Financial Results & Investor Presentation Q4 2025 Safe Harbor Statement This presentation contains forward-looking statements. These statements may relate to, but are not limited to, plans for growth, technological capabilities and new features and products and the long-term financial targets of Dropbox, Inc. ("Dropbox," "we," "us," or similar terms), as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predic ...

Industry Overview - The rapid advancement of artificial intelligence (AI) has raised concerns among investors regarding the potential disruption of traditional software models, particularly Software-as-a-Service (SaaS) [2] - The software sector has transitioned from a bull market to a bear market, with the iShares Expanded Tech-Software Sector ETF (IGV) falling approximately 30% from its 52-week high and nearly 22% year-to-date [4] - Many high-quality software companies are now trading below their historical earnings multiples due to a significant selloff driven by fears surrounding AI [3][6] Company-Specific Insights Salesforce - Salesforce has experienced a decline of over 42% from its 52-week high and is down close to 29% year-to-date, raising concerns about its SaaS model in the AI era [8] - Despite the selloff, analysts maintain a Moderate Buy consensus for Salesforce, with a price target suggesting nearly 71% upside potential [9] - The introduction of Salesforce's Agentforce platform, which allows for the creation of AI-powered agents, is seen as a potential growth driver [10] Dropbox - Dropbox shares have decreased by 26% from their 52-week high and nearly 12% year-to-date, resulting in a forward P/E of just 8, indicating potential value [12] - The company is transitioning to an AI-powered platform for productivity and content intelligence, with products like Dropbox Dash and Dropbox AI [13] - Analyst sentiment remains neutral, but the consensus price target implies nearly 30% upside, suggesting the selloff may have been excessive [14] Adobe - Adobe's stock has fallen 43% from its 52-week high and nearly 25% year-to-date, primarily due to fears of competition from generative AI tools [15] - The company has responded by integrating AI deeply into its products, such as Photoshop and Illustrator, rather than treating it as a separate tool [16] - Analysts hold a neutral sentiment, with a consensus Hold rating, while Adobe's forward P/E of 10 positions it as an attractive value opportunity [16] Oracle - Oracle shares have dropped more than 53% from their 52-week high and are down nearly 18% year-to-date, amid concerns over debt-funded capital expenditures for AI infrastructure [17][18] - Despite the negative sentiment, Oracle continues to secure public-sector deals, indicating ongoing business activity [20] - Analysts remain bullish on Oracle, with a Moderate Buy consensus and a price target suggesting over 80% upside potential [21] Investment Opportunities - The iShares Expanded Tech-Software Sector ETF (IGV) offers diversified exposure to North American software companies, holding 114 stocks and trading at a P/E of 34 [22] - The current market correction may present opportunities for long-term investors, particularly for companies that effectively embrace AI and adapt to the changing landscape [24] - The key question for investors is which companies will successfully integrate AI to thrive in the next market cycle [25]

Summary of Conference Call Notes Industry Overview - **Industry**: US Application Software - **Key Focus**: AI contribution and outlook for 2026 - **Demand Environment**: Stable yet uncertain, with some relief from US government re-opening [1][11] Core Insights - **AI Adoption**: Companies are actively adopting AI products and monetization strategies, with a focus on AI-driven acceleration stories and cloud migration support [1][11] - **Investor Sentiment**: Investors are expected to focus on early indicators for 2026, looking for realistic acceleration opportunities [11] - **Company Performance**: Incremental positive outlook for BlackLine (BL) and Workiva (WK) [1] Company-Specific Insights Automation & Collaboration (DBX, MNDY, OTEX, PEGA) - **PEGA**: Recognized as a leader with a unique Blueprint strategy enhancing go-to-market efficiency and legacy app replacement [2] - **MNDY**: Mixed top-of-funnel traffic from search; recovery in traffic was temporary [2][37] - **DBX**: Largely unaffected by market concerns, but SMB purchase activity remains a concern [2] Financials & Supply Chain (BL, INTA, MANH, OS, ROP, VERX, WK) - **Cloud Migration**: Accelerated by ERP transformation and AI readiness [3] - **Execution Risks**: Some companies face execution and demand backdrop questions [3] HR Software (PAYC, PCTY) - **Investor Sentiment**: Depressed due to macro/AI impact concerns on payroll models [4] - **PCTY**: Stronger execution noted with a broader product scope [4] Target Price Adjustments - **MANH**: Target price adjusted to $200 from $204 due to lower margins and updated valuation [5] - **MNDY**: Target price lowered to $293 from $319 due to lower revenue and FX headwinds [5] - **INTA**: Target price raised to $49 from $46 based on updated billings seasonality [5] - **OS**: Target price adjusted to $24 from $25 [5] - **OTEX**: Target price lowered to $36 from $38 [5] - **PAYC**: Target price adjusted to $185 from $191 [5] - **PCTY**: Target price raised to $179 from $175 [5] Analyst Rankings - **Top Picks**: PEGA, WK, and ROP identified as having acceleration potential supported by AI rollouts [13] - **PEGA**: Rated as a buy with a target price of $81.00, reflecting attractive valuation and enterprise automation focus [14] - **WK**: Rated as a buy with a target price of $113.00, highlighting stable core business and consolidation opportunities [14] - **ROP**: Rated as a buy with a target price of $575.00, emphasizing operational capabilities and organic growth potential [14] Additional Insights - **BlackLine (BL)**: Noted competitive landscape challenges with AI-native accounting software; progress in invoice-to-cash processes [18] - **Dropbox (DBX)**: Recent management changes with a new CFO; focus on improving execution and retention through new product features [23][24] - **Intapp (INTA)**: Conservative guidance and evolving pricing models to incentivize cloud migration [28][30] - **Manhattan Associates (MANH)**: Insights into the cloud renewal cycle and expectations for 20%+ cloud growth [33][34] Conclusion The US Application Software industry is navigating a stable yet uncertain demand backdrop, with significant focus on AI adoption and cloud migration. Companies are adjusting their strategies and target prices in response to market conditions, while investor sentiment remains cautious but optimistic about future growth opportunities.

Core Insights - Dropbox has reported a slight sales decline of 0.7% year-over-year, with total revenues of $634.4 million for Q3 of fiscal 2025 [3] - The company is undergoing a leadership transition, appointing Ross Tennenbaum as the new CFO effective December 16, succeeding Tim Regan [8] - The decline in revenue is partly attributed to reduced investment in FormSwift, which is expected to negatively impact revenue by approximately 130 basis points this year [4] Company Developments - Tennenbaum, who has over two decades of finance and operations experience, will receive an annual base salary of $550,000 and a one-time signing bonus of $350,000 [6] - Alongside the CFO transition, Eric Webster has been appointed as the new chief business officer to enhance Dropbox's focus on scaling Dropbox Dash and improving core file storage services [5] - The company aims to prioritize the scaling of its AI-powered workspace search tool, Dropbox Dash, in the upcoming fiscal year [4]

Financial Performance - The company's trailing twelve months (TTM) revenue is $2528 billion[7] - The company's TTM free cash flow (FCF) is $916 million[7] - The company's TTM non-GAAP gross margin is 824%[8] - The company's TTM non-GAAP operating margin is 403%[8] - The company's TTM non-GAAP EPS growth is 263%[8] User Base - The company has over 700 million registered users[36] - The company has 1807 million paying users as of September 30, 2025[8, 36] - The company's ARPU (Average Revenue Per User) is $13907[36] - The company has approximately 575K paying teams[36] Future Guidance - The company expects Q4 2025 GAAP revenue to be between $626 million and $629 million[94] - The company expects fiscal year 2025 GAAP revenue to be between $2511 billion and $2514 billion[94] - The company anticipates a non-GAAP operating margin of approximately 370% for Q4 2025 and approximately 400% for fiscal year 2025[94]