DBX - Earnings call transcript Q3 2018

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Operator

Good afternoon, ladies and gentlemen. Thank you for joining Dropbox's Third Quarter 2018 Earnings Conference Call. All participants are in a listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions.

As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Dropbox’s Web site following this call. the team. to hand Dropbox's Yip now Relations Investor will call Darren over from I ahead. go Please

Darren Yip

and subject Thank These that you. the be financial business, well materially And for XX-Q this those relating included call. and implied that Good to the as afternoon. growth in distributed call. results, call risks Today, uncertainties results statements factors included XXXX could third to XXXX. were that Form XX-Q unknown as future to performance our Form particular, from during statements, quarter the overall Dropbox strategy, earnings risk cause include quarter factors differ the forward known long-term will for quarter In including described actual risk our the or Statements expected and in future discuss ended our earlier. those June ended quarterly XX, are looking results welcome will financial projected in prospects. on to statements XXXX, this Dropbox’s September our of XX,

today, assumptions looking beliefs by should events. except law. this as on on rely are our statements not required we and on obligation forward-looking no to forward make update based statements predictions All of of that You as undertake as we call future and them

our Relations I be found Officer, Drew with the materials Web results. which addition GAAP today site and our earnings as Executive our like a and in Dropbox's not Our Drew? discussion Chief or was results in reconciliation today be posted turn would and Form call isolation to may will now furnished also investor investors.dropbox.com. include X-K to non-GAAP non-GAAP from financial the over to found should considered substitute Co-Founder measures. may our These of release, filed Houston. with non-GAAP in at be the measures supplemental Investor in GAAP to on for A SEC

Drew Houston

our earnings everyone welcome and call. afternoon, Good to

Q&A. Vashee, Ajay update business strategy and the provide product fiscal continued our was Chief about will are ARPU go Rangan, our me on of with Officer by with call I’ll of an ecosystem. Customer highlights Yamini you expansion. during our Officer revenue our Chief the with On review and Today, XXXX. results for another guidance Financial market talk us provide join and and and XX% our Ajay year-over-year, and remainder strong financial growth QX QX paying to quarter will growth user also driven

of continue moment. great their quarters But a of deep our a they built tools company. I three strong this margin, XX% milestones us the demonstrate also strength market non-GAAP and collaboration We discipline. do before work. strong platform, strategy We’ve cash a our go best efficient the I to to operating helped which public our in first deliver These for understanding want margin. that I’ll significant our free thank speak our to We need hit do a a business global results team that, to generated flow quarter operational and sustainable as past based to on customers

continue We’re with because scale margins operating healthy we’ve our of million and XX efficiencies. that to at over users, paying infrastructure improve

designing We’re enlightened against working. more mission also of a our way executing of

all we’re friction the new product modern collaboration continuing our and bringing love work ecosystem around reduce a to by between together and and people tools at the work. open and for building our We’re to platform coordination Users expand in content, communication it. features use the updates

of QX number Moving We products. delivered admins. latest in makes on our for Dropbox teams, innovations experience that the and better our the even a users, on

call intelligence DDXI. which platform our we through One efforts, machine is of the important ways of improving our

and Our more workdays are noisier disorganized. getting

harder documents and to are emails, find and harder content you’re and for. text what it applications, many making across Our around and scattered looking and conversations messages, between it the spreadsheets,

So solve introduced help we initiatives problems. two we of machine to new see improvement lot intelligence QX, for these in room And here. a

engine we experience to Nautilus completely their First, of of It on efficiently an important architecture the relevant search for our we machine built our the harnesses search from deliver surfaces upgraded most can improved power our personalized of files that quickly with intelligence called hundreds the so millions ground most users. up. focus Nautilus work. and users

original access as subscribers. of making or made PDF files for billions therefore opposed character launching in of optical text. are to There’re actually that in and documents a new scan to Dropbox and select photo or technology in stored big on searchable a recognition we’ve OCR strides by business document Dropbox Second, and images form early are image

Now, tools and images. use we find today this text a presents can’t problem because most

when you it search, with results. a turns no So typical do

result, involve scans. PDF a coming many we workflows of As of our customers noticed JPEG manually have that bunch a through files or that

text QX, plans. them within automatically in machine images this our enterprise forward, And began Dropbox, on beginning future and be advanced in we stored will PDFs intelligence searchable. So easily available scanning users that all and enabled professional the to going making are

add users Adobe, today’s and applications And actions now a often applications, And project. DocuSign, workflows to Dropbox. single initiate more such fragmented working between Adobe and perform with signatures or with help solve when so that videos, users that Autodesk, Vimeo can HelloSign, highly seamlessly partner and all more can announced manage toggling category also like extensions problem, on We workflows request PDFs within noticed Dropbox from this right users are take several leading Dropbox. we different Sign, as

keeps organized, centralized that their their applications And and and functionality such from place. maintain download back the or a requesting sync of and as important For example, and content to way automatically users' save ever draft based the our draft final utilize without having option have to work. contracts signature users scan got for a Dropbox it to Extensions one a document. can content teams first folder in to in home individuals most this start taking workflow, external

for our and will help For Dropbox, continued Extensions to platform. drive engagement stickiness

to will an but as design serve continues be of help of a Paper better Paper. for only testing to also coordination. due can activity overlooked. activity conversion gets and stay can ground it so platform. also teams dates our and team recently retention that easily status help corresponding files features partnered drive several it us Timelines our applications work. Lucidchart, early to important and From their help and oversee and does embed, functionality the assigning aligned. part and continuously show one to tasks, projects Turning better files, their Not subscribers, been investment paper update to of with And nothing Paper paper in that can milestones content dock. key directly unifying including features Adobe, are how these into future aggregating class with to design so use tool interactive companies, all and project for we from workflows. With and We tool graphics add adopters powerful shape a users Airtable management. streamline Timelines the new Paper observing consolidated an adding our We've QX, is launched teams spreadsheets, for

enabled leaving the team can functionality, Finally, enhanced users we added can Dropbox link and a that also their the Dropbox without navigate this their folder previous. With ever paste through Paper doc. folders in Paper core experience

business, X everyday security of to at performance Next synced our With is billion than more content is and XXX,XXX for Dropbox over the platform admin scale. and for teams pieces experience. optimized Dropbox paying

configure more. end to products collaboration, Salepoint apps Google points integrations manage a announced and to customers administrators with admins and need help variety to to Better These Identity, Our use work and facilitate Cloud they for teams how Coronet, Dropbox. a tools Dropbox well partnerships Cloud, the employees with together. we get of they security home to And their their as secure unified work, empower allowing seamlessly use make to

on that the powers Now, to move infrastructure let's platform. our

in over for world of an of registered Toronto us reliability. around ultimately of and announced of just network users gears Switching network our of who half plan requests HTTP we have owned we've of the of provide of exclusively an ecosystem. terabits with access to that Scandinavia bandwidth in millions the reliable trust performance We dedicated adding fast expansions to These use, traffic. end and new the that, year. call Dropbox, by To customers We to and presence two by all And this extensive present points and billion network be data. improving support more Exabyte will their built Edge. a over means Dropbox

Zoom viewing work modern collaboration Zoom a and leader that continue video Dropbox one conferencing, we of and devices cloud develop series devices, Dropbox types communications and believers and is real We that meeting, together integrations across all chat Zoom, meeting is position in firm and to And a enterprise uniquely on are all at have content. Dropbox, Dropbox time webinars in most announced We teams a users workflows. systems partnerships across towards content remote that the of we our the applications. adjust help We're open of platform. operating around center individuals world. their for And strategic interoperable partnership in with differentiators and of October, important our teamwork for shared reliable working easy-to-use communications, Together, around power an expand spaces. video platform users and option communication users' audio while of and facilitate offering will within join platform making Zoom and and features or and to shared a effective. the cross content, will more initiate the

contents of exploring through share and as be new Zoom each then channels. to promote Dropbox. During other's slides excess The such for Dropbox from also of and can it market content will and users partnership as back able drive we’re example the discovery ways documents, the to how adoption and additional products, to go display be to an meeting, images among process growth screen. And the will saved

with partnership our deepened also We Salesforce.

demoed Quip any folder better apps Quip Cloud, to we launching directly view, Users in at and around Dropbox Live for navigate to and with QX, Cloud pilot Service the In addition integration and can download Salesforce’s Quip. to content. app app a latest marketing within Dropbox cloud. updated users Dropbox Salesforce’s of also Dreamforce, allows insert Dropbox files the we launched for their inside. And our The collaborate Sales open

managing digital the like marketing assets working cumbersome, For with to external collaborators when tends be especially agencies. teams, creative

that will and Our solution within internal partners. are accessible marketing by users teams branded folders cloud both let external create personalized

within Salesforce. that’s a from With workflows, third-party assets Dropbox these two contributors folder can way to available add central

we building earlier, of progress Timelines, like and and launch I ecosystem Nautilus companies and way with that I'm in the Paper our of features last product seamless new As We really quarter. a integrations environment the we're over the deep more and open launched through leading Extensions Salesforce. work and mentioned Dropbox Zoom an experiences like made proud supports

We the building. excited future at work, and have technology experience a of using huge improve the opportunity we’re I'm to about

financial our through turn I’ll walk results. Now, over CFO, to Ajay, our it to

Ajay Vashee

Drew. you, Thank

ARPU $XX.X our and line channels. Our demonstrate QX by QX growth users on X% free QX, year-over-year focus million The paying coming for through to the year cash and was XX% million, of paying was and strong ARPU We flow in majority paying $XXX.XX of results continue self-serve by delivering the to primarily $XXX.XX professional our expansion. a by revenue top ago. execution strong driven $XXX in an with total driven premium new ended year-over-year up expansion increase quarter users. Total advanced and new with plans users was users ARPU adoption from our generation. up

tailwinds to expiration of grandfathering period. on our some saw also We upon the advanced opting plan their remain teams from

to methodically strategy users convert Our sustainable ARPU our monetization drive highest and continued growth to value in retention. our reflects

a expanding to land engine and existing with within the across market the Dropbox we effective deployments of technology, wins driving to In value advertising, addition that a is go efficient a in focused targeted approach retail This of all on mechanism highly ability gives we over our conversions, paid outbound In number serve time. to we are verticals, viral customers QX, had manufacturing. also including us unique organizations and teams. higher range team. to and self-serve expand sizes of is an sales couple

Without Ingram printing IT in We're deployment global XXX expanded its in specializes XX X,XXX to we’re last division pleased that marketing has Flint QX. has share example, Dropbox workflows facilities any share Micro's with Dropbox, over also high-value users several users Micro, Company manufacturing business that deployment well of training, internal about expanded share For a suppliers. supplies over worldwide. on grown Dropbox from has to quarter. XXX as Flinch Dropbox files months. distributor, collaboration and as planning. cloud or to Group deployment partners, Ingram customers Flint team including internal equipment, and with the sharing needed external in group and partners, to established excited Group's The its and tool

and business and capture Dropbox, will recent to best like to security begin also providers. appropriately integrate With Micro's Ingram The into segregated. that because verification ability employees, of gain premium class Dropbox with Dropbox work team IT domain features insights to are leverage files personal in Company usage ensure their purchase, an most account by of array and chose our

gross our Gross in with indicated, materials Before Web relations the for approximately revenue. We and for offset margin third our our investor footprint. the on quarter with our want XXXX. as with non-GAAP lower infrastructure to primarily I in of A quarter that furnished to depreciation by GAAP share measures and compensation. now otherwise X-K spend driven release, network that including a infrastructure statement as I all today XXXX unless move earnings lower follow expansion the our The gross fiscal unit found supplemental which hardware, expense was SEC, XX%, we X posted margins site. investor grow on as cost the global the in percentage of to P&L, filed was form margin will an on excludes our increase increase efficiency depreciation may to to compared non-GAAP results gains expect note was points be of income on reconciliation be of XX% stock-based storage

operating to expenses. Moving

headcount a was as or in driven revenue X by $XX $XX QX was including XX% was and of S&M expense G&A million at revenue XX% QX of outside expenses, Third quarter higher higher in new and to based or The our and than compared was year-ago. was prior a expense was points $XXX percentage investments in R&D lower to of of incremental quarter revenue a XX% million services lower expense of or product testing. spend taxes and driven primarily result million, ago. revenue year. of The compared the by percentage revenue development a third as year Dreamforce. presence primarily marketing decrease non-income increase expense a the in spend. XX% in our The XX% G&A

we earned translates in the point is profit third percentage to in This which quarter. XX% QX million XXXX. Taken X $XX improvement operating together, of margin, from operating

Net shares higher per was a performance in share, income $X.XX Our $XXX up margin margin million EPS revenue by expansion from strong million, operating Diluted as diluted the the driven was QX. of for up and million year-ago. the gross in $X.XX per from quarter quarter. weighted QX $XX on outstanding was average $XX share XXXX, based

Moving tenant or from free our receive landlord QX any quarter. cash on XX% cash $XXX cash on in investments spend during million not operations $XXX million quarter. flows allowance billion. improvement and $X ended spend cash million. of revenue. Cash were We the with the Capital than and $XXX CapEx of expenditures excluding of new more of cash million, was included from $X would $X have the to short-term balance been free headquarters, flow We QX yielding flow did million flow. in our reimbursements

$XX For CapEx we center in lines fiscal for $XX million, million quarter. any the expect QX, related to build million total capital to reimbursements In out including $XX $XX allowance be of additions XXXX, had our improvement headquarters. $XX to expect collect the new our to to we We million tenant offsetting lease to not fourth equipment. data do million of

to digits additions this to a high of as to continue year. capital lines We expect be percentage lease revenue single

our guidance. to Turning

XX%; margin $XXX price. of be and non-GAAP million XXXX; XX weighted in be based X% $XXX diluted of range share to to expect operating range trailing the For to in the of shares to million be fourth $XXX to to the the outstanding our $XXX average day in range quarter we million; revenue on of million average

For million, cash million raising previously to we new previously $X.XXX $XXX and are figure of our $XXX $X.XXX raising we to billion, are was spend was billion; the to dout are previously guidance, also operating $XXX year includes full guidance, one-time to was million. $XXX to the XX%; to our X.X% our to XX.X%, corporate XX.X% million which we buil to which flow related margin XXXX; billion non-GAAP to raising free headquarters. which revenue guidance, This billion $X.XXX to our $X.XXX

$XXX spend, cash $XXX the to Excluding be free million million. flow would

XXXX share now turn we price. Finally, to for to of average day Drew XX expect fully diluted average shares weighted back outstanding it $XXX on $XXX be the million trailing range to in based closing our remarks. I’ll million

Drew Houston

of machine mission enlightened working. Thank you, we new more achieve great way a integrated Ajay. features and In adding quarter. closing, our designing using another We're had to of intelligence

deep of more And noise users our giving players, more without cash building flow. free adding breed we’re to We’re choice doing this all strong with while partnerships best work. generating the

management of for our Dropbox team, a Yamini, focus that, functions, team. as and I’d to Yamini moment customer behalf Chief Q&A. like thank join And partners take to on like Customer invite Ajay and including So sales, to entire I’d customers, our Officer, reminder, marketing a our business me partner Operator? our to and development. And and with oversees the

Operator

Thank [Operator time, gentlemen, conducting this will a at question-and-answer we session Ladies you. Instructions]. begin and

the of Canaccord. from first Davis question Our Richard from comes line

Your question please.

Richard Davis

have Zoom this about legs, on that. it strategy you with touched Again, creating to and could of just a and a bigger you about You've like do there? bunch feels about much think just business? beyond terms like and your in How have talk added you overtime of you this extend a broadly Thanks. things a you platform. in bunch platform, something your on But you When technology. touched if you if think that. get your it, partners you And

Drew Houston

going lot narrow investments. to -- valuable Our our then asset make continue ecosystem of platform to where make a are is and we is a

content is starting in you in revolve Dropbox. lives for business point the that around see us lot so the other workflows that a content. And when the And

So sales to sending with a that signed a in a to presentation you or think are prospect, people communications. Dropbox, similar partnership contract about our CRM are content back; and getting lives Salesforce; they all

going presenting So at some Dropbox. be to meeting Dropbox, transcripts Zoom is them the in could meeting, who someone the have from from content

we when Exabyte content And of the about have Dropbox, have we so it. in think we an

is that fuel engagements. lot of So for a

platform our integrations and that and drives value lifetime And ecosystem then that ultimately platform engagement to so and that retention so then which engagement, drives monetization. and the drive stickiness

So In will be with us our deepen us we of for there opportunities integrations drive and customers. the help apps see our vice future, partners, these relationship versa. that to distribution then

contributes which the business of in it So important also our it's number ways approach, is the really typical part a to a different from I suite. and office think of

Operator

next line with Our Jaffray. the Zukin Piper Alex of question comes from

Your question please.

Alex Zukin

sticking So I little ARPU user And And and existing it the wanted with like teams to acceleration. more it a driven bit, from higher saw is another growth price it's new sounds unpack being I see guess starting points. would you the increased overtime of made how marketing year. And be that last benefits trend because sustainable is over are to the I growth intermediate-term and the helpful. ARPU that this you branding some guess investments from

Drew Houston

by And paying-off. end also made and functionality would a few investments our of years then higher of have last a premium improvements it's that's both our in driven adoption in tier both early the I our and it's lot SKUs. So that say products driven SKUs over and we is business the engine product of conversion higher adoption of combination

Ajay Vashee

just said. a Ajay. little color more add just is, what this Drew of and reiterate I'll some bit And

a in plans, targeting past tailwind more plans for those that's those a at primary professional If our attach us advanced in and a rates user higher through and as progress saw subscribers. better higher strategy, any the initiatives And licenses by our paying paying then that's teams drivers a through of revenue the mentioned, result us you function more those a we and rates in including products to a ARPU we and higher to other of SKUs and given may driving better conversion for shift the attach our new And driver mix we're higher and a generally ASP. of grandfathering users. from bundling to these activities. expansion. look and us Drew more depending continued one users promoting And we're value journey, user initiatives And just team well certain of higher was be are to in team deploying. more than as three new And forward, premium and quarter, of at exploration then customer will plans paying the at our then and going the get towards of other, quarter, combination outpace those those continue drive acquisition more growth we better getting marketing have that to on and as seeing levers managing

ARPU more expansion ahead as the be think question focused adoption being. users to our plans, and it asked, on to I we’re of pertains the ARPU, to in certainly value while rate deliver variations of the how there’s likely you time Looking just premium continuing some that’s increasing for that in it our quarterly about to on and

Alex Zukin

follow-up, versus high-level it continued maybe and historical commentary consensus we just versus a look net the around adds, if bit on trends. flat churn, then again if little quarter. strong solid a grandfather? gross adds Any growth you another on ARPU But number last given unpack the at particularly with And quick

Ajay Vashee

our can this I processes, level publishing of a and both talk as provided we’re churn, not that ones Sure. metrics IPO year at revenue part about retention net that earlier high regularly. we

it pertains two past those that over given churn the quarters. at stable team revenue level, remain think very assume components as overall, certainly with again over the can net And you that’s to higher rates something business, we’re improving And our starting there, business. we’re with across time, revenue seeing subscriber of then I the driving retention retention. that mix the we’re just the highest

Operator

Thank you.

line the from comes Justin Lynch. question next Post Our of from Merrill

please. Your question

Justin Post

X% just be then Anything interesting? with for the quarter the focusing seems How October see pretty the guidance conservatism? picture. do Two we'll your questions, at am about XQ. to and Any transition. just see strategy high on calculating on you’ll I here -- -- end. secondly, the you from And Sequentially, market changes CEO you. changing or bigger goes usual it’s go that Thank in how first, the

Drew Houston

Dennis a is to the introduce Yamini company to COO, our who we’re in that and Customer our Maybe about a second, So Lang Chief Officer, on last Dennis it's opportunity bench Woodside, quarter. transitioned super excited Yamini and good filled. but

our So is, a have we as the well. efficient answer short We changes to see At we strategy. no. don’t And level, it model. I’ll think speak high an to incredibly scalable and Yamini let

Yamini Rangan

where model motion. self adoption driving land-and-expand targeted. And figure success really an achieved Our and are of motion outbound really a leveraging targeted our opportunity. the expanding scaling then proud been sales science we’re use very, to This and this and is efficient able be really models very is starting to and on data is for well there we’ve with and to teams out there. been opportunities into serve that super able that to We’ve and has efficient proprietary outbound super going

we’ll with strategy. that So continue

Ajay Vashee

our then And your answer QX Ajay. on guidance, of is the to this question part

focused there continue to while is couple incorporate have I'll very from on remain quarters. benefits very steady investing And over And in level, don't say Our and growth, business. the philosophy we predictable philosophy healthy with consistent past the we and a highest at a initiatives. of new we our

number to those as time, levers estimate impact. over we we guidance our continue believe an to And as execute them. their into initiatives a revenue grow so we to we And have and data will make enough on of incorporate to we observe

Operator

you. Thank

comes question from next DiFucci from line the John Our of Jefferies.

question Your please.

John DiFucci

models. of can percentage great choosing that’s us that’s versions? you Ajay advanced But that's follow-up you driver obviously what about roughly ask because customers I I can what are question Alex’s customers, on am tell can us not it's hear. to the primary sure am those was of But going paying to said more you new tell our that important really actually us. lines, to the along ARPU, something a those And new tell Anything because that. as to and

Ajay Vashee

lot plan adoption in growth of we're of the new disclosing and can better whole X.XX driven ARPU that look get Again, the that a look, you them. that we landing and as couple users for growth. you we say users majority the year-over-year with I that's starting by not our is that There detail paying if best drove of things, a the change there. suited of at SKUs year-over-year was as by premium better in at

one then I'll secondary continued to that’s and So exploration. thing tailwinds the impacts And were grandfathering say. the in there ARPU

Although, majority shift this and a then And at of tailwind time, grandfather ARPU point this users in we've the the to gotten seeing that's through those also mix we're towards from individuals teams overtime. growth.

we're rates, at to the I that and it can better As pertains attach is say what specific getting attach better driving higher rates.

And so those rates are increasing pretty consistently.

we that so our ARPU now is tailwind overtime. to structural it And see

John DiFucci

last Ajay, XX%. last right? was quarter you that said was -- about the And also, quarter majority --

full this year to see in one to next like we come for Ajay build the really it's an guess, elevated to going force be But should about we this model out. our should still had quarter CapEx expected to like and guess too. thinking continue beyond jump how So I the there is close -- level at sounds headquarters and it's that we that? quick jump stays that beyond. for -- into assumes Is quarter. It next I I for follow-up guess majority. is CapEx

Ajay Vashee

the summer; expenditures is starts pertains So on cycle $XX $XX it plan QX; continue build occupancy currently summer; of to do expecting to and of will of the our and when our provide to we so CapEx next as on majority correct QX; some we'll to going phase still about to for million on over that, share we're XXXX really and the call into And so CapEx focused XXXX $XX are have construction managing in execute we to and ranges kick-off and expectations trending; that in out the that so around on new million are the see some you that study company first are spend onetime be there to going and phases; million year, million. and for beyond; and in headquarters; where next guidance where then the space; that current on the that in we're $XX actually we year; our this in QX. we ahead to more new initial detail move our of facility

Operator

you. Thank

next question the Goldman from comes Heather line Our Bellini of from Sachs.

please. question Your

Heather Bellini

growth. trying because are us not is mean all I what for you to following our thought of a is just So be to you how I sense are XX setting of to related that. up we on I'm know just forecast. to But much get give think to through, there say is to the we're months, we going had year-over-year you year, would could getting next you -- can there grandfathering? for models setting more that tailwind pretty comp process a soon. asking is any because are going -- obviously a up the all all start tougher And guiding XXXX, calendar next seeing where question ARPU I we're and just everyone to good going to but really really, our

Ajay Vashee

about driver remaining end. ratably that higher completed I March and year-over-year And reiterate we've of process those attach exploration the for QX, and few would majority just and premium going grandfathered rates just quarters, organically of QX. of primary expansion that We end are pretty grandfathering next our and be ARPU in And the that across is X.XX of whole growth team the rates this our Ajay. gotten is of the process attach two is the of will that in driver increasing. that to so had plans thirds to of as through XXXX, subscribers, So the -- QX managed third across renewal

expect we continue so general that to forward next do into And year. trend going

Heather Bellini

Just grandfathered? were that to to think because premium assuming included for SKU to that clarify grandfathered advanced going is who it, that Does People I the include who are to is pay advanced to SKU? -- are that then you in choosing uplift to people people that in -- pay the a that guess there or way -- converting are you’re deciding about for percentage the seeing. are that that the of are get, you’re

Ajay Vashee

say showing renewal lot of I specific are the in not remain a just proactively are to plan. that that we’re in that electing coming numbers. team that we’ve the value of SKU. getting out for that subscribers advanced majority features included up But whole So can They’re

Operator

you. Thank

comes Our Mark Murphy from next question from the Morgan. line of J.P.

Your question please.

Mark Murphy

cash looking I'm the Just -- high free are talk curious SMR along far density can about this it how you strength relates in rollout gross and flow. you at margins of technology. of the as

the that to Does double that you build Just to that requirements capacity reduce turn planning? for be volumes. storage of your nearly related would in to the extent data the CapEx it allows out centers

Ajay Vashee

were margin we infra the efficiency SMR talked beginning margins hardware; also gross as quarter. the to delivered without dimensions revenue; and SMR that revenue question disk free our to shared but we operating are And about our from on increases gross the call, excited realize efficiencies I is drive it's the your one source something our is reason rollout of performance. a unit to for higher two, would we technology. you couple those gains And and and our just say reminder that and performance depreciation that specifically It's about. CapEx, margin increased gross desk. QX margin our SMR really cash a then in high technology flow density something we’re a last with of physical primary increasing if and that capacity of around cost look strong just the drivers lower a reasons; to And get third

We’re tech be benefit infrastructure. scale. at our by from owning a deploying really we can it’s to thing major company own the SMR And first

you time. gross CapEx if reduce core our certainly, other and our and for achieve are operating margins long-term margins to so they do and longer-term, plan about our gross investments think roadmap user for And store margins profile our CapEx a target And part of data. in SMR to requirements us the efficiencies over

Mark Murphy

very experience? your immersive that past that would recall you for you're on if user it and to mentioned tonight. little touched search I I As on shed and in a have know you make the area Drew, working mean and briefly light concept could a perhaps search you I'm vision more the on that follow-up, what But more wondering just in engaging. at how a

Ajay Vashee

So to a or in storing has think future us massive the little we’re data. in focused of search search spoke on places. bunch has earlier searching data pretty many a about comes deliver I bit homegrown any or we talked access a you user at allows in that we when And every couple personalized access then that dimensions. little cases, end like sets to about really content our of -- different where One, infrastructure it's the Internet broadly, have a organizing and every we because different to scale, to -- different Dropbox, within user have bit than

we places. help scattered experiencing, with customers want reduce deal their our help because in these the content to different fragmentation So they're is or all

really the how think help do place their one we then about them. corpus Dropbox broadly, we all So organize bring and search people content and both more into it before

of core so to And so search addition made observed we their that really about, technology. customers with to also we trying turned around you is workflows a nutritional trend that OCR it And came out manually search text, using through text so documents, a our it information, for the normal documents that of the because because our in results. images flipping search in super photo and can find

it even would something so box to when but And have types all. a don’t into search is better search of that it search part be people someone

huge users clutter information, our show inundated signals cut like So and other our and what’s to opportunity and through your signals relevant use places volumes intelligence with Dropbox and customers. we find in from calendar. machine using we the see We're using also to big

data in activity help is with So the what's and and is really people one predict engagement important the finally, drive always you of really our experience work relevant for we're platform be that can to and that core to monetization. to now we've of part and a a to of to see that about and that files today something we able -- that. a is And drive right learning way and science them of evolving, being as unique shifted see newsfeed the that. think one that great of And list machine use the elements we products help machine relatively about then learning less is

predict, that sharing to plans, helping if much showcase, okay, use So try are our -- match what paid business individual to that you to a is in you're opportunity and getting higher Dropbox whether Dropbox. like show something, of you really trying And some functionality to do the for also or then experience tier text sharing sense help you richer you. which makes to

also you is machine in -- because about the an Dropbox working common fuel not in our going timeline, way relevant it's us zooming a think and of the goal amount is I are on to data more or of So think build to year point fact experience. out many focused content is where to the figure adoption for of heavy lifting just data to have more rapidly and our we have we we the content strengths, what's do our really if have And Exabyte And allows our scale sale I of of last say information. Dropbox the data transform and the our with experience. the and out that much better would trying learning so inundated that really you that -- environment to our plays

Operator

Thank you.

line Hindlian Macquarie. of Our next question comes Sarah from from the

please. question Your

Sarah Hindlian

to into I on thought it workflow what a Drew, in interesting the when value we've tools start the always pull asking earlier bit to of content unique amount the really Dropbox you gets was because of call, is little communications And the want share Richard and have. you in follow-up platform.

Salesforce. if the for with those it And you partnerships, want it dig product new that now? seeing future the I the next Zoom I talk you that how follow-up. comms clearly it search? could do of would helpful is into in And Is if or those have then you arena, and see me mean the is for next guess or through or And type may be act act What what through so monetize? I company. adjacency really or And workflow partnerships we're think it's a in

Ajay Vashee

for think any lives And in people or you content. being Dropbox over where So to together critical see core been messaging take talking evolving we help find of couple And different very of today part opportunity to ton first, as from a about and again see the those we Dropbox of is that experience you And our XX collaterals a see files all future, the share stuck our and that, volume all Dropbox. duct just content out a like being workspace these we think And years the when and the world different experience. in ecosystems different the of ago a users' the about tie we together you companies. opportunity watch workflows last integrations of videoconferencing customers different workflows we’ve tools tools. are for to, stuff other those from what base intelligent because when repository years, -- your often can of taping that are and are for the huge friction

that happens turning And workspace, friction into you freedom but through a so when and having to -- the all the other forth have and place still think toggle where about cut-and-paste huge these points, Dropbox to tools without work there. back best-of-breed we use that constantly, people all need or see

and that at through we those We will value. drives time drive because how we integrations have that distribution and -- are So and that drive asked a see to it, provide then companies investing up so integration, they make any to monetization. SaaS future, we for -- that you the in bigger rates. it happens to partners higher the you extent drive retain a integrations I’d looking engagement at those we there’s convert life third-party experience. do And indirectly, that continue see platform opportunity platform And retention an both and way say the in about monetization teams our open audience. look directly engagement, to our that

a provide users for and do the more our great for and deepen with So platform experience. customers we engagement our both to see our big opportunities

Sarah Hindlian

Just for this a then follow-up maybe Yamini. quick is and

the go do, changes with drive in you in market are can taking on things you leaving net particularly you’re Just what to of Dennis with conversion. the that think increases paid some to

user area do paid to Can that? that think adds. conversion do get I of you and on how growth net in really you growth

Yamini Rangan

not we go-to-market, go are of market actually terms strategy. the changing to any In of

very I effective strategy larger into have teams adoption small teams. the a and driving think we larger landing for and then in

that strength model to model. and in we’ll there’s that invest And so continue in

We stepping we’ve the customers. In terms conversions, what is called Advanced mentioned, in value driving and as QX, SKU there our drive to paid of that enterprise Ajay addition larger a is in business and introduced the back. conversions last we paid that year Q team’s in

growth how that’s we So would the continue to within as drive segment outbound well.

Ajay Vashee

more science. working to platform. scale a on Sarah, conversion This your the initiatives Expanding a data self and And they are Still in largest focused new high-volume where that more great our to a that one a go great that questions more the I we finally, would that broadly. some market, we users initiatives very channels that to few and targeted world. is a working product around to driven at value everything three, bring Two, offering of us. about joint the to is end to value more users, on Dropbox acquire is experiences growth early Ajay, because bit and then then outbound Zoom of value machine to example always through making exploring color our partnership that and market always platform engine, a conversion deliver engines deal business that Zoom make users, really there bit, paid to high then discover conversion like and to important products investing always fuel also of level, gave And can helps growth. we're to user in And as just investments extend productized to And platform size market serve our examples continue is But products in base. increase our go the our add and product Yamini, component And continuously we’re overtime. overtime us, Drew I integrations users. to more we're say well. this. we’re subscribe paying new at able And to on that is on to more talked we're for we’re growth to they but we’re those where learning attractive of things our drive as

Operator

Our RBC of Capital. from Mahaney the Mark from next question comes line

Your question please.

Zachary Schwartzman

some have Zachary Schwartzman net-add. and Mark. follow-up I questions on for the on growth ARPU continued in

The model? feel turned company talk on about this and the leads? first help enterprise lower is under-monetized over does mentioned of the techniques. terms has some or bundled changed in acquisition larger And for has pipeline strong of dynamic using contracts, any Were that you. You underpenetrated these you of bit of Can last Dropbox a data Yamini. a two it new question recent Ajay, science the a IPO? Thank since serve still And specifically Drew improvements the were quarters? levers to

Drew Houston

about in We of growth and user think customer one terms journey. as and growth our subscriber --

it helping we And our sustainable growth is and good profitability. Ajay drive for department someone starts So self team and the a it Dropbox with the the bringing deployment free often of going reached want an want see our outbound along all these to start goes and paying dropbox.com, -- and hundreds job to as on might to becomes journey has getting way we of to customers move then as then customers to with a version, business that And so growth. then thousands possible. drive deal we've wall of project mentioned, effectively a balance as importantly, we team they collaborating And that enterprise serve work whole of healthy then or wall project with

the it end day, we Dropbox, that driven quality world gives of out and teams educate to friction, up. mean in whole terms integrations say to when at get always so of much figuring we there your when more at we to I that more done, how are optimize, and And So that say out is our across the properly bunch everyday different help users, team Dropbox. there's the I all set product. then of their spend remove improving. the Dropbox, customers we of do get users continue teams levers how would I working our And these were reasons of more our say look I help do to would in users, of journey. what optimize get engagement we've value a And information in business by time

a we these what mean by so system driven see conversion And working that's things engine. project together we a as and all

Ajay Vashee

since second to questions pertains is we that been your it model the multiyear hand self of and between larger went our and color on enterprise lot extension remained hand works certainly, has pairing period. and organizations But lead a generation and as year provide I'll to public There's earlier how part of And whole a consistency -- little this this Ajay. us. to off really Zachary, serve But Yamini into it outbound more that over for consistent. to maybe a bit over

Yamini Rangan

we targeted And what to So science continue to our as -- and our we baton well. from expand models outbound call land there is there motion. passing use self-serve data a

And a that anybody of expanding upsell will we the upsell has model for we call scores deployments look example, chance for We signals Xx with us. in that actually the of docile are model. significantly. find So on the expanding top it that

are really team. So that’s the up product, queue we how with like that where use out users our proprietary adoption engaging driving the we figure actually where and signals they’re to our

passing baton that pretty working is so And effectively.

Operator

Thank you.

comes Bank. line question Our of Deutsche Keirstead Karl from next from the

Your question please.

Karl Keirstead

cash I for have first XXXX, cash Operating operating just months income growth the XX growth. nine But growth XX%. one of been put has only Ajay, flow up Drew. has revenue you for over on Ajay, one Through perfect percent up plus XXX%. flow. been

be growth it as as back that obviously some there’s So is. holding offset the solid might

help Drive then to that So I just wonder cash want Drew, if through likely for you to just us could elaborate growth is as XXXX. I think on what One is cetera. in well. we et that flow SKUs, And XXX very a And obviously powered more into bundling Dropbox mind Office I Microsoft bit just talking asking through am about is wondering little you,

can in that sell You But how I'm bundling your what see on thoughts that trend? the you numbers. you. against Thank curious just

Ajay Vashee

this talk maybe going a the P&L see then can with about part start for would correlation I about I at And forward. the where question, I level Ajay. And the bit trends can a that the is of between flow cash little us. high talk just first we and and

cash level, flow to over initiatives help to high recognized the translate looking certainly P&L. we free necessarily can flow And growth. to the to But time. is we longer-term, one our flexibility to expand strategy spend believe forward one maintain QX, on want what’s cash drive as that to can also of through doesn't well as that quarter-to-quarter non-cash our income factors a impacted at flow. So be always adjustments operating like FX as includes by an certain a spend, the timing that don't to free example flow And in way cash free on to

of continue on will this pass based of cash seeing part guidance I’ll our we’re to our forward going quarter second answer to trends view reflect and we to Drew the our just guidance So free over what year-to-date. question. are flow the it raising

Drew Houston

as time a a and Office Office alluded XXX out for One -- long for a you and And around part of that’s been that One and time. has Drive, XXX yes, that’s to something Microsoft Drive dynamic long

exceeds just ourselves the of our Dropbox and environment within doing exceeds with And the has starts our just that to all and just experience whereas that think because that on first compete happened about about love I cumulative probably and the all our you is continuing think we that Google, design. are this there. that Microsoft our that product including Users growth that successfully focus. companies So And those -- investment experience think everybody singular focus things works. else, see of just in fact

distribution starts adoption best building experience it led different think IT from us it’s approach. traditional that’s then so when viral -- model, and pretty about you the led top And down the especially our with

of have So our we within ton a Dropbox that of customers company. organic find a adoption often

and employees network their design the open then important approach. because as and or don’t with that this want so have the users finally then they phase the our for switch. feed their vote be will sharing established because And to ecosystem works the existing them, Dropbox voted and And with and best -- increasingly

able best Sheets particularly Slides. Docs, really making of you when be like any Dropbox all be adopting content and and lot you'll tools of Google we’ve these integrations of the And and store from folks in to our that been in and a think with from ecosystem are particular Google, every so And We increasingly in investments the are cloud to the tools. turning place customers they turning that. to the to find breed do us best and fact

So these differentiator we and overtime. integrations see our -- as proprietary pretty a opinion ecosystem powerful

Operator

Our Pat JMP. comes the question Walravens of next from from line

Your question please.

Pat Walravens

focus internal Drew, minute. shifting to an a for

through side reviews growing pain. could But the you is that do where on I the overall, -- a really comes word glassdoor, As rating up is employee on good. the better read your lot

how you're and -- biggest to pain what want address just you do I it? So is do think growing you

Drew Houston

growing always company we've Well, quickly. that's been really a

are growing are that's feel some enough. the And pushing good. so you not you're doesn’t necessarily or not pains fast good a thing, growing are that pains boundaries if I growing that probably But some you like if in ways mean because not having

and running and you help efficiently best leaders that scale. that can bench So you sure people got and are make want the you're the deep company that you've effectively, a that to hiring

to -- So team last made in attention look pay things think the when the are maturity management the those for say of and lot we've strides made sure the I of years. I even the of predictability, big the I'll that we've you at where business couple and

what And faster than I the I continue resolving making on pains. we pay attention what always so spend and to growing is and that we'll my company I'm have are But sure growing they appear. those time improving pains sure to focus

Pat Walravens

I are international the Where can there? if And and we what's strategy more. on one growth ad

Yamini Rangan

locations. our half know, international of actually you comes As from revenue

strategy between in split countries. as cloud a see outside. those on So well we're pretty adoption international we as evenly of here, And different is really as what lot dependent revenue growth the

first if you are Australia, where Europe economy, of which is are at we specifically, countries we growth. that lot more significant, cloud look that a lagging mobile So there. adoption more Similarly, see see lot then adoption And cloud curve. Dropbox a there a first pretty is adoption Western in

international. So growth we to markets and these in lot continue of we'll from to continue a see invest

Operator

from from comes of line Davidson. for final now D.A. question And today the Rishi our Jaluria

please. question Your

Rishi Jaluria

follow One Paper portion for a and Paper, that. functionality for are grown Drew Drew, of I maybe features and talked or around what users directionally know have you us quick tried up then Ajay. now a have it? Dropobox the Can you've for you about give sense using on how

Ajay Vashee

been and it But rate So that internally Paper helps we it we now. convert we And description paper serves see when What that see to also to a improving or attention of And shared users those our a to engagement lab investments don’t have drive Paper platform, can't I during dimensions. help better teams twice as that. and contributes as created is monetization. our all because paper folks have retain a that we specific trials at right overall break as across millions future shape and is -- share future use the that adoption page or to stats to here the We what or has test pay work. don’t certainly levels out docs. on pay how levels of attention what we

IPO was in might of it like of a evolution. have ahead it’s plays a seen success by relatively progress number lot early within; live companies you But had Pinterest; the its in our excited in show early So and we’re and roles video. road we

use about its excited So and some future. we’re pretty cool really cases

Rishi Jaluria

I more brought international, Ajay, foreign denominated but currency. of year since think we about revenue But is housekeeping third a up question in

So just quarter there how should here out? any impacts Thanks. wanted think on itself; we to and on get a FX for; for the if within model A, about the sense our FX impact were B,

Ajay Vashee

smaller for is our majority given of how works. just us, in deferred revenue rev FX already a movements our rates as on top into quarter-to-quarter, rec revenue, at model historical vast had our FX on on The that’s impact our rates. line a based So and heading books quarter

we’ll respect in certainly a 'XX move a little clear share point have of have of and rates less call. an that have us from have FX for QX movements impact to our us view, early near-term to where on still rates for the of So And in next too long-term. start with see versus the But more the beyond, now on year. to and to we'll to

Drew Houston

really for support appreciate again forward looking speaking Well, quarter. thank today. you with you joining We us and your next we’re to

Operator

us. joining for you Thank call. our concludes That

now You disconnect. may

Dropbox (DBX) 8 Nov 182018 Q3 Earnings call transcript