | $943.0 | $23.9 | | Accumulated depreciation | $(604.7) | $(584.2) | $(20.5) | | Property and equipment, net | $362.2 | $358.8 | $3.4 | - Infrastructure assets acquired under finance lease agreements totaled **$501.4 million** as of June 30, 2025[103](index=103&type=chunk) - Depreciation expense related to property and equipment was **$32.6 million** for the three months and **$64.3 million** for the six months ended June 30, 2025[104](index=104&type=chunk) [Note 5. Intangible Assets](index=23&type=section&id=Note%205.%20Intangible%20Assets) Intangible assets, net, decreased to **$42.5 million** due to amortization, with developed technology remaining the largest component Intangible Assets, Net (in millions) | Category | Jun 30, 2025 | Dec 31, 2024 | Remaining Useful Life (years) | | :------------------------ | :----------- | :----------- | :---------------------------- | | Developed technology | $93.6 | $93.7 | 2.6 | | Customer relationships | $48.5 | $48.5 | 1.7 | | Patents | $16.6 | $16.6 | 2.1 | | Total intangibles | $179.0 | $178.6 | | | Accumulated amortization | $(136.5) | $(123.7) | | | Intangible assets, net | $42.5 | $54.9 | | - Amortization expense was **$6.3 million** for the three months and **$12.8 million** for the six months ended June 30, 2025[105](index=105&type=chunk) Expected Future Amortization Expense for Intangible Assets (in millions) as of June 30, 2025 | Year | Intangible assets | | :---------------- | :---------------- | | Remainder of 2025 | $12.8 | | 2026 | $15.9 | | 2027 | $7.3 | | 2028 | $4.2 | | 2029 | $1.8 | | Thereafter | $0.5 | | Total | $42.5 | [Note 6. Goodwill](index=23&type=section&id=Note%206.%20Goodwill) Goodwill increased to **$452.3 million** due to an acquisition and foreign currency translation effects, with no impairment recorded Changes in Carrying Amounts of Goodwill (in millions) | Metric | Amount | | :-------------------------- | :----- | | Balance at December 31, 2024 | $442.8 | | Acquisition | $7.0 | | Effect of foreign currency translation | $2.5 | | Balance at June 30, 2025 | $452.3 | - No impairment of goodwill was recorded during the periods ended June 30, 2025 and December 31, 2024[107](index=107&type=chunk) [Note 7. Debt](index=24&type=section&id=Note%207.%20Debt) The company holds a **$1.0 billion** term loan and **$1.389.1 billion** in convertible senior notes, with associated hedges and warrants to manage dilution Term Loan Facility (in millions) | Metric | Jun 30, 2025 | Dec 31, 2024 | | :---------------------- | :----------- | :----------- | | Principal balance | $995.0 | $1,000.0 | | Unamortized issuance costs | $(24.4) | $(27.1) | | Carrying value, net | $970.6 | $972.9 | - Interest expense for the term loan facility was **$21.8 million** for the three months and **$43.3 million** for the six months ended June 30, 2025[114](index=114&type=chunk) Convertible Senior Notes (in millions) as of June 30, 2025 | Metric | 2026 Notes | 2028 Notes | Total | | :---------------------- | :--------- | :--------- | :------ | | Principal balance | $695.8 | $693.3 | $1,389.1 | | Unamortized issuance costs | $(1.5) | $(4.2) | $(5.7) | | Carrying value, net | $694.3 | $689.1 | $1,383.4 | - The company entered into convertible note hedge transactions for approximately **18.2 million** shares (2026) and **19.6 million** shares (2028) at strike prices of **$38.25** and **$35.35**, respectively, costing **$265.3 million**[136](index=136&type=chunk) - The company sold warrants for approximately **18.1 million** shares (2026) and **20.1 million** shares (2028) at an initial strike price of **$46.36** per share, receiving **$202.9 million**[139](index=139&type=chunk) - The Note Hedges and Warrants are intended to reduce potential dilution and effectively increase the overall conversion price to **$46.36** per share for both series[141](index=141&type=chunk) [Note 8. Leases](index=28&type=section&id=Note%208.%20Leases) Dropbox leases office space and datacenters, with its Virtual First strategy leading to subleasing and **$2.6 million** in real estate impairment charges Future Minimum Lease Payments (in millions) as of June 30, 2025 | Year | Operating leases | Finance leases | | :---------------- | :--------------- | :------------- | | Remainder of 2025 | $31.9 | $74.1 | | 2026 | $58.5 | $130.4 | | 2027 | $58.8 | $92.7 | | 2028 | $57.6 | $50.5 | | 2029 | $57.2 | $5.8 | | 2030 | $54.1 | — | | Thereafter | $118.3 | — | | Total liability | $362.5 | $326.7 | - Sublease income was **$2.5 million** for the three months and **$5.5 million** for the six months ended June 30, 2025[145](index=145&type=chunk) - Total impairment charges of **$2.6 million** were recorded during the three and six months ended June 30, 2025, related to real estate assets due to the Virtual First work model[148](index=148&type=chunk) [Note 9. Commitments and Contingencies](index=30&type=section&id=Note%209.%20Commitments%20and%20Contingencies) The company is involved in various legal proceedings and claims, including intellectual property infringement suits, but expects no material adverse impact - The company is a party to various legal proceedings, including intellectual property infringement claims[151](index=151&type=chunk) - Resolution of pending legal matters is not expected to have a material adverse impact on consolidated results of operations, cash flows, or financial position[151](index=151&type=chunk) - Indemnification provisions for customers against intellectual property infringement liabilities are in place, but maximum potential amounts are undeterminable[152](index=152&type=chunk) [Note 10. Accrued and Other Current Liabilities](index=30&type=section&id=Note%2010.%20Accrued%20and%20Other%20Current%20Liabilities) Accrued and other current liabilities decreased to **$134.0 million** primarily due to reductions in non-income taxes and accrued legal fees Accrued and Other Current Liabilities (in millions) | Category | Jun 30, 2025 | Dec 31, 2024 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Non-income taxes payable | $55.8 | $59.2 | $(3.4) | | Accrued legal and other external fees | $19.0 | $26.1 | $(7.1) | | Acquisition indemnification holdbacks | $8.5 | $4.0 | $4.5 | | Other accrued and current liabilities | $50.7 | $53.9 | $(3.2) | | Total accrued and other current liabilities | $134.0 | $143.2 | $(9.2) | [Note 11. Stockholders' Deficit](index=30&type=section&id=Note%2011.%20Stockholders'%20Deficit) The company actively repurchases Class A common stock under a **$1.2 billion** program and has a multi-class stock structure with differing voting rights - Class A common stock has one vote per share, Class B has ten votes, and Class C has zero votes[155](index=155&type=chunk) - As of June 30, 2025, **190.8 million** Class A shares and **76.6 million** Class B shares were issued and outstanding[158](index=158&type=chunk) - The Board authorized a **$1.2 billion** share repurchase program in December 2024, under which the company continues to repurchase shares[160](index=160&type=chunk) - During the six months ended June 30, 2025, the company repurchased **32.2 million** shares of Class A common stock for **$907.0 million**[161](index=161&type=chunk) - Unamortized stock-based compensation related to unvested stock options, restricted stock awards, and RSUs was **$682.8 million** as of June 30, 2025, to be recognized over approximately **2.8 years**[166](index=166&type=chunk) - Stock-based compensation expense related to the Co-Founder Grant was fully recognized by the fourth quarter of 2024, with no expense recognized during the three and six months ended June 30, 2025[171](index=171&type=chunk) [Note 12. Net Income Per Share](index=33&type=section&id=Note%2012.%20Net%20Income%20Per%20Share) Basic net income per share was **$0.46** (three months) and **$0.98** (six months), with diluted EPS at **$0.45** and **$0.96**, respectively, using the two-class method Net Income Per Share (Unaudited) - Key Figures | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic net income per share (Class A & B) | $0.46 | $0.34 | $0.98 | $0.74 | | Diluted net income per share (Class A) | $0.45 | $0.34 | $0.96 | $0.73 | | Weighted-average shares used in computing diluted net income per share (Class A) | 276.7 million | 323.7 million | 286.1 million | 332.4 million | - Potentially dilutive securities totaling **85.9 million** shares for the three months and **85.6 million** shares for the six months ended June 30, 2025, were anti-dilutive and excluded from diluted EPS calculations[178](index=178&type=chunk) [Note 13. Income Taxes](index=35&type=section&id=Note%2013.%20Income%20Taxes) The provision for income taxes was **$22.2 million** (three months) and **$41.4 million** (six months), influenced by jurisdictional mix and tax credits - Provision for income taxes was **$22.2 million** for the three months and **$41.4 million** for the six months ended June 30, 2025[179](index=179&type=chunk) - The difference between the U.S. statutory rate and the company's effective tax rate was primarily due to the jurisdictional mix of earnings, tax credits, and state income taxes[181](index=181&type=chunk) - Unrecognized tax benefits increased by **$9.4 million** during the six months ended June 30, 2025[184](index=184&type=chunk) [Note 14. Segment Information and Geographic Areas](index=37&type=section&id=Note%2014.%20Segment%20Information%20and%20Geographic%20Areas) Dropbox operates as a single segment, with the majority of its long-lived assets and revenue concentrated in the United States - The company's chief operating decision-maker manages the business activities as a single operating and reportable segment[186](index=186&type=chunk) Long-Lived Assets by Geographic Area (in millions) | Region | Jun 30, 2025 | Dec 31, 2024 | | :------------ | :----------- | :----------- | | United States | $353.6 | $353.1 | | International | $8.6 | $5.7 | | Total | $362.2 | $358.8 | Revenue by Geographic Area (in millions) | Region | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $354.1 | $361.7 | $710.5 | $720.0 | | International | $271.6 | $272.8 | $539.9 | $545.8 | | Total revenue | $625.7 | $634.5 | $1,250.4 | $1,265.8 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, key metrics, and liquidity, impacted by macroeconomic conditions and strategic decisions [Overview](index=38&type=section&id=Overview) Dropbox serves over **700 million** registered users across approximately **180** countries, with **18.13 million** paying users - Dropbox serves over **700 million** registered users across approximately **180** countries, expanding from file syncing to team synchronization[193](index=193&type=chunk)[194](index=194&type=chunk) - The company has built a global business with **18.13 million** paying users[194](index=194&type=chunk) [Our Subscription Plans](index=38&type=section&id=Our%20Subscription%20Plans) Revenue is generated from diverse subscription plans for individuals, families, and teams, including Dash for Business, FormSwift, DocSend, and Dropbox Sign - Revenue is generated from subscriptions for individuals (Plus, Professional, Essentials), families, and teams (Standard, Advanced, Business, Business Plus, Enterprise)[195](index=195&type=chunk) - Offers Dash for Business (AI-powered search), FormSwift (cloud-based forms), DocSend (secure document sharing), and Dropbox Sign (e-signature solution)[195](index=195&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - Pricing is generally based on the number of licenses purchased, with some Dropbox Sign products based on transaction volume[199](index=199&type=chunk) - A strategic decision was made to significantly reduce investments in FormSwift at the beginning of 2025[197](index=197&type=chunk) [Our Customers](index=39&type=section&id=Our%20Customers) The company's highly diversified customer base includes individuals, families, teams, and organizations of all sizes, with no single customer accounting for more than **1%** of revenue - The customer base is highly diversified, including individuals, families, teams, and organizations of all sizes across various industries[200](index=200&type=chunk) - No single customer accounted for more than **1%** of the company's revenue in the periods presented[200](index=200&type=chunk) [Our Business Model](index=39&type=section&id=Our%20Business%20Model) The business model focuses on driving new signups and converting registered users to paid plans, with over **90%** of revenue from self-serve channels - The business model focuses on driving new signups through word-of-mouth and in-product referrals[201](index=201&type=chunk) - Increases conversion of registered users to paid plans via in-product prompts, free trials, and marketing campaigns[202](index=202&type=chunk) - Aims to upgrade and expand existing customers to premium offerings or additional licenses[203](index=203&type=chunk) - Over **90%** of revenue is generated from self-serve channels[202](index=202&type=chunk) [Recent Developments](index=39&type=section&id=Recent%20Developments) Macroeconomic conditions continue to impact business trends, with improved customer retention in Individual and Teams plans, but cautious spending still affects Teams performance - Macroeconomic conditions continue to impact business trends, with improved customer retention and engagement in Individual and Teams plans, though Teams performance is still affected by cautious spending[205](index=205&type=chunk) - DocSend delivered strong year-over-year growth, while Sign and FormSwift performed in line with expectations amid a competitive and cost-conscious environment[205](index=205&type=chunk) - Incurred **$1.2 million** (three months) and **$3.5 million** (six months) in expenses related to the October 2024 workforce reduction[207](index=207&type=chunk) [Key Business Metrics](index=40&type=section&id=Key%20Business%20Metrics) Total Annual Recurring Revenue (ARR) and paying users declined due to strategic decisions and a challenging operating environment, leading to a decrease in Average Revenue Per Paying User (ARPU) Total Annual Recurring Revenue (ARR) (in millions) | Metric | Jun 30, 2025 | Dec 31, 2024 | Jun 30, 2024 | | :-------- | :----------- | :----------- | :----------- | | Total ARR | $2,542 | $2,574 | $2,573 | - Total ARR decreased primarily due to the strategic decision to significantly reduce investment in FormSwift and a challenging operating environment across Teams plans[212](index=212&type=chunk) Paying Users (in millions) | Metric | Jun 30, 2025 | Dec 31, 2024 | Jun 30, 2024 | | :----------- | :----------- | :----------- | :----------- | | Paying users | 18.13 | 18.22 | 18.22 | - The number of paying users declined largely from a decrease due to the strategic decision to significantly reduce investments in FormSwift and a challenging operating environment across Teams plans[217](index=217&type=chunk) Average Revenue Per Paying User (ARPU) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | ARPU | $138.32 | $139.93 | $138.74 | $139.71 | - ARPU declined due to the strategic decision to significantly reduce investment in FormSwift, an increased mix of sales towards lower-priced plans, and unfavorable foreign exchange rates[221](index=221&type=chunk) [Non-GAAP Financial Measure (Free Cash Flow)](index=42&type=section&id=Non-GAAP%20Financial%20Measure%20(Free%20Cash%20Flow)) Free Cash Flow (FCF) increased to **$412.2 million** due to higher operating cash and lower capital expenditures, with further increases expected from operating efficiencies Free Cash Flow (FCF) Reconciliation (in millions) | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | YoY Change ($) | YoY Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------- | :------------- | | Net cash provided by operating activities | $414.3 | $406.1 | $8.2 | 2.0% | | Capital expenditures | $(2.1) | $(15.1) | $13.0 | (86.1)% | | Free cash flow | $412.2 | $391.0 | $21.2 | 5.4% | - FCF increased primarily due to an increase in cash provided by operating activities and a decrease in capital expenditures[226](index=226&type=chunk) - Increased cash outflows from operating assets and liabilities were driven by payments for a lease termination fee and the 2024 workforce reduction[226](index=226&type=chunk) - FCF is expected to generally increase in the near term as the company drives operating efficiencies, partly due to the 2024 workforce reduction[227](index=227&type=chunk) [Components of Our Results of Operations](index=43&type=section&id=Components%20of%20Our%20Results%20of%20Operations) Revenue is primarily from self-serve subscriptions, while operating expenses are expected to decrease due to a workforce reduction, and a new act will reduce cash tax outflows - Revenue is recognized ratably over subscription terms, with over **90%** from self-serve channels[230](index=230&type=chunk)[231](index=231&type=chunk) - Cost of revenue includes infrastructure costs (depreciation, rent, network) and employee-related costs for infrastructure support and user support[233](index=233&type=chunk) - Research and development expenses are expected to decrease in absolute dollars and as a percentage of revenue due to the 2024 workforce reduction[237](index=237&type=chunk) - Sales and marketing expenses are expected to decrease in absolute dollars and as a percentage of revenue due to the 2024 workforce reduction[240](index=240&type=chunk) - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is anticipated to reduce domestic cash tax outflows in 2025 by reinstating immediate expensing of research expenditures[247](index=247&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) Revenue experienced a slight decline, while operating expenses decreased significantly, leading to improved income from operations Revenue (in millions) | Period | 2025 | 2024 | $ Change | % Change | | :---------------------- | :------- | :------- | :------- | :------- | | Three Months Ended Jun 30 | $625.7 | $634.5 | $(8.8) | (1.4)% | | Six Months Ended Jun 30 | $1,250.4 | $1,265.8 | $(15.4) | (1.2)% | Cost of Revenue (in millions) | Period | 2025 | 2024 | $ Change | % Change | | :---------------------- | :------- | :------- | :------- | :------- | | Three Months Ended Jun 30 | $123.7 | $107.0 | $16.7 | 15.6% | | Six Months Ended Jun 30 | $240.4 | $212.8 | $27.6 | 13.0% | Operating Expenses (in millions) | Expense Category | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | $ Change | % Change | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | $ Change | % Change | | :---------------------- | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Research and development | $184.4 | $227.1 | $(42.7) | (18.8)% | $362.8 | $446.2 | $(83.4) | (18.7)% | | Sales and marketing | $87.8 | $112.5 | $(24.7) | (22.0)% | $179.8 | $221.3 | $(41.5) | (18.8)% | | General and administrative | $58.8 | $60.9 | $(2.1) | (3.4)% | $112.6 | $115.0 | $(2.4) | (2.1)% | - Net loss on real estate assets was **$2.6 million** for both the three and six months ended June 30, 2025, compared to zero in 2024[256](index=256&type=chunk)[266](index=266&type=chunk) - Interest (expense) income, net, increased by **$23.3 million** (3 months) and **$45.2 million** (6 months) due to interest expense related to the term loan facility[257](index=257&type=chunk)[267](index=267&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains **$736.3 million** in cash and equivalents, with significant debt obligations and substantial cash usage for stock repurchases - As of June 30, 2025, cash and cash equivalents were **$736.3 million** and short-term investments were **$218.4 million**[270](index=270&type=chunk) - The company has **$995.0 million** outstanding on its term loan facility and **$1.389.1 billion** in **0%** convertible senior notes due in 2026 and 2028[273](index=273&type=chunk)[272](index=272&type=chunk) - Principal uses of cash include funding operations, repurchases of Class A common stock (**$907.0 million** in H1 2025), tax withholding obligations, and debt payments[276](index=276&type=chunk)[277](index=277&type=chunk) - Net cash provided by operating activities was **$414.3 million** for the six months ended June 30, 2025, an increase of **$8.2 million** year-over-year[281](index=281&type=chunk)[282](index=282&type=chunk) - Net cash used in financing activities was **$1,066.3 million** for the six months ended June 30, 2025, an increase of **$386.9 million** year-over-year, primarily due to increased stock repurchases[287](index=287&type=chunk)[288](index=288&type=chunk) [Critical Accounting Estimates](index=54&type=section&id=Critical%20Accounting%20Estimates) There have been no material changes to the company's critical accounting policies and estimates since its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the company's critical accounting policies and estimates since its Annual Report on Form 10-K for the year ended December 31, 2024[289](index=289&type=chunk) [Recent Accounting Pronouncements](index=55&type=section&id=Recent%20Accounting%20Pronouncements) Refer to Note 1 for information on recently issued accounting pronouncements not yet adopted - Refer to Note 1 'Description of the Business and Summary of Significant Accounting Policies' for information on recently issued accounting pronouncements not yet adopted[290](index=290&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk on debt and foreign currency risk on international sales, without hedging programs - A hypothetical **100 basis point** increase in interest rates would have an immaterial impact on the market value of the investment portfolio[292](index=292&type=chunk) - A hypothetical **100 basis point** increase or decrease in interest rates would result in a **$2.5 million** (3 months) and **$4.7 million** (6 months) change in interest expense related to the term loan facility[293](index=293&type=chunk) - **26%** of 2024 sales were denominated in currencies other than U.S. dollars, primarily Euros and British pounds sterling[296](index=296&type=chunk) - The company does not currently maintain a program to hedge exposures to non-U.S. dollar currencies[297](index=297&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[298](index=298&type=chunk) - There was no change in internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting during the period[299](index=299&type=chunk) - Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance and are subject to inherent limitations[300](index=300&type=chunk) [PART II. OTHER INFORMATION](index=58&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, detailed risk factors, equity security sales, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in patent infringement lawsuits, expecting no material adverse impact on financial position - The company is currently involved in legal proceedings, including patent infringement suits by Motion Offense, LLC and Entangled Media, LLC[302](index=302&type=chunk)[303](index=303&type=chunk)[306](index=306&type=chunk) - In the Motion Offense Litigation, a jury found in favor of Dropbox on all counts (non-infringement and invalidity) in May 2023, with judgment entered in August 2024; Motion Offense filed a Motion for Judgment as a Matter of Law and a renewed Motion for a New Trial in September 2024[304](index=304&type=chunk) - The Entangled Media Litigation was transferred to the Northern District of California, with trial currently expected to occur in 2026[306](index=306&type=chunk)[307](index=307&type=chunk) - The company believes any potential loss from these legal matters would not be material to its financial position or results of operations[307](index=307&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include user retention, data security, competition, financial performance, debt, and regulatory compliance - Risks related to business and operations include dependence on retaining and upgrading paying users, failure to attract new users, privacy and data security breaches (e.g., Dropbox Sign incident), declining growth rates, service disruptions, intense competition, failure to respond to technological changes (including AI), reliance on third-party interoperability, macroeconomic impacts, dependence on key personnel, and uncertainties of the Virtual First model[312](index=312&type=chunk)[315](index=315&type=chunk)[320](index=320&type=chunk)[327](index=327&type=chunk)[330](index=330&type=chunk)[335](index=335&type=chunk)[341](index=341&type=chunk)[345](index=345&type=chunk)[348](index=348&type=chunk)[351](index=351&type=chunk)[357](index=357&type=chunk) - Financial performance risks include a declining revenue growth rate, potential for increased expenses impacting profitability (especially AI investments), significant cash requirements for servicing indebtedness, and quarterly results fluctuations[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk) - Legal and regulatory compliance risks involve adherence to various U.S. and international laws (e.g., copyright, consumer protection, privacy, data protection, export control, anti-corruption), potential intellectual property claims, and the impact of changes in tax laws (e.g., OBBBA)[413](index=413&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk)[420](index=420&type=chunk)[434](index=434&type=chunk)[408](index=408&type=chunk) - Risks related to ownership of Class A Common Stock include potential price volatility, concentrated voting control due to the multi-class structure, potential dilution from convertible notes, and anti-takeover provisions in corporate documents[441](index=441&type=chunk)[443](index=443&type=chunk)[448](index=448&type=chunk)[450](index=450&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=89&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **14.15 million** Class A common shares for **$403.0 million** under its **$1.2 billion** program Issuer Purchases of Equity Securities (Quarter Ended June 30, 2025) | Period | Total Number of Shares Purchased (in millions) | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Programs (in millions) | | :----------- | :------------------------------------------- | :--------------------------- | :------------------------------------------------------------------------------------------------------- | | April 1 - 30 | 5.77 | $26.96 | $714.34 | | May 1 - 31 | 5.42 | $28.98 | $557.40 | | June 1 - 30 | 2.96 | $29.24 | $470.73 | | Total | 14.15 | $28.21 | | - The repurchases were made under a **$1.2 billion** share repurchase program authorized in December 2024[474](index=474&type=chunk) [Item 5. Other Information](index=89&type=section&id=Item%205.%20Other%20Information) Directors and executive officers adopted Rule 10b5-1 trading plans for Class A common stock sales - Abhay Parasnis (Board Member) adopted a Rule 10b5-1 plan on May 21, 2025, for up to **5,346** shares[475](index=475&type=chunk) - Andrew Moore (Board Member) adopted a Rule 10b5-1 plan on May 29, 2025, for up to **22,548** shares[476](index=476&type=chunk) - Ali Dasdan (Chief Technology Officer) adopted a Rule 10b5-1 plan on May 12, 2025, for up to **128,714** shares[477](index=477&type=chunk) - Tim Regan (Chief Financial Officer) adopted a Rule 10b5-1 plan on June 10, 2025, for up to **66,000** shares[478](index=478&type=chunk) - Will Yoon (Chief Legal Officer) adopted a Rule 10b5-1 plan on June 8, 2025, for up to **33,591** shares[480](index=480&type=chunk) [Item 6. Exhibits](index=90&type=section&id=Item%206.%20Exhibits) This section lists exhibits, including officer certifications and financial statements in Inline XBRL format - Includes certifications of Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1)[484](index=484&type=chunk) - Financial statements for the quarter ended June 30, 2025, are formatted in Inline XBRL (Exhibit 101)[484](index=484&type=chunk) [Signatures](index=92&type=section&id=Signatures) The report was signed by the CEO and CFO on August 8, 2025, as required by the Securities Exchange Act - The report was signed by Andrew W. Houston (Chief Executive Officer) and Timothy J. Regan (Chief Financial Officer) on August 8, 2025[489](index=489&type=chunk)

Core Insights - Dropbox (DBX) reported second-quarter 2025 non-GAAP earnings of 71 cents per share, exceeding the Zacks Consensus Estimate by 12.7% and reflecting an 18.3% year-over-year increase [1][9] Financial Performance - Revenues for the quarter were $625.7 million, a decline of 1.4% year over year, but surpassed the consensus mark by 1.28%. On a constant currency basis, revenues fell 1.3% [2] - Total annual recurring revenues (ARR) were $2.54 billion, down 1.2% year over year, with a constant currency decrease of 1.1%. FormSwift negatively impacted ARR by 160 basis points [3][2] - The company reported a non-GAAP gross margin of 82.2%, down 230 basis points year over year, while the non-GAAP operating margin increased to 41.5%, up 550 basis points year over year due to cost reductions [7][8][9] User Metrics - As of the end of the second quarter, Dropbox had 18.13 million paying users, a sequential decline of approximately 34,000. The average revenue per paying user (ARPU) was $138.32, down from $139.93 in the previous year [4] - The company expects a decline of approximately 1.5% in paying users for 2025, with FormSwift contributing to roughly half of this decline [14] Strategic Initiatives - Dropbox launched new features in April aimed at enhancing user productivity, including intranet features and rich media search, which now accounts for a double-digit percentage of total queries [5][4] - Initiatives to redesign the Teams onboarding experience have led to a 5% improvement in activation rates and a 10% improvement in setup rates [6] Cash Flow and Share Repurchase - As of June 30, 2025, Dropbox had cash, cash equivalents, and short-term investments totaling $954.7 million, down from $1.18 billion as of March 31, 2025. The company generated $260.5 million in cash from operating activities during the quarter [10] - In the second quarter, Dropbox repurchased 14 million shares for $400 million, with $470 million remaining under existing share repurchase authorizations [11] Guidance - For Q3 2025, Dropbox expects revenues between $622 million and $625 million, anticipating a negative impact from FormSwift of 170 basis points [12] - For the full year 2025, the company projects revenues between $2.49 billion and $2.5 billion, with FormSwift expected to negatively impact revenues by 150 basis points [13]