First Quarter Revenue of $631.3 Million, up
3.3% year-over-year; on a constant currency basis, up 3.2%
year-over-year
GAAP Operating Margin of 22.7% and Non-GAAP
Operating Margin of 36.5%
Net Cash Provided by Operating Activities of
$175.5 Million and Free Cash Flow of $166.3 Million
Dropbox, Inc. (NASDAQ: DBX), today announced financial results
for its first quarter ended March 31, 2024.
“In Q1, our core business delivered in-line revenue and better
than anticipated profitability,” said Dropbox Co-Founder and Chief
Executive Officer Drew Houston. “We recently announced a collection
of product updates designed to make it even easier for our users to
secure, organize and share their content across different devices,
locations and platforms. Looking ahead, we’ll stay disciplined in
our operations, while investing in growth initiatives focused on
building AI powered product experiences to improve distributed work
for our customers.”
First Quarter Fiscal 2024 Results
- Total revenue was $631.3 million, an increase of 3.3% from the
same period last year. On a constant currency basis, year-over-year
growth would have been 3.2%.(1)
- Total ARR was $2.556 billion, an increase of 3.6% from the same
period last year. On a constant currency basis, year-over-year
growth would have been 2.8%.(2) Utilizing the exchange rates set at
the beginning of 2024, total ARR increased $15.6 million
quarter-over-quarter.
- Paying users was 18.16 million, as compared to 17.90 million
for the same period last year. Average revenue per paying user was
$139.59, as compared to $138.97 for the same period last year.
Paying users increased 35,000 quarter-over-quarter.
- GAAP gross margin was 83.2%, as compared to 80.9% for the same
period last year. Non-GAAP gross margin was 84.6%, as compared to
82.4% for the same period last year. Effective January 1, 2024, the
Company increased the useful lives of certain infrastructure assets
from four to five years due to recent technological advancements.
In the first quarter of 2024, the change in useful life reduced
depreciation expense in the amount of $10.4 million for assets that
existed as of the effective date of the change and applying the
revised estimated useful lives prospectively.
- GAAP operating margin was 22.7%, as compared to 13.8% for the
same period last year. Non-GAAP operating margin was 36.5%, as
compared to 28.6% for the same period last year.
- GAAP net income was $132.3 million, as compared to $69.0
million for the same period last year. Non-GAAP net income was
$196.7 million, as compared to $146.1 million for the same period
last year.
- Net cash provided by operating activities was $175.5 million,
as compared to $139.9 million for the same period last year. Free
cash flow was $166.3 million, as compared to $138.0 million for the
same period last year.
- GAAP diluted net income per share attributable to common
stockholders was $0.39, as compared to $0.20 in the same period
last year. Non-GAAP diluted net income per share attributable to
common stockholders was $0.58, as compared to $0.42 in the same
period last year.(3)
- Cash, cash equivalents and short-term investments ended at
$1.176 billion.
(1)
We calculate constant currency revenue
growth rates by applying the prior period weighted average exchange
rates to current period results.
(2)
We calculate total annual recurring
revenue ("Total ARR") as the number of users who have active paid
licenses for access to our platform as of the end of the period,
multiplied by their annualized subscription price to our platform.
We adjust our exchange rates used to calculate Total ARR on an
annual basis, at the beginning of each fiscal year. We calculate
constant currency Total ARR growth rates by applying the current
period exchange rate to prior period results.
(3)
GAAP and Non-GAAP diluted net income per
share attributable to common stockholders is calculated based upon
340.7 million and 348.8 million diluted weighted-average shares of
common stock for the three months ended March 31, 2024 and 2023,
respectively.
Financial Outlook
Dropbox will provide forward-looking guidance in connection with
this quarterly earnings announcement on its conference call,
webcast, and on its investor relations website at http://investors.dropbox.com.
Conference Call Information
Dropbox plans to host a conference call today to review its
first quarter financial results and to discuss its financial
outlook. This call is scheduled to begin at 2:00 p.m. PT / 5:00
p.m. ET and can be accessed by using the web link at
http://investors.dropbox.com.
Other Upcoming Events
- Tim Regan, Chief Financial Officer, will be hosting meetings at
the Jefferies Software Conference on Wednesday, May 29th,
2024.
During these events, a live webcast will be accessible from the
Dropbox investor relations website at http://investors.dropbox.com.
Following the event, a replay will be made available at the same
location.
About Dropbox
Dropbox is the one place to keep life organized and keep work
moving. With more than 700 million registered users across
approximately 180 countries, we're on a mission to design a more
enlightened way of working. Dropbox is headquartered in San
Francisco, CA, and has employees around the world. For more
information on our mission and products, visit http://dropbox.com.
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to the most
directly comparable financial results as determined in accordance
with GAAP are included at the end of this press release following
the accompanying financial data. For a description of these
non-GAAP financial measures, including the reasons management uses
each measure, please see the section of the tables titled "About
Non-GAAP Financial Measures."
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
including, among other things, our expectations regarding
distributed work and artificial intelligence and machine learning
trends, related market opportunities and our ability to capitalize
on those opportunities. Words such as "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect," "plans,"
and similar expressions are intended to identify forward-looking
statements. We have based these forward-looking statements largely
on our current expectations and projections about future events and
financial trends that we believe may affect our business, financial
condition, and results of operations. These forward-looking
statements speak only as of the date of this press release and are
subject to risks, uncertainties, and assumptions including, but not
limited to: (i) our ability to retain and upgrade paying users, and
increase our recurring revenue; (ii) our ability to attract new
users or convert registered users to paying users; (iii) our
expectations regarding general economic, political, and market
trends and their respective impacts on our business; (iv) impacts
to our financial results and business operations as a result of
pricing and packaging changes to our subscription plans; (v) our
future financial performance, including trends in revenue, costs of
revenue, gross profit or gross margin, operating expenses, paying
users, and free cash flow; (vi) our ability to achieve or maintain
profitability; (vii) our liability or other potential legal,
regulatory, or reputational consequences of any unauthorized access
to our data or our users’ content, including through privacy and
data security breaches; (viii) significant disruption of service on
our platform or loss of content; (ix) any decline in demand for our
platform or for content collaboration solutions in general; (x)
changes in the interoperability of our platform across devices,
operating systems, and third-party applications that we do not
control; (xi) competition in our markets; (xii) our ability to
respond to rapid technological changes, extend our platform,
develop new features or products, or gain market acceptance for
such new features or products; (xiii) our ability to improve
quality and ease of adoption of our new and enhanced product
experiences, features, and capabilities; (xiv) our ability to
manage our growth or plan for future growth; (xv) our various
acquisitions of businesses and the potential of such acquisitions
to require significant management attention, disrupt our business,
or dilute stockholder value; (xvi) our ability to attract, retain,
integrate, and manage key and other highly qualified personnel,
including as a result of our transition to a Virtual First model
with an increasingly distributed workforce; (xvii) our capital
allocation plans with respect to our stock repurchase program and
other investments; and (xviii) the dual class structure of our
common stock and its effect of concentrating voting control with
certain stockholders who held our capital stock prior to the
completion of our initial public offering. Further information on
risks that could affect Dropbox’s results is included in our
filings with the Securities and Exchange Commission ("SEC"),
including our Form 10-K for the year ended December 31, 2023.
Additional information will be made available in our quarterly
report on Form 10-Q for the quarter ended March 31, 2024 and other
reports that we may file with the SEC from time to time, which
could cause actual results to vary from expectations. If the risks
materialize or assumptions prove incorrect, actual results could
differ materially from the results implied by these forward-looking
statements. Dropbox assumes no obligation to, and does not
currently intend to, update any such forward-looking statements
after the date of this release, except as required by applicable
law.
Dropbox, Inc.
Condensed Consolidated
Statements of Operations
(In millions, except per share
data)
(Unaudited)
Three Months Ended
March 31,
2024
2023
Revenue
$
631.3
$
611.1
Cost of revenue(1)
105.8
116.8
Gross profit
525.5
494.3
Operating expenses(1):
Research and development
219.1
235.2
Sales and marketing
108.8
119.2
General and administrative
54.1
55.8
Total operating expenses
382.0
410.2
Income from operations
143.5
84.1
Interest income, net
7.3
3.9
Other income (expense), net
0.3
(0.4
)
Income before income taxes
151.1
87.6
Provision for income taxes
(18.8
)
(18.6
)
Net income
$
132.3
$
69.0
Basic net income per share
$
0.40
$
0.20
Diluted net income per share
$
0.39
$
0.20
Weighted-average shares used in computing
net income per share attributable to common stockholders, basic
334.8
347.1
Weighted-average shares used in computing
net income per share attributable to common stockholders,
diluted
340.7
348.8
(1) Includes stock-based compensation
expense as follows (in millions):
Three Months Ended
March 31,
2024
2023
Cost of revenue
$
5.2
$
5.4
Research and development(2)
55.4
52.9
Sales and marketing
5.1
5.5
General and administrative
12.3
12.2
Total stock-based compensation
$
78.0
$
76.0
(2) On March 15, 2023, our President
resigned, resulting in the reversal of $6.7 million in stock-based
compensation expense. Of the total amount reversed, $4.4 million
related to expense recognized prior to January 1, 2023.
Dropbox, Inc.
Condensed Consolidated Balance
Sheets
(In millions)
(Unaudited)
As of
March 31, 2024
December 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
548.9
$
614.9
Short-term investments
627.0
741.1
Trade and other receivables, net
66.7
68.7
Prepaid expenses and other current
assets
96.6
91.9
Total current assets
1,339.2
1,516.6
Property and equipment, net
315.0
309.2
Operating lease right-of-use asset
177.6
183.8
Intangible assets, net
51.6
58.1
Goodwill
401.8
402.2
Deferred tax assets
460.8
460.4
Other assets
51.7
53.2
Total assets
$
2,797.7
$
2,983.5
Liabilities and stockholders'
deficit
Current liabilities:
Accounts payable
$
32.0
$
38.5
Accrued and other current liabilities
160.2
155.2
Accrued compensation and benefits
42.7
109.2
Operating lease liability
75.0
57.4
Finance lease obligation
115.1
116.2
Deferred revenue
741.8
725.0
Total current liabilities
1,166.8
1,201.5
Operating lease liability, non-current
281.6
310.7
Finance lease obligation, non-current
164.2
168.5
Convertible senior notes, net,
non-current
1,378.7
1,377.8
Other non-current liabilities
83.6
90.8
Total liabilities
3,074.9
3,149.3
Stockholders' deficit:
Additional paid-in-capital
2,554.8
2,598.0
Accumulated deficit
(2,811.6
)
(2,742.3
)
Accumulated other comprehensive loss
(20.4
)
(21.5
)
Total stockholders' deficit
(277.2
)
(165.8
)
Total liabilities and stockholders'
deficit
$
2,797.7
$
2,983.5
Dropbox, Inc.
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended
March 31,
2024
2023
Cash flows from operating
activities
Net income
$
132.3
$
69.0
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
31.4
42.5
Stock-based compensation
78.0
76.0
Amortization of debt issuance costs
1.1
1.0
Amortization of deferred commissions
7.5
10.7
Non-cash operating lease expense
9.3
12.7
Deferred taxes
(0.5
)
3.4
Other
1.2
0.7
Changes in operating assets and
liabilities:
Trade and other receivables, net
1.6
(3.8
)
Prepaid expenses and other current
assets
(10.7
)
(7.2
)
Other assets
0.9
1.1
Accounts payable
(8.2
)
(0.3
)
Accrued and other current liabilities
(5.5
)
25.6
Accrued compensation and benefits
(66.3
)
(91.6
)
Deferred revenue
16.6
24.7
Other non-current liabilities
1.4
(4.7
)
Operating lease liabilities
(14.6
)
(19.9
)
Net cash provided by operating
activities
175.5
139.9
Cash flows from investing
activities
Capital expenditures
(9.2
)
(1.9
)
Purchases of short-term investments
(62.3
)
(30.9
)
Proceeds from sales of short-term
investments
55.6
152.7
Proceeds from maturities of short-term
investments
123.9
77.6
Other
5.7
3.3
Net cash provided by investing
activities
113.7
200.8
Cash flows from financing
activities
Payments for taxes related to net share
settlement of restricted stock units and awards
(41.3
)
(34.1
)
Proceeds from issuance of common stock,
net of taxes withheld
0.1
0.2
Principal payments on finance lease
obligations
(32.1
)
(32.0
)
Common stock repurchases
(279.4
)
(175.4
)
Net cash used in financing
activities
(352.7
)
(241.3
)
Effect of exchange rate changes on cash
and cash equivalents
(2.5
)
0.5
Change in cash and cash equivalents
(66.0
)
99.9
Cash and cash equivalents - beginning
of period
614.9
232.8
Cash and cash equivalents - end of
period
$
548.9
$
332.7
Supplemental cash flow data:
Property and equipment acquired under
finance leases
$
26.6
$
34.5
Dropbox, Inc.
Three Months Ended March 31,
2024
Reconciliation of GAAP to
Non-GAAP results
(In millions, except for
percentages, which may not foot due to rounding)
(Unaudited)
GAAP
Stock-based
compensation
Acquisition-related and other
expenses
Intangibles
amortization
Non-GAAP
Cost of revenue
$
105.8
$
(5.2
)
$
—
$
(3.1
)
$
97.5
Cost of revenue margin
16.8
%
(0.8
%)
—
%
(0.5
%)
15.4
%
Gross profit
525.5
5.2
—
3.1
533.8
Gross margin
83.2
%
0.8
%
—
%
0.5
%
84.6
%
Research and development
219.1
(55.4
)
(3.0
)
—
160.7
Research and development margin
34.7
%
(8.8
%)
(0.5
%)
—
%
25.5
%
Sales and marketing
108.8
(5.1
)
—
(3.1
)
100.6
Sales and marketing margin
17.2
%
(0.8
%)
—
%
(0.5
%)
15.9
%
General and administrative
54.1
(12.3
)
—
—
41.8
General and administrative margin
8.6
%
(1.9
%)
—
%
—
%
6.6
%
Income from operations
$
143.5
$
78.0
$
3.0
$
6.2
$
230.7
Operating margin
22.7
%
12.4
%
0.5
%
1.0
%
36.5
%
Dropbox, Inc.
Three Months Ended March 31,
2023
Reconciliation of GAAP to
Non-GAAP results
(In millions, except for
percentages, which may not foot due to rounding)
(Unaudited)
GAAP
Stock-based
compensation
Acquisition-related and other
expenses
Intangibles
amortization
Non-GAAP
Cost of revenue
$
116.8
$
(5.4
)
$
—
$
(3.6
)
$
107.8
Cost of revenue margin
19.1
%
(0.9
%)
—
%
(0.6
%)
17.6
%
Gross profit
494.3
5.4
—
3.6
503.3
Gross margin
80.9
%
0.9
%
—
%
0.6
%
82.4
%
Research and development
235.2
(52.9
)
(5.4
)
—
176.9
Research and development margin
38.5
%
(8.7
%)
(0.9
%)
—
%
28.9
%
Sales and marketing
119.2
(5.5
)
(1.7
)
(3.4
)
108.6
Sales and marketing margin
19.5
%
(0.9
%)
(0.3
%)
(0.6
%)
17.8
%
General and administrative
55.8
(12.2
)
(0.3
)
—
43.3
General and administrative margin
9.1
%
(2.0
%)
—
%
—
%
7.1
%
Income from operations
$
84.1
$
76.0
$
7.4
$
7.0
$
174.5
Operating margin
13.8
%
12.4
%
1.2
%
1.1
%
28.6
%
Dropbox, Inc.
Three Months Ended March 31,
2024 and 2023
Reconciliation of GAAP net
income to Non-GAAP net income and Non-GAAP diluted net income per
share
(In millions, except per share
data)
(Unaudited)
Three Months Ended
March 31,
2024
2023
GAAP net income
$
132.3
$
69.0
Stock-based compensation
78.0
76.0
Acquisition-related and other expenses
3.0
7.4
Amortization of acquired intangible
assets
6.2
7.0
Income tax effects of non-GAAP
adjustments
(22.8
)
(13.3
)
Non-GAAP net income
$
196.7
$
146.1
Non-GAAP diluted net income per share
$
0.58
$
0.42
Weighted-average shares used to compute
Non-GAAP diluted net income per share
340.7
348.8
Dropbox, Inc.
Three Months Ended March 31,
2024 and 2023
Reconciliation of free cash
flow and supplemental cash flow disclosure
(In millions, except for
percentages)
(Unaudited)
Three Months Ended
March 31,
2024
2023
Free cash flow reconciliation:
Net cash provided by operating
activities
$
175.5
$
139.9
Less:
Capital expenditures
(9.2
)
(1.9
)
Free cash flow
$
166.3
$
138.0
Free cash flow margin
26.3
%
22.6
%
Supplemental disclosures:
Key employee holdback payments related to
acquisitions(1)
$
0.5
$
10.7
(1) For the first quarter ended March 31,
2024, we made payments in the amount of $0.5 million related to
employee holdbacks pertaining to our acquisitions. The related
expenses are recognized within research and development over the
required service period.
About Non-GAAP Financial Measures
To provide investors and others with additional information
regarding Dropbox's results, we have disclosed the following
non-GAAP financial measures: revenue growth and Total ARR growth
excluding foreign exchange effect, which we refer to as on a
constant currency basis, non-GAAP cost of revenue, non-GAAP gross
profit, non-GAAP operating expenses (including research and
development, sales and marketing and general and administrative),
non-GAAP income from operations, non-GAAP net income, free cash
flow ("FCF") and non-GAAP diluted net income per share. Dropbox has
provided a reconciliation of each non-GAAP financial measure used
in this earnings release to the most directly comparable GAAP
financial measure. Non-GAAP cost of revenue, gross profit,
operating expenses, income from operations, and net income differ
from GAAP in that they exclude stock-based compensation expense,
amortization of acquired intangible assets, other
acquisition-related expenses, which include third-party diligence
costs and expenses related to key employee holdback agreements, and
the income tax effect of the aforementioned adjustments. FCF
differs from GAAP net cash provided by operating activities in that
it treats capital expenditures as a reduction to net cash provided
by operating activities. Free cash flow margin is calculated as FCF
divided by revenue. In order to present revenue on a constant
currency basis for the quarter ended March 31, 2024, Dropbox
calculates constant currency revenue growth rates by applying the
prior period weighted average exchange rates to current period
results. Dropbox calculates constant currency Total ARR growth
rates by applying the current period rate to prior period results.
Dropbox presents constant currency information to provide a
framework for assessing how our underlying business performed
excluding the effect of foreign currency rate fluctuations.
Dropbox's management uses these non-GAAP financial measures to
understand and compare operating results across accounting periods,
for internal budgeting and forecasting purposes, for short and
long-term operating plans, and to evaluate Dropbox's financial
performance and the ability to generate cash from operations.
Management believes these non-GAAP financial measures reflect
Dropbox's ongoing business in a manner that allows for meaningful
period-to-period comparisons and analysis of trends in Dropbox's
business, as they exclude expenses that are not reflective of
ongoing operating results. Management also believes that these
non-GAAP financial measures provide useful supplemental information
to investors and others in understanding and evaluating Dropbox's
operating results and future prospects in the same manner as
management and in comparing financial results across accounting
periods and to those of peer companies.
We believe that the non-GAAP financial measures, non-GAAP cost
of revenue, gross profit, operating expenses, income from
operations, net income, and diluted net income per share are
meaningful to investors because they help identify underlying
trends in our business that could otherwise be masked by the effect
of the expenses that we exclude.
We believe that FCF is an indicator of our liquidity over the
long term and provides useful information regarding cash provided
by operating activities and cash used for investments in property
and equipment required to maintain and grow our business. FCF is
presented for supplemental informational purposes only and should
not be considered a substitute for financial information presented
in accordance with GAAP. FCF has limitations as an analytical tool,
and it should not be considered in isolation or as a substitute for
analysis of other GAAP financial measures, such as net cash
provided by operating activities. Some of the limitations of FCF
are that FCF does not reflect our future contractual commitments,
excludes investments made to acquire assets under finance leases,
includes capital expenditures, and may be calculated differently by
other companies in our industry, limiting its usefulness as a
comparative measure.
The use of non-GAAP cost of revenue, gross profit, operating
expenses, income from operations, net income, free cash flow, and
diluted net income per share measures has certain limitations as
they do not reflect all items of income, expense, and cash
expenditures, as applicable, that affect Dropbox's operations.
Dropbox mitigates these limitations by reconciling the non-GAAP
financial measures to the most comparable GAAP financial measures.
Additionally, we have provided supplemental disclosures in our
reconciliation of net cash provided by operating activities to free
cash flow to include expenses related to key employee holdback
payments related to our various acquisitions. These non-GAAP
financial measures should be considered in addition to, not as a
substitute for or in isolation from, measures prepared in
accordance with GAAP. Further, these non-GAAP measures may differ
from the non-GAAP information used by other companies, including
peer companies, and therefore comparability may be limited.
Management encourages investors and others to review Dropbox's
financial information in its entirety and not rely on a single
financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240509601399/en/
Investors: Peter Stabler peterstabler@dropbox.com or
Media: Alissa Stewart press@dropbox.com
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