DBX - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2020 Dropbox Earnings Conference Call. [Operator Instructions]

It is now my pleasure to introduce, Head of Investor Relations, Darren Yip.

Darren Yip

Thank you. Good afternoon and welcome to Dropbox's first quarter 2020 earnings call. the results discuss earlier. were will Dropbox quarterly that financial distributed Today or responses financial on statements, relating our future pandemic results, features, the and execute health forward-looking call ability to to and growth profitability including our the public Statements of strategy key include our financial generate sustain developing positive prospects. new cash our of the by ability overall including and expected as products extend to this our on well economy, and results flow, the our potential performance impact our as related expectations on long-term statements of the future platform and free business, future our business, ability strategy, to COVID-XX regarding employees

risks those subject that our ended from for those These quarter to uncertainties actual to ended this risk factors included unknown the during described Form for included particular, XXXX. year implied and known will XX-Q call. that risk differ and in in results XXXX XX-K are In our be March our the in projected materially cause the factors and could December statements Form XX, or XX,

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

results. Investor not of also which be in filed a and GAAP with today or discussion A the with Form in Our our substitute the materials Relations be our non-GAAP include may in in furnished website and at GAAP non-GAAP measures. may results was found our investor from measures today will as reconciliation investors.dropbox.com. on our our supplemental release, posted and SEC isolation found earnings considered be non-GAAP X-K financial addition to These should for

Chief and Dropbox's Houston. the Executive like Drew? call to Co-Founder I over turn would Officer, now to Drew

Drew Houston

Good afternoon and to everyone our call. welcome QX Darren. earnings Thanks

under Thank you circumstances. for taking the time especially to us the current today, join

with Olivia remotely Operating the please next us The will quality during Ajay the our us is for in dialing our homes, Vashee, Chief us also our Q&A. so issues Financial join background Officer. On forgive are Officer from call three any noise hour. me Chief or sound of Nottebohm, over

funnel last Today Ajay I'll the trends we're on touch of QX go-to-market provide results, strategy will of as product financial our XXXX. from top and update provide a and seeing and an guidance fiscal talk quarter. to QX review the on and COVID-XX business for result engagement highlights our and

is perspective really First our employees I environment. the to effectively here proud want in have to working I'm this provide at team challenging of Dropbox how responding how to some quickly on adapted COVID-XX.

global company-wide our map and of have remained regular hold work productivity meetings road across to adapt shifted product continue demand. our vast majority even emerging has high, We offices remotely us hall customer reorienting to town our while if to to the

work to an and get they takes even teams service interruptions during have staying higher addition, at are with continuing I tools issues provide operate for together we support any want customers to significance. the the times or the content thank to ensure to for greater been In focused like our to to easily on ability hard utilization continue teams on serving without and time. on done. our to to them need these, work and able In team work infrastructure this access

helping and content, of the in teams remotely. friction connect Dropbox our bring last address We reducing unmet organize together, the user and teamwork distributed needs new smart year workspace to to around collaboration. sync a working tools stay launched It's and users

favor that's in in our companies underway accelerated create that we're the to the see run believe added to metrics. demand top that long work funnel and our will remote like starting for have ours products effects of We transition will and lasting

Over an individual the months, last in plans. free across team few our we've increase trial both starts seen an

daily by periods. with pre-covered to over increased and approximately Dropbox XX% daily of the trial activity. of the XX% at outset levels business team over over higher mid-March plan individual Since Similarly collaborative the trials year Plus our engagement starts levels same increased

cohorts We and will coming be months. closely contribution in conversion business the trends weeks monitoring for these newer and

funnel, increased of addition new demand adoption seen our In our higher to seen of in desktop the we've we've app. top also

all the Business adoption of Dropbox our our of couple desktop XXX,XXX the increased approximately In by grown over months, to active XX%. early users available users has of new Now on over past teams. to XXX,XXX desktop over new app weekly has app

related seen We've usage February. number use months average in workflow fully new and of levels times of the and in COVID-XX HelloSign customizable higher requests signature with seen an recent January also And uptick has are document cases. significantly three from as HelloWorks solution across

of X,XXX product tens of relief forms in Lenders care applications out York-based intake a HelloWorks on patient alone. thousands loan process the leveraged to business April sent nearly have relied and and urgent New small facility

Paper come have make shifted content Increased remote more interest a are and accessible for increasing higher-education model. institutions universities in tool collaborative professors is from to to using learning Dropbox our students. products that from as has Demand educational Dropbox and also for

donate to as hospitals the local NGOs on In COVID-XX we critical like We program and medical licenses K can battling as everything to want support these. a teachers we well also free to our front lines. continuing we're professionals and do launched help to to to Dropbox QX, efforts XX

see QX we XX% driven by our on ARPU basis, business. grew currency to constant strength and paying across user expansion. growth Turning in continue a year-over-year our Revenue to results, quarterly

GAAP record profitability for our the global operational go-to-market and discipline. underscore efficient the strategy We reached of also our operating time. results platform, achieved collaboration first These margins our strength and

some focused highlights users. the on from product Let's building We're for on to experience move great of our quarter. a the always

ever features with notable to even a deep had leaving to our more users allowing we Zoom quarter Dropbox. This integration without do

a in members team can along it they meeting to directly and Now share make in they keep transcript with meeting. Zoom them Dropbox. with when record to there save From recording can't and the the it a users loop can securely the transcript

And during since phrase they'll our any index Transcript video are feature, conference. these a mentioned full text search search for up show using files are when

compared that usage Given users in many working be remotely. This February of our our collective Heading timely to release. times Zoom saw are proven XX April, has levels. product we now increase a integration to of into

of experience. QX, updated we Empowering activity enables insights of business actions dashboard. adoption as take console admin an needed. as also teams. admin we quarter, launched focus we for within the Business user and refresh a introduced This part In of area to drive easily to review This us improvements number important relevant is an dashboard the IT IT Dropbox Dropbox

new how with active allows admins pending often, for paid on see The monitor which dashboard members at send-in-members invites, domains activity and a stats glance license to is and outside compliance. team generate sharing the utilization, sharing and

these In as over power usage. helped deal and QX, HelloSign streamline this IT already multi-team today. security into Customers in of to launched oversight also control utilization and branding features These centralized controls, templates, to enterprise. HelloSign queue providing management like capabilities have in visibility land delegation documents, admin and Enterprise new we features with scales. one its stay can now largest

functions. are number business e-signature Enterprise drive delivery of leading faster HelloSign. join a will workflows announce companies across to for experience improved who The another growing services deploy seamless create restaurants to several and that platform on-demand leveraging and Instacart a excited more Plus including We're customer HelloSign onboarding will

help Together, streamline Dropbox for to as security our new business team the and introduced dashboard experience admin the in deployments scale Dropbox. their HelloSign, advanced insights admin of features we

In to and Dropbox breed teams secure admin addition SaaS a best to manage to tools functionality, in we've been key improving our partnerships environment. Business native bring investing of

advanced over admins and in user add and controls Our ability IT and cycle data visibility automated enhance empowers greater BetterCloud on, with audit with team protection, control life management. even content partnership launched

controls employees a among HIPAA-compliant we tool highly with across a QX, specializing collaboration included control need advance medicine the for group Dropbox With on customers' outbound locations, team XXX the where as advanced X,XXX nine acute a on, a workforce. address competitor and at was add to emergency cited physician In differentiator. closed win key and over team enable enterprise to This displace a a deals add and care. distributed content in our Dropbox content

ahead strong trends was To for for we likely there amidst economy. that cognizant shifting environment. a global up, are The been have record quarter headwinds engagement QX broader things the us but customer wrap rapidly volumes and remain encouraging, trial

At Dropbox, the remote enhancing capabilities continue our remain and our facilitate we customers to we'll to work. focus and distributed of on products committed to

users our expand so can their improve the bring teams experience tools efficiently their help different they and for to their our be. on IT may partnerships, efforts admins that latest work in help integrations deployments securely Our wherever all they focus together will and

Ajay, financial walk our to I'll through now turn CFO, over it our results. to

Ajay Vashee

Thank you, Drew.

Our results year up profitability. $X.XXX have our $XXX from the to the growth demonstrate balance On delivering the constant growth focus been revenue strong execution XX%. ARR currency basis on and a XX% was Total year-over-year, period. and topline was healthy ago year-over-year quarter million. XX% of up quarter billion, QX for for a would

$XXX.XX million We On with and calculate quarter-over-quarter period. the in used year-over-year. and our FX update retention. the There paying reflects highest every note users a monetization ARPU XX% constant year our of in that million ARR. value drive we methodically QX $XX strategy was grew to currency rates users convert QX basis, and ARR sustainable I XX.X are to to ended

the Let executing me highlight we're on ways few a strategy.

on-boarding Over Plus engagement a the platform. mobile drive who flows sign trial that months, enhanced conversion users of for levels higher to our past our for and we've several up Dropbox

the which subscriber. Our convert users take Such to into of a their as data actions that weeks increase first can identified paying sharing few links mobile content, certain in trial. their propensity team science to

of our have trial is users we're the spoke on-boarding elevated these mind, take trial, actions, prompts to an notable in earlier. improvements our investment engineering volume our This of trial the particularly in With drive to on that types been helping Drew conversion encourage insights light in rate. plus these to revamping about mobile thereby excited teams

Let's of publisher our customer. COVID-XX. announce to insurance. including In shift we Dropbox a of We're based as leading customer work children's had excited business Publishing and Publishing healthcare, part QX, a this education due books Dropbox a now to on of U.K. a move range accelerated some technology, verticals strategy of Usborne to to is highlight. remote turn that of that number wins across is to Usborne a

provision and With of a enable needed they a that work on all teams was the can in virus who tool than to the from and servers to dependent file creative on were week deploy the the employees less quickly. business with to purchased company on-premise Dropbox the onset employees. UK production home In

the inside born in Adobe widespread As usage our and critical as media key their decision industry with to to integrations product the platform. Dropbox is being adopt

pleased University and we're Dropbox made all customer. Flagship the to now faculty, is at Oregon's addition, Dropbox of Oregon a available In that University. staff will to Public announce be students

usage faculty products University's the already at professors widely collaborate with colleagues to institutions. across particularly leverage were with Our Dropbox adopted high research who other among

usage Oregon available now the this With University be controls to will IT using centrally customers. to purchase, able Dropbox of enterprise administer the all

Our protocols FERPA, to to and HITECH a support partner of trusted becoming key the was university. HIPAA

and indicated P&L, rest note and certain on compensation, unless I excludes otherwise income Before related stock-based amortization the move I to statement to intangibles non-GAAP follow measures acquisition that want expenses our that the of HelloSign. of the of to purchased all

today net and of our our gains was our results net GAAP furnished SEC Our may with investments. materials, Form to Investor the be on website. non-GAAP Relations posted reconciliation release, in equity A with also in non-GAAP losses earnings the investor filed supplemental which and found X-K income excludes on

compared P&L, share quarter margin gains cost first an a the increase XXXX. in gross increase lower efficiency of of as our infrastructure quarter points three to percentage margin was The revenue. driven was the to with for Moving XX%, including unit depreciation of by the gross hardware,

gross margin XXXX be points approximately higher X.X fiscal expect XXXX. to continue than to We

million in compared increase The $XXX investments operating as driven to Moving year quarter ago. of by headcount XX% higher revenue was R&D primarily first was as percentage in in product a XXXX. to of to revenue, XX% or QX new revenue, a was S&M was as expense to testing. due million expenses, in of ago. marketing XX% greater in to decrease of year efficiencies development spend first relative a QX quarter related XX% $XX expense and compared The or QX the well

based revenue due taxes. expense XX% a ago. XX% compared non-income $XX G&A million was of or revenue to The in of lower QX to decrease year was

the of in the first in million we for $XX up This together, operating is quarter. a QX Taken percentage ago. translates $XX year margin, improvement million, record quarter six from XXXX. Net million a was operating point earned XX.X% $XX income profit to a from which

share on shares per QX year $X.XX was in million XXX ago. EPS based a from up Diluted average diluted $X.XX weighted outstanding

earlier, As Drew QX milestone profitability, for also GAAP our important was an us. first noted quarter of

While on we based we for be GAAP timing quarter-to-quarter may see of some expect fluctuations spend, to the fiscal year. profitable

X% allowances. yielding QX million new free and cash included of revenue. with cash billion. million, from of cash were and flow, $XX ended quarter. short-term the in of headquarters cash investments tenant in flow of offset or $XX to expenditures which spend balance $X flow on on of QX $XX Moving CapEx million Cash by improvement operations $XX we was was million million Capital $X.XXX our

of acquisition related deal HelloSign. holdback QX, payout we consideration of the also first our In to incurred

headquarter consideration HelloSign million, hold we the would million lines QX, $XX revenue. of spend, $XX flow data of $XX finance equipment. TIAs payout net or free lease deal of center have million for $XX to Excluding In back cash million also been XX% of our added and

time finance in lease be X% revenue XXXX. We to approximately to expect additions our of

the our our we've ago, introduces our and And we quite signal we and to second outlook our model, guide a as of consistent the maintained revise in into build revenue two-years and time business our some initiatives guidance. remain to IPO uncertainty a half turn given more over being of near-term guidance year. our degree on subscription-based trends philosophy across let's pipeline. visibility Now COVID-XX predictable have Since earnings to certain that while what

support to past remote global product Our learning, over the resilient and to business the that's believe portfolio has work we and been few months underway. positions shift remote our uniquely us

on we're team although related front. mentioned encouraging to seeing it's this Drew volumes of both some early top individual funnel As trial earlier, and trends still

could weakening other current revenue the flow well of as the lower of and remainder our On rate hand dollar, at they currencies persist as cash relative if to free interest the foreign the the US impact negatively year for levels.

today, broader on. risks And bring. of of the may the like that, and second need unpredictability that business remain half move SaaS to macroeconomic every the other year mindful we With let's

currency revenue higher. For we $X in revenue we the million XXXX be $XXX estimate basis, approximately range to the be a of of second quarter that $XXX expect to On would constant million million.

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

last largely million currency of $X.XXX on quarter's earnings constant higher basis, year For On range was FX billion billion account to headwinds guidance the that are $X.XXX we guidance to by revising our to COVID-XX. a full which revenue approximately would a $X.XXX for XXXX, to estimate $X.XXX $X.XXX $XX for previously revenue billion range, call. billion $X.XXX which we introduced be to is with billion our consistent

margin We the be of range XX%. to continue to in expect XX.X% non-GAAP to operating

guidance cash previously lower was a our million $XXX headwinds to to rates range revising of COVID-XX. as and to million $XXX $XXX are result which million free $XXX a interest million to for cap flow We FX

range includes well the This corporate our hold HelloSign. to of of the acquisition related spend build-out our headquarters, related to deal back one-time payout of as consideration new as

to million $XXX million. would these $XXX items, be cash free flow Excluding

remained Net million free we adjustments, with for on of quarter's our FX figures provided $XX would and approximately earnings cash higher. consistent guidance interest have flow related call last the

range to our expect price. on average be XX we XXXX million outstanding $XXX of share in diluted to million day trailing shares $XXX weighted the Finally, average based

times. on Moving remain forward focused during these unprecedented and employees customers our supporting we

generation. to we're remain other environment. flow business, delivering our Like company, uniquely also we're closely operating the shareholder certainly committed while And free feel monitoring strong long-term we Dropbox is value. positioned. do self-serve efficient cash driven pressures, an macroeconomic external every which not We're evolving to that We immune underpins

a in healthy build enabled short-term and investments. sheet $X us over has with This to cash balance billion

efficiencies targets to in execute while to also we're will levels business, on committed productivity quarter's the long-term continue company call. the ahead, of certainly last across investing and to Looking outlined our we higher driving

We our by long-term $X flow annual on XXXX billion XX%. margin free generating over achieving remain operating target of XX% focused cash to and

goal As balance profitability is healthy a about growth to opportunity excited and deliver the our ahead. and always, of we're

I'll it now turn closing back Drew remarks. to for

Drew Houston

Ajay. you, Thank

business remote to the moment management In conclusion, challenging team. I'm proud Dropbox self-serve with customers, and a our I'd a profitable a environment. a model sweeter solid On of partners our like and behalf execution of that in and work, our what's to facilitate We're take healthy been products a thank entire balance team, sheet. in position a distributed

like Operator? I'd up open that Q&A. to for the With call

Operator

from Instructions] Alex our And [Operator the Markets. Zukin line first with question RBC of comes Capital

Alex Zukin

tailwinds one work of you're the Maybe seeing just the around benefits home. from the from first that

I'd the seeing seat you're the maybe I got You love April and mentioned top to of quick Yeah, month you follow-up. far of in what QX seen customers thus counts its in what rates ultimately funnel. anecdotally respect have with and one from then conversion to existing expanding those hear

Drew Houston

is This Drew.

So we've desktop - mentioned, funnel uniquely demand far certainly top And stable. couple of the acting has the last months. the higher in as churn up so up, seen I is are new of and and been engagements in our then XX% up conversions engagement app, the at held

for So because is broadly, that But macroeconomic like everything second to far monitoring dramatic home unplanned most us unpredictability the opportunity pretty huge from we work the bring. in it's a closely, for that think environment and more way been all this the now, may given said possible. half right and

our lot Dropbox we've you for how we integrations, do Zoom users very lot good really experience define are they focused and presume people of experience a to integration right work and XXXX% - as helped our with room and Slack certainly of for seen needs strategy. that. on how for now has elements a great do and there's been example more that that wherever everyone always But think And Zoom I from validation do of and strategy or thing we've engagement being improvement

that making is biggest to really, as aligned But as get of roadmap just focus. the sure out opportunity is our possible our

Alex Zukin

maybe maybe And mentioned churn Perfect. also then you Ajay. that and for Drew just just

various you're them think by troubled either trough expect we you should how cohorts. trends about about seeing net retention up you maybe of and churn what talk can exposure the maybe and then Where in Just end just or often terms trends or SMB to industries? to

Ajay Vashee

Sure, this there and like jump free feel in to. is Ajay, Drew happy you'd to add then any context to that

play resilient that As eye being very keeping Drew be of knowledge continues months, for because the critical these because cohorts past them. bit that. just and case been be date. our one can the this mentioned, content volumes, a retention where is a really And Alex, dimension, trial That the little we're us Churn of really business in of our still for and important for beyond we'll was today. signed elevated we from very 'XX said, in lot business managing stable QX imagine have a subscribers majority seeing over on to that has newer us role a 'XX, workers cohorts early on are of close up that you I'm to

macroeconomic there. other an investing. existing proactive on every pretty eye to we subscribers we're from impact we keep being do trends still where early potential like need company about on broader but it's are so, And And the

support shift As roadmap year for Drew our been the accelerated to we've work. product distributed to adapting this really said

to the in across rates the example, and to flows implementing so the cancellation investing of new higher retention. mitigate proactively flexible into we're second And more future. half facilitate We're rates for leverage churn year improve

to have if things we're we're to But for across sense right been so now. teams. stable where investing us make individuals for and So us going far both

Alex Zukin

you. Thank Perfect. guys.

Drew Houston

financial And remote sure customers to the and churn getting And we're environment. customers taking focused release helping they're offering just platform. we're And I'm work selected and I address then really to just said, support to that, ensure building proactively of that can the on other most measures adapt our the as manage. out on

supposed our disrupted knowledge must than But workers work even that average overall on often who been SMBs we find be can we people especially that's, as are to home. have when like then essential business continues our base, and businesses, to discretionary. you're and to content is collaborate customer and an working their operations need These and all to true - Dropbox from that have around

Operator

question William comes Ader from of next Blair. And Jason line our the with

Jason Ader

teams to question to for historical Thanks but of on the is top funnel thoughts helpful greater question I analytics on that, kind of of hear the your and probably most definitely that some get metrics. get issues detail It's the around my emerging market lot the investors, is hope long XXX. features app that's same a spaces the in bundle the they've workspace got Office fact the Dropbox of given of from there that smart for and and term dominance Microsoft the

Drew Houston

Sure.

So look opportunity a we at big because to when our they tool. complementary the messaging then on content need usually for and that's workflows, experience are customer's parallel and our you there to see a if collaborate us

people bundled with when solution using customers customers apps, to and something I G using like more a are because Zoom - often different tend and pulls more on. is Office Suite the what also tools favor the the be but complementary that and they're These and like are proliferation offerings the like our be teams talking Slack Dropbox. it the Dropbox for together all content turning they're to may And they're complementary often agnostic of that think and tend tools within suite experiences. Slack, So using are about platform and all something so to using

all together. it more a to and need more way And we tie

for just and and experience been the to or has a a more different I of going business, chat our is one to work and opportunity complementary organize strength content part really that's every see for collaborator knowledge messaging. of a way and a in experience content workflows really we're So bit to more we team the channel Dropbox The every on is, is our every the basis need think

Jason Ader

teams in chat smart of the terms But think to trying of don't - in a has you similar messaging. terms workspace, and is vision not just

Drew Houston

Yes.

there are think that challenges Although, are, I of there model.

with saying, my of simultaneously we'll scale. five chat in secret okay, putting people different years in all room back day. messaging chat the the don't XX at As I to look is and model kind synchronous a think and productivity

I and becomes think it very environment distracting noisy at scale.

all if remains days, be chat what's always think pages it of back - ingredient, a but you means figure like like Transcript come out on vacation the chat By and go on. of challenges will be will I use important for going hundreds of read you a answer to couple

work think I all I have together an to the so or don't And to the different you're more there increasing that and see teams And - going continue already organize is pull go is focused to place will a can tools need be to doing apps be there using. that. and messaging

Ajay Vashee

us. fantastic And bring just to back to Yeah, those question think and Jason metrics are just for some alright. of the bring I - this way the to

and We are not adoption seeing application levels of higher that's as around mentioned Drew that, higher earlier. and engagement

over of the increase past with XXX,XXX activity teams we've Now of in months. seen application. business of business plus the teams our that our couple XX% are majority that And over engaging XXX,XXX

Operator

And with line of from Mark JPMorgan. our next the question comes Murphy

Mark Murphy

surge of you was say you ask the assumption continue that I to activity the it what workplace the since it for time will your FX that into metrics I'm then mentioned take or model. Congrats offsetting? for back on is over you great Drew in on year as Ajay, one-time solid I if wanted see rates, funnel be that you the top was versus adjusting is think it and how ongoing interested and do resilience of that the you in showing much it and mid-March interest fiscal and to look tailwind in usage clarify they'll where uplift business like seems and the impact and wondering could COVID-XX guidance, just and

Drew Houston

Sure I'll start.

surge what effects versus for early when think uplift, huge I permanent little back extent well to of in a tell first how a time. forced will it's the work are remote the of think into go much state certainly I the beyond the it But office. being this world persist a to is physically we percentage a too

that things straightforward you're important pretty And that suddenly able of the when missing of you're what one the like immediately around that like window messaging my have think kind happened you things up when from or to working people work things is today now I relatively by video of being home challenging contact team everybody tool. what to, only conference we're into become is and

if is that really of the lot primarily have which and we're have distribute or see go things a of being we to or to about, lining make people, chat wade is we work, lot to a shift what's do The kinds back on that this as around team be hundreds pages be silver out more be we're the opportunity physically right on from going without happening help. to email. work but permanent distributed big to I a think of a you to having How but even would thinking productive, designed home through you're of my office the we to do benefit of messages So get flexibility because easier work me. now. to working if I of how able to on equally you for everyone that's And to after tools big sense going even all figure aren't that I a it

expand in big us that's helping So people we to for terms opportunity do the of really what distributed work.

Ajay Vashee

I guidance would question philosophy Mark. reiterate there, a And to answer your of the on couple part second the of points,

want is risks that monitor still broader and of largely of to business, the some half It currency are retention resilience may to mindful core second front. early macroeconomic the the maintaining this funnel our movements like guidance, trends. given top introduced net seeing of COVID-XX we of of the interest So one conversion bring. your both and we We and cohorts year the data point, for remain are rate and encouraging on annual do information we

with that view months trends as subscriber new granular more well distributor information realignment that of August an And and half so learn really will some and more enabling and of existing our will as year share of on retention we there certainly on rates accelerating will incorporate product on a that that call the coming those customer. is work mix, the some on our on updated second perspective roadmap for this to in more of focus cohorts funnel of the the top

Operator

Davidson. of And our line next the DA with Jaluria from Rishi question comes

Rishi Jaluria

Thanks for so taking much my questions.

should consumer, wanted First your using customers consumer are XX% XX% I be about But especially if to business. a unemployment XX are well, follow-up or the think business seeing users How of of remaining got of ask, work. we are at What you or but I know higher are check. I out the night you that. that about then up, thinking how Dropbox million with that last that's side I've thinking and

Drew Houston

around I'd say primarily large users for cases or Dropbox or who majority we're Dropbox who both case. have and personal use we we work share Dropbox as audience work our But use you used the and have certainly vast certainly home for blended use primarily - an of only over XX% use time, audience pointed a out, use cases.

see literally use you - I more now we is consumer opportunity a I we're at this it's that think less right experiencing of lot that big think think Because pure a on line the and said, working is between work so a given mentioned we're the focused home. dynamics, think And think I there there particularly all there, little blurred I That home the challenging. we're cases.

your We personal go in they work in offer way that a boundary particular tools see are that having only and focus other on can only the you don't personal life because between seamlessly focus a where Dropbox is strength or on work.

And our we're a so have well. working case launches of of the number personal on use a in work as our context things terms in

been that's Dropbox true of Then historically.

a pure that's primary personal both perspective, for work I focus case. prioritize big market when we segment after use features from is on model not and the and think So have our a that business us. the going but consumer tougher is really work, Certainly,

Rishi Jaluria

terms behavior seeing Okay, are maybe to got helpful. ago, you renegotiations did alongside of ask, quarters seeing That's or it. any extended couple like what things as contract terms that. payment duration, in buying opting What monthly customers, you and over then annual. And from mention, more of believe, a you know, because in customers say seeing I are of for deal you as were I wanted

what seeing you are in those understand to trends? Thanks. wanted terms of Just

Olivia Nottebohm

and take Hi Rishi, I'll Olivia this question. that is

and trying make payment customers changing selective have them we and our of and as targeted the considered in one asks thoughtfully need So successful we're really certain doing net situations. we've and our of customers to well gauging extension certain each terms frequency had from moment for invoice we're

customers we're the to also of it. crisis. assist that mechanisms our help neutral side flip see doing all are These in we And this

the the contracting where and So to paper work we do also situations customers we instantaneously on catch then seats extra and we need see respond immediately quickly provisioned are to for to licenses and wait moving up. be and that

Boston seats renewal cycle it in needed in that then we Hospital XXX up an extra month be manage on we'll a to catching they when the a that spun and immediately inventory, do bed up. additional true So

Ajay Vashee

where Yes. It's and rapidly Ajay-- of on It's And individual of in subscribers a self-serve work on a customers, lot would This impact so duration immaterial there. just our business few it monthly I pertinent as your I on really small as seen a work some offered. number that acclimate and that that kind more would appreciate months. just to annual people relates versus to that's it relatively our been And monthly some surge to volumes remote question to the past really it. of add environment. have A over the distributed in in demand. has been of to this business primarily we increase of and there -

to keeping close It we're does week. change a on eye that that So week

Operator

line And question our of Bellini Goldman with comes Sachs. from next the Heather

Heather Bellini

just I up. want to follow

see. the XX,XXX, it and to just that and that talked expected probably we're about Ajay, of back, prior quarter go you the You wanted again to trends, is I top two those encouraging mentioned quarter some sub you've ago adds roughly this quarter of funnel net you and added last then quarters was it. reiterated had it these great you what which

point. increase. us the pricing this that this Is The primary should at anniversary reason of is the largely was we given just something behind assume

number about the for thinking commentary higher a and trends or ARPU it when side so bit stays flip should the you. guidance, some you're your any same of you're thinking would And that assume little XQ? we around just influx I guess Thank kind be

Ajay Vashee

increase say a in phase. of some to as a very still start in demand of those of will the that early are trial relates users that like on it still top funnel lot to is Sure. I

that converted user and So, more quarters. they and we'll our is there into haven't in there future more share months learn than so paying yet

revenue call, of on base be to growing that and But our forward. to noted versus a expectations focus can repricing we QX our where you is commentary will and be will a total us repackaging going initiative our note Earnings slightly result in and number I growth that's for quarters priority our with subsequent that 'XX as you user it lower continues that and resourcing optimizing launched that ARR and our and user did overall note initiative tailwind when would see and you consistent a paying specific profitably we as also Plus

balance the going for mean has and the us and across year historically, forward us expansion being That revenue been driver persist will I of said, volume. driver into this for secondary conversion future. has growth ARPU that been primary the

new the little I quarter, context point a that quarter is output that gross, to data in consistent well. X this per more users engine be engine said trends million and very bit and our to one of probably I conversion can those shared share gross at last QX about conversion little you were think you bit I consistent continues as a give a

Operator

question Sarah of Hindlian And next Macquarie. our with the comes from line

Sarah Hindlian

Alex's so I Ajay. to question much, up follow call. the wanted Drew the you just at and start of on Thank

that with is are well I some as as others just how helping home gauge you're of to from I'm to from think grappling the things one the exposed and seeing work think verticals that's that. right demand are just from now we're you and I home, to major that offset to a are trying to of from get industry how and just COVID-XX shattered much school balance particularly trying

on more specific vertical So and have you follow-up exposure I maybe bit a a little have then color for you.

I think this the about for incredible you're one with It's just seeing really is conversion better impressive. app. the Drew, desktop thinking really

teams drive seeing on the quickly? up desktop you're And of number so so doing is to guys you are what user apps the

Drew Houston

and of a a Sure, customers I very both. thing can the I have I Yeah, speak to Olivia base, specific to are think both speak can is as customer ones add mean, is - very go first to sizes all please and a we level of selling very diversified I high verticals. say which spot. of strength especially were I'd lot and I where knowledge a you of back work looks to command workers these are hit before, can't sectors I us and that said segments. or for are hardest sweet and and guess demand kind operated like

to continue can those tool. A them Dropbox an and lot working be essential folks continues of for

and is what, environment. monitoring we relatively So although macro we're This be we've far. less typical the company impacted than given see shared closely so I we're something what think the

conversion. experience of the people use showing we're And Dropbox the that kind can - where that and of file into got both in lot a access refine tray of much content in driving now them helping from then second, have that We're collaborative content features, experience. and features make looking the lot lot machine core for you to easier a intelligence that they the we've are a bringing then Dropbox much include classic the would how getting migrate the and the richer of - desktop to the people system

when were operating necessarily built you can the commented that the I experience file, our file by if because system, new the and really you want operating all experience provided just of see - you and is kind if the historically - that to a that So in more. into couldn't of interfaces that on commented we system and

desktop we want our we app tuning how makes upgrade you it have a installed, if any or with directly way, from the we experience something that progress do can pretty and of experience, a to introduce number of that seamless that we're happy rollout. integrations, process so you but share the can fact we're via So on Slack use the the always people and that

Operator

Pat Walravens line And the JMP our of next Securities. with question comes from

Dennis Mark

questions. so I am Dennis Thank Pat. Mark for taking you my much for

and strengths. more after the us continue you strength give the little about you mentioned guys Thank expect whether you COVID? from would you. was SMB little enterprise is streams the can a or coming bit So, HelloSign I if wondering

Drew Houston

start new e-signature see in. home, starts is having for you work to so chime a demand example, and - can spike we from can up times you products. as spike I a to when number request of HelloSign HelloSign across products core Dropbox how for - high others we've up in signature, and then Certainly about level and think seen, goes that for you three a signature have trial similar we've seen the

end them for which is And about product and document I onboard services. delivery lot workflow particle their for and used HelloWorks talked the a it's delivery general e-signature example then services very and of of so in that drivers helpful user we think also product

bunch I guess cases. just another delivery time, you a probably had for we use HelloWorks COVID have been and long major related platform we've of a using started seen

So as the using said, to process lenders or loan out I help people HelloSign applications. release

the it's pipeline been we So and are pipeline I'd say more in seeing we've you but been thus. actually the decide, or on building

Olivia Nottebohm

see surprisingly, but given nice the It's see it. add consistent that, in, to in across just the consistency customer across board, not it's segments. the increase obviously, pretty that of Yes, to new world to we trials we're

Operator

question from And we of line time Research. have and that Zane one comes with for Chrane more the Bernstein

Zane Chrane

the really of substantial user added had relative you're paid ARPU over XX-K, seems how and in some I helpful had you at couple commend great increase paid data in you you a you of really quarterly the this transparency much past suggest the ARR the look ARR guys on to I your users incremental adds, years adding. on when quarter to year-over-year pretty average the effective it

driving interpret to you more of a the up about. of in couple that. one higher customers like it So hand prices On ARPU and ways is at those bringing lot much there average maybe effective seems that's business

that's ARPU higher On the something mix difference the hand, of that be attrition shift. that it what's value there relative between about? coming am you is on the up driving we out two and could about driving consumers factors to I effective that should the have or other could missing maybe those lower the How think driving else,

Ajay Vashee

Yes, a Ajay. It's this and question observation. great is

the drive strategy the numbers profitable today. company the seeing and our of and that's reflected metrics high-value on think, in and you're the growth in to I reflective of ARR that conversion to focus

average IPO was I new something paying gross and you're years the new we effectively ASP, ARPU ARPU. new it's past at the pretty that and called lead is think that over to it been ASP increased alluding ever add methodically gross in blended the and a quarter disclosed which is what users, two this highest for past meaningfully we

tend higher are higher period the so new to every one And that rate and converting paying our users we're premium plans. convert of to

increase of us pricing individual then period. sort one our and tailwind packaging from the and the every And years. plan, over a past also Dropbox tax to or Professional some changes of quarters we've there's for that of premium it's made rates our few team, So the plans and

Zane Chrane

just follow ahead. Go to And very Very helpful. on up helpful, that.

Drew Houston

use was - true. I focused we're cloud you going like I more use we're consumer on both cases less pure storage, mean hypotheses trends focused use case. are on and your just to add think high-value both on cases I of less legacy focused for

and of that's aggregate shift in because that ARR mix been to So that's we've trying on intentionally. customers a more adding good higher drive proportionately value we're focused measure why

Zane Chrane

That's helpful.

quick Just follow-up. a

mix. interpret the consumers I up maybe to mean come as the portion of should that that smaller So

higher have the new ARR coming You'll a prices business again? that enough customers net in new turns in positive growth year-over-year

Drew Houston

growth of tailwinds given the much are look gross but volumes ones in those would our across are revenue see that medium that those have we're how guidance paying to between our for improvements to a both see driving headroom there for I revenue and much ARR. that ASP coming we just conversion and expect to term. new an some perspective. higher ARPU we on new to ASP you the structural how certainly persisting, of and guide users and on ARPU near don't how much we of we So the growth focused sense

Operator

I call further you. remarks. will Houston now for Thank back over CEO, Drew turn any the to

Drew Houston

taking making. team All some efforts right, progress care one under everyone pretty want business thank of for for we've you to of to joining well thank extreme their and my the really heroic we're I conditions time more the us. our continuing been And run customers proud in and

we hanging staying all so and and you Thanks. hope And for safe of there and quarter. in see next all you're we'll we you hope

Operator

in and conference. the Ladies today's you gentlemen, thank This participating for does now disconnect. and conclude may program you

Dropbox (DBX) 7 May 202020 Q1 Earnings call transcript