DBX - Earnings call transcript Q4 2024

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Operator

Good afternoon, ladies and gentlemen. Thank you for joining Dropbox's Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Dropbox's website following this call.

I will now turn it over to Peter Stabler, Head of Investor Relations.

Peter Stabler

you. Thank welcome Quarter and Earnings Dropbox's to afternoon, XXXX Fourth Call. Good

financial users, to get forward-looking that our first including quarter started, for we year and remind long-term statements and flow objectives our macroeconomic our assets, I'd as and include our as expectations our business, XXXX regarding profitability, Before margin well our will like revenue and our you the forecast expectations, and as operating strategies, demand technology, employees, products, today growth, environment. our expectations such fiscal unlevered and guidance remarks free cash regarding

These update statements or They cause Form are risks filed as and risks new Factors of differ today's them undertake from could these of actual forth uncertainties our materially. our actual on statements based that in SEC. we and annual assumptions earnings as materially a cause result XX-K in are could results are subject with to on set the also to forward-looking release future today, information differ events. to results that obligation to and and report no

of release discuss and provided at which non-GAAP financial reconciliation prepared results not accordance non-GAAP investors.dropbox.com. Generally and earnings on also Accepted our Principles. in A are our with is Accounting We'll in measures, GAAP website

now I call and over turn Houston. the CEO, will to Dropbox's Drew Co-Founder

Andrew Houston

Welcome everyone. earnings XXXX QX good call. our and to Peter, afternoon, Thanks,

Joining me today Regan, is Tim Officer. Financial Chief our

XXXX. guidance of a year and our off full for things kick QX by QX into with recap Tim for results, with followed dive XXXX. at along financial a then I'll strategy XXXX, look will our and

the repurchase growth Through on flow our and by full year-over-year XX.X the and free quarter in income for get count modestly per this resulting reduced shares ahead share quarter share in started. diluted operating year guidance. a note. quarter, positive Fourth share We program, year. our revenue both Let's out million XX% closed came in of our we the cash

maturing to decisions navigate year of strengthening in businesses business reducing are back growth workforce FSS our including scaling such significant we capped a FSS business, at from continue difficult decisions that investment to size included our areas and noncore of aimed QX simplifying and These as as our a FormSwift. transition the potential.

decisions these near-term also long-term are improve Dash that profitability in they like us introducing efficiency, our to While enabling growth headwinds, growth opportunities. products significant unlock and invest

So against with briefly made objectives me our that, last on let the touch year. we progress main

X reminder, business a objectives in primary we As had XXXX.

experience friction creations, year-over-year. percent upgraded our The functionality, sharing improvements first end led funnel were all which which to invites, Teams rate team We key Teams IT double-digit conversion users trial new invitation activations, team admins. user of and was Teams collaborative This of product. to in up and including the removed improve for metrics, both and

As versus year gross SKUs for ago. a result, additions a Team were up XX%

IT relaunched are scores, and admin console crucial purchase Our key also engagement decision admin IT admins which CSAT makers. since are improved

to elevated offset in the reduce lower-priced own and within Teams particularly Essentials, Simple to individual layoffs pressure we their downsell However, and some course year, our sought these Plus our plans, the license strength of relative due as by plan. customers new Conversely, were over often saw software exposure gains companies. churn their Dropbox

AI-powered IT can June, goals clear well it Dash. launched reception our We the a QX, where And In a base SKU that for sales self-serve launching early, Teams separate see we've for still Our became And users. end far. universal customers Dash partner for as need while process made Dash onboarding here. individual Business, our we towards was customer of exceeded the our for Business. We significant with while installed in value been proposition with for investing to for continue work non-Dropbox pleased admins near-term building. as strides the second our opportunity that October, lies streamline early and product, larger development is to for Dash pivoted objective so search. viable with In we still we Business a customers as pipeline we

engineering saying, search users is The important the is query to in your summed The way. saved saves by universal easier search up Head most IT being feature time that's resonating and retailer me accounting, From of much teams able information faster most to IT be at a Dash's by productive. with making single accessible apps everyone by time cloud as more understand how come can valuable of and my Dash an to a outdoor impact Dash. to all in

addition, is having protect the tools is admins concerns. that value are X finding in In admin unapproved sharing. features, two Dash's strictly control which critical ensuring is and address IT also quickly protected; content One and remediate to

increasingly obstacle that customers for company, major us adoption AI telling and any growing us. us security close CEO new security accumulate helps security gives over us advantage. mind and security for competitive It's access a a is top unexpected that is gaps that tools Dash's years as sharing. of clear file into Dash of remarked, customer, Superhuman naturally visibility tool are are their and a are a concerns Dash

this Now about year. plans let's for talk our

We primary X for have objectives XXXX.

pipeline as sales We're all customers to with additional drive includes its Dash. to sell key through more solve adding and build adopt decisions. product how they dialogue starting with customer in investments sales and their our salespeople team this customers priority the onboard problems, leveraging an features teams Dash motion. on active of and Dash maintaining scaling service and aspects managed customers and our expansion This awareness of our help to is to renewal as marketing the team focused continue make help first includes we are can go-to-market Our scaling our to

Dash. growth investing expertise into this aggressively about offer to ways use to that keep to and Dash product-led year as the experience, user for we'll our improving and Over we also refine time, I'm we excited and hear and name SaaS pioneering and customers and process, our governance onboarding creation product additional our expect connectors the application content We're buy tap XXXX tools try, of to few. this to an product content security about road GenAI search you'll map. new universe expanded features, universal Answers, a improved In year, more launches improvements

year of compliance we more and In And a we the standards will excited Dash, will additional we're front have expansion. than for be opportunity ever believe gain us. expect to unlock help international short, big in that about XXXX we

greater This means we'll and strengthening efficiency. mission-critical doing and that or than is simplifying while things features better our inefficient fewer priority second growth. Our continue delivering functionality improving subscale rather core and business operating pursuing

external our invite sharing For Teams and internal motions. flows core we'll and product, optimize

While we an capabilities user and to continue value refining also our illustrate optimizing We'll proposition. our that product a see key by retention remain strong, churn the enhancing pricing opportunity critical options provide most FSS clearly structure of reduce workflows. usability set to our the rates of simpler

our focus on customers where are. individual business, For meeting they we'll

Our traffic our customers and paid continues lower-priced point to shift a towards plans. requesting entry have mobile for been

launched year retention and cannibalization. We've Simple we strong steady response, Plus last countries. in limited plan in demand, select So Dropbox seen

higher driving our roll gradually on out multi-platform retention we'll knowledge plans across the based focus usage FSS and year, rates. Simple U.S., we'll users our that This on in have multisurface

workflow of a strategic as business. extends FormSwift exploring engineering for investment decided we've Our been options as businesses. the levels DocSend increased aim feature previously, And for marketing efficiency to into to see Dash. recent significantly as we this while drive a increased mentioned efficiency growth upon reducing we've manage market, opportunity spend After document will our our focus surveying in launches. as remain Dropbox priority rather retain and profitability redirect than solid ownership We'll investments FormSwift. growth of Sign on we building to we

a positioning Our to FSS third is as priority pad Dash. launch business our for serve

managed work can, bundling our entire to sales offer to to see base it also as the Dash will easy customers have Dash. FSS we we Dash While product potential user and new our and want initial as customers to We Dash our of make efforts through introduce base Teams fast and integrations. our customers opportunity for to adopt to installed

experiences our FSS SMB prosumer our together Dash of getting customers. help accelerate bringing and in Dash will front and So

a many before companies Dropbox technology successful like us, managing transition. closing, generational is In

Creative Just evolved Netflix as we are and and Adobe to content from from Cloud, DVDs evolving share traditional from file sync Software intelligence. Package to universal streaming or search AI-powered to

search universal when them solving that customers AI solves cloud I organize founded today's but content. with As similar files similar you've productivity and helping capabilities and share added in both content secure, heard their their faced customers tools. many their ways, secure, the me environment, helping share Dropbox, of say, set we're of a for Dash and organize challenges, problems and

making require changes. chaotic. from a focus, Business of lot look challenging. be can transitions and can outside, They difficult And they perseverance the

have a and We where of of we're strength. we're starting from vision a clear going, position

over Electronic transformations. him have We're X.X extend helping content advantages decades like I'd team. a but all through last of have warm we as build capabilities with brand. companies and has deep significant a Nielsen, Dash. lead welcome to experience lucky Warren Arts, and management next business not technical our significant million We like And in customers, These are trusted least, to chapter the member, our newest Jensen. Board Amazon on Warren NBC to

to Tim financial results over turn outlook. the now review I'll and to our call

Timothy Regan

our highlights cover QX QX from guidance and year then I'll Thank for XXXX. you, and financial the Drew. provide full

increased results Starting revenue $XXX quarter. million. the QX for X.X% Total fourth for to with our year-over-year

billion, year-over-year. growth On ARR year-over-year. million Foreign grew exchange revenue $X Total the contributed rates total currency X% $X.XXX in a up quarter. a was to X.X% constant of to basis,

strength to that team plans. increases new resulting largely year-over-year to user alluded plans, expansion year-over-year growth was continue driven on and in sign-ups pressure our top-of-funnel be ARR individual in and offset Our the With and gross we sharing, downsell, activations; ARR in improvements our however, respect Teams to these by continue churn activity. to relative in by see Drew growth

fourth FX exiting paying the revenue these shift plans. paying sequentially was $X in the increasing users was users, FormSwift. paying declined seasonality million mix approximately quarter. million Average dynamics basis. to mix by higher-priced on a well sequential SKU, from and quarter's the growth with driven quarter individual to to Essentials This a as ARR to $XXX.XX approximately as $XXX.XX slight from For XX.XX users per as quarter, due primarily XX,XXX compared down sequential the monthly The teams annual to by our translated tailwinds shift prior

I with further assets, P&L, continue workforce stock-based purchased would discussion income exclude reduction losses all and certain estate acquisition-related mentioned gains statement compensation, we unless investments. of non-GAAP like equity on are expenses our Before amortization note on losses net and and that intangibles, to of expenses, real indicated, figures our otherwise net

the of adjustments. effect non-GAAP net tax aforementioned income includes Our also the income

quarter. Gross margin the was XX.X% for

As mentioned resulted X January in fourth gross of an X, previous quarters, driver X XXXX. This effective in change useful benefit in the quarter. year-over-year gross in of our increase was servers life margin increase to profit in the to the primary of million the $X approximately from years

of as we profit in to the life lower the for was tax guidance from cost driven up force Operating and operating year million, fourth and by ahead year, ago of the the expenses release lower gross a well experienced ago from year expenses basis lower useful $XXX operating aforementioned in XX% reduction year-over-year, XXX force approximately to full period, from in benefited $XX income following of was our reserves. the as operating Compared Net of points million. servers. of quarter our For our XX% benefit certain following change of reduction the our margin sales up margin XX.X%, period.

diluted increase. the weighted for $X.XX to million compared outstanding year fourth $X.XX representing based average was quarter ago EPS XX% on year-over-year quarter, in Diluted the a shares XXX

of $XXX cash Free of $XXX per force. million. $X.XX, XXXX. flow quarter Cash resulted on expenditures ended year cash quarterly increase in compared period. related free with a of quarter million, the X% in from operations severance to cash increase. made sheet. investments and year-over-year flow and This Capital reduction an benefits $X.X for Moving was of XX% short-term representing to QX payments million the million our and ago of flow the in $X totaled share $XXX in our We quarter to was This balance includes $XX versus flow cash billion. the million

respect on optionality the secured added us In and center leases we $XX and to balance This of X.XX% interest SOFR loan the to centers. rate sheet, at that finance data billion, X% in term billion drawn for we we With a loan our reminder, interest in delayed provides amount consisting of up a as in draw continue a equipment future. loan December, million our feature X-year borrow invest another amount. $X plus $X also term refreshing the on to our an billion to quarter, a entered data to into the initial new undrawn bears $X as

of we revolver. As also this capital terminated part raise, $XXX million our

with enable concurrent capital quarter, share and our a initiatives and us authorized new addition, our in $XXX this and capital our reducing towards In fortify million. growth raise, approximately approximately to Collectively, these XX.X shares, the spending repurchase $X.X this To count. Board sheet program. balance in invest allocate our actions million to fourth share repurchased effect, we billion

billion our fourth had approximately As of share remaining we the the $X.X end quarter, repurchase of under authorizations. existing

and tranches across we loan, XXXX in $X.X to carry X% continue of term the X convertible equally billion of to XXXX. March addition coupon split notes, maturing In

approach are I'll our XXXX. We now further QX to share have but full XXXX for no options the we updated considering offer and year maturity, as today. actively news the outlook our

first However, few early updates a since we I will shared thinking call. our November expectations our offer during earnings XXXX on

our towards of a our direct decision FormSwift, sale. with underlying our review during stemmed to options undergoing the focus to November material RIF potential [ noted a as and objectives company strategic most call, that from This ] earnings we are our initiatives. we strategic our First, we aiming were including respect

investment and while business. eliminating completed in outcome that reducing to since profit-maximizing marketing have headcount continue the have that significantly We our concluded and ownership assessment of our our our FormSwift concurrently is

this expect few flow. cash also a to to as We next over serve as approach will the years, serve tailwind though revenue headwind it that thereby will growth a free

which shared recent impacting of in And XXXX, associated with associated flow, expectations to Second, our XXXX. their we to free net the raise, we free U.S. thinking revenue early dollar our our our benefit. on tax and begin as impact term free loans, cash third, has will both define since meaningfully guide flow, for unlevered strengthened the we cash capital excluding cash interest payments of flow light of

cash guide of unlevered While with we metric will aligns that we business. core free provide as cash flow will have a performance report we to free to still best our previously, flow, the operating

to these the Given million. updates be the of $XXX revenue in for XXXX, $XXX we to quarter expect first of million range

to of headwind we to basis, are constant million million. range million. expecting We be of $X revenue the in On currency $XXX $XXX a a approximately currency expect revenue

I'd We to QX of expect relative consequently, point revenue we QX less year And QX serve less roughly to recognized as a versus in quarter. XXXX. FormSwift X basis shift XXXX strategic XX ago this the headwind result that note day direction. revenue X the of as has our to also day a

be strong the that will strategic weighted approximately FormSwift marketing shift which historically our in expect given is into funding We quarter. towards we first operating non-GAAP be to for the XX.X%. FormSwift, factoring margin for direction QX, eliminating The was for margins

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

the to For in billion. expect revenue to XXXX, be we the $X.XXX $X.XXX full range year of

a We ] headwind currency XX are of or [ points. million approximately expecting roughly basis $XX

On $X.XXX a currency billion revenue to expect to the basis, billion. in constant $X.XXX we of range be revenue

to a roughly year. for full the expect We as serve XXX headwind basis revenue to point FormSwift

XX%. approximately be to margin gross expect We

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

cash be million. $XXX unlevered million. flow to $XX few inclusive cash flow We items guidance expect totaling free unlevered This onetime a free of or above is at

payment executed buyout million Francisco January The we that our tranche the in in lease of for XXXX. first is final a San we that and made $XX third

employee severance, force. QX related in The second $XX our and benefits with reduction associated costs for is million

full million lease expect be finance We revenue. to be $XX lines $XX additions million approximately to for to CapEx between the and of year to X%

the to cash expect $XX of related net tax loans, As we benefits of interest term approximately aforementioned million. expense

million the of range to expect we diluted to outstanding be shares Finally, in XXX shares. million XXX weighted average

in I'll headwinds well headcount as as Starting headwinds. additional ongoing FormSwift our our marketing that as for guidance our also these have guidance on XXXX. from in guidance This now have with contemplates the Consistent mentioned, where revenue, we change this our share reducing and investments a FX some factors seen today, Teams reflects historical yet of visibility we mentioned guidance teams business trends. a into I in earlier. what with high degree dynamics our meaningful not of perspective approach,

by our the our In does we the early sales state are addition, opportunities while long-term excited contribution on are of from and DASH the encouraged given efforts, this for include guidance not a nascent product. material DASH progress about

XXXX we paying reduced expect to X.X% in in half our decline about with to to respect decline. investment users, users FormSwift of roughly users driving paying XXX,XXX With by this

user continued remaining teams. sales to stem as our lesser the self-serve expect paying outbound well as, pressure risk reduced a of to pressure subsequent We half a force to from some on extent,

to roughly in year's expect of in QX, elimination investment FormSwift. marketing We coinciding with half our the of full the occur decline

guiding operating we year-over-year main factors. our XX% The XX.X% to is force. benefit; Moving margins, on offset this are range year. of a will in to This however, X reduction where of margin expansion be this by partially driver to

benefited of First, this tailwind margin XXXX tailwind a we hardware, see the XXXX. where extension the million in useful of our will gross to not $XX center data due life from

strengthening the FX result in This given than since thinking a million. of the dollar. shared that we both to backfilling million $XX our that select across Second, time Dash we deteriorated expect be free more positions free and flow at above unlevered early or marketing is November, by to For $XXX scale will ] RIF. the flow, as also by sales of we impacted R&D [ U.S. cash slightly be has below investing and and cash

our decision our gains reduce investments FormSwift. However, this in from partly is to offset by

average weighted approximately XXX million program. to to outstanding our share committed are In as over we via reducing share time our shares decrease to shares expect we XXX repurchase to our remain Lastly, million cash count business positioning flow from our continue as document lines of core to free we these we and operating closing, levels higher drive file share [indiscernible] workflow areas. increased for and efficiency margins

then profitability per reduce in We our cash the leveraging thereby strength our meaningful driving sheet count, and balance free flow are share. share growth of this to

DASH, investing are our most long-term vectors we of growth, notably see Concurrently, a opportunity. we in large future where

we value to growth, efforts time creating While these culminate our shareholders. for believe revenue long-term to it will in take will decisions that for these translate

please operator, for the that, open questions. With line

Operator

Our Instructions] RBC Capital Jaluria [Operator line from comes of first with question the Rishi Markets.

Rishi Jaluria

call wanted I I years? in and doing out win search a understand if gives Dash. and driver And revenue far pivot in within follow-up. I've a can that? usage X maybe adding about competition this these advanced seen early gives what you that Look, gives And to we pieces to capabilities, with be growth other you you start then to meaningful it's the first and X But the search with maybe the think got space early, can think number again that you obviously, kind semantic pure you next, about two, the one, get platforms, plays space what if to right that we uptake it, there, are quick number universal confidence actually too that X successful that over so or have disclose. of and confidence of

Andrew Houston

question. Great Sure.

so as far been more a a first, over much it's usage says way growth too gives It's on makes that that clear I everybody And worker mean what the an years. that look And IDC first, too I $X far a uptake more stuff that struggles and like few at apps it as then mean you the the market. what greenfield next knowledge space, it having in it's any market. many confidence as this confident too is in years? universal it, the open. tabs next pretty big with translates a we've mean, market us billion can and to as drive market the the just market. big with us many today, problem, far much doubling over starts I few So and it's

not solutions customers problem. of there's So a is or are this for really that most this a to solvable lot not great customers aware

the first we're in inning. So

evolution we with And that respect then right business of see do, X.X and content. have advantages. of our customers natural lot to on understand win, this mean to a good organizing We of to from and cloud to prospects is organizing evolution I files their what XXX% Dropbox prospects over it's the we a we have and and million them today. Dash, natural accounts for Dropbox has people's go a

progression and And more theory, so a of And validating a validated become then lot clearer it's lot launch. been believe makes -- It's in that. we the sense. since we've that and

early, to And QX. internal so It's content with but so around since of far. been props with lot and or growing resonate -- and really We and security then the positive we're launch first. signals Universal seeing sales the in have protect reception the pipeline lot a and exceeded we've attention functionality our very key We're control of and targets our customers. paying a governance Search customer value features

year. not the also scratch, from lot of of and business over problem. first and this advantages clear, about like to million going in built then investments make mentioned technical again, there the like having Control things with also chapter a way we in advantages in generally. it that product pretty to itself start-ups starting also of Protect And are scale coming which the and number of space, are like X.X and there's sort we we're And see leverage Dropbox certainly -- of are our to is and lot our the and a able other competition and distribution this having experience and relevant are be infrastructure the there accounts. a You

platform the agnostic sure the future, the really compared them, the to I'm Dash in are companies. or platform But important. we'll then is incumbents with compete fact that And and Dropbox

integrating in if the not AI stuff of revolve suites, but mean, within products around most them office most you across incumbents the own are ecosystem, today -- I look at ecosystem. their their focusing So

lastly, there, for your all our the of privacy big So big companies, we prospects, bigger advantage. some certainly, think think then our users and a of our brand posture that's think you And trust look are And I a and and opportunity. when I is at customers all they're apprehensive data like most -- model, to also ads training of it's naturally they're entrusting conflicts apprehensive something important or a you're but their that about that's foundation customers also some all about. of company, you if are the if next selling

And We're have anything with of -- those so to service, provide good don't not we we're kinds a providing the conflicts. provide your just than a else other here and you doing service. data

progress. and are these we're important about all really early So the really excited points,

Rishi Jaluria

That's right. All clarification. point And or Got of a quick just Tim, it. Drew. then, helpful, X really

the versus if and you be flow if providing paying to new to? that closer focused should unlevered X missed and deck helpful. over in -- you're cash see guided to a flow see change profitability. metrics But guidance and different you that I highlighting look, talk maybe that I highlighting I noticed deck, bridge guide, of free typically prior And appreciate not knowledge, the and in that the to there. since a kind us help less That's why the has the could us at a in deck, great of on that I kind one, you you you're IPO, of actually we lot something operating metric cash that I definitely Number adjusted in why on. So unlevered saves time there, apologize now. terms Is about understand my you in of flow EBITDA would your then cash been free CapEx attention the be least the focus anxiety. now

Timothy Regan

with latter Maybe Sure. the starting question.

we of So guide we our this impact in free which going metric raise, unlevered And the free that loans, flow, recent flow, best to core define light our do business. cash believe aligns payments tax benefit. interest to cash the term of performance with capital excluding related of as associated net our are with of just operating we the

And EBITDA, treated to So consistent similar offering this just adjusted here. what is with our business our do and to how as this aiming ratios we're help we're of have business. other understand is debt-to-EBITDA the metric with loans companies far term metric as another

So additional line analysts investors. of to and sight to provide

Operator

Enders next the Steve comes question Our from Citi. with line of

Steven Enders

the guess, the incremental -- just little through throughout year, breakdown outlook. bit from ask year. gave thinking Okay. more of part that growth good I know kind And growth kind on for guess Great. building the of the there. and a through puts I a business But the of I that want of you growth just year to least rate bit of and they're the, pace I in some like the little at seem I better a headwinds going versus the throughout the, think, back XQ takes

the in user of of kind just build throughout factors that? the like Or just there of around it there? some yes, kind declines is of build help us through different of impacting So that's the Is think or new going like can -- FormSwift? year the kind the timing you

Andrew Houston

and a there's But a handful outs. lot lot of level, one, just level, quarters. Tim so specific the headwinds ins of that the and -- let we've this last to higher a at over from the timing high talked I'll of speak about a

are I those pretty think stable.

lot rotate core of like like a the and strengthen Dash. of towards and So aspects. of seeing this voluntary the then lot -- also what simplify growth But a result to you're there's business inefficient cut and choices market some is

just much It's as and as near of in inefficient we or some headwinds nature optimize headwinds portfolio, shows product size and of not of back spent some on spend better But just we're kind opportunity that the towards dollars the growth the and returns our there's of health seeing you're we up by on they're there. cut like or the more We growth that areas kind or nature the deploying in back cut the term on these Dash given of very But or can or that that's when we here. are no if think less opportunity. Dash other the FormSwift greenfield seeing, and we us the for you're of those decisions cut business So dollars of back feel like the costless marketing the It's compounding on these them and in some greenfield the long-term of right market market the as cut the get better business. optics mindful places. that areas. we

Timothy Regan

Yes.

to on year, thoughts shift maybe and I'll then some full quarterization. maybe And some

guidance about. year. very our we're of Dash about material of part scaled So a sales from if the pressure we to and our points, been excited revenue to team innings part back Dash RIF, roughly the while in its sensitivity of downsell we've talking we with contribution do the business Teams trends we're XX end FormSwift, pricing our and a to sales our which much also high this the to is and team churn pressuring range and in as basis managed decline respect at continue expansion, outbound expectations. due We've expect early don't still see then normalize potential, long-term for on And here implies and FX the

translate respect how And then the for maybe should with it to quarters.

about expect of coinciding think if year, of FormSwift. in first by the FormSwift this we paying with decline. most the half that investment marketing and decline XXX,XXX quarter, do about occur that I to users expect for of And this to about for paying users, users, elimination in So represents we reduced

see the that's half that put flow does to full year, the guidance. you first of on year what pressure respect the through with so And and

Steven Enders

like kinds it pace? I and I how And have have kind it's we kind there, side consistent like least guess, pieces of when guess the downward the that that's headwinds a of Okay. least of and there for becomes is at I the to of moving maybe there feel of declines? other QX. exceeding at bigger about Teams you is within does kind think Got those stabilizing framework business at business good on of a think I expectations hear, pressure you. the we Dash Is starting that the helpful. to That's guess, to there? of it, piece guess good seen But that some maybe then should a should offset that about where

Andrew Houston

our I different is all mean of we continue see there's in But say. guidance, netted -- think to I'd see growth. few -- reaccelerate a we directionally, how I out this we parts Sure.

Teams So there's optimization business. the opportunity continued in

As I where some areas to number the was sharing where offset from earlier, -- continue of seeing. to the we team there's expansion to success onboarding pricing churn a of improvements to just we've or we funnel, optimizations across headwinds can can been ranging

potential Dash's as net have signal about early And But little as excited very growth. a And pad all as of core the we we'll will for share our far turning or this more too bringing and Dash. obviously give when it. a into out. third exactly is there, business it's timing We're kind opportunity to launch

a terms see natural So lot in we see we overlap -- for already we Dash unlike previous evolution some of our being business products, -- our our this core do of in customers. what more of and a our between

so files being And knowledge as see workflows subscribers and prospects as vast generation of also new to. don't to much as around our the for we revolve relevant being see used Dash as maybe good Dash, of whose they a FSS majority workers we whole

and how our provide are through these the guidance in drive continue on net those the out how more and parts all major the So parts signal we'll to of growth, we'll year. different refresh

Operator

from Bank And of the Michael our of Funk next question comes with line America.

Matthew Bullock

additional some the still out curious, Understanding what was Appreciate you're Teams, provide for you question. on This seeing Mike. seeing some pricing there is in Matt you're I color on sensitivity can SMB. behavior of macro benefit you've there's some seen or curious from customer any during quarter? points the just general positive Obviously, And terms on user trends? behavior data if been relatively in

Andrew Houston

I say to anything new wouldn't trend. major call a

in strong across I that mentioned we're metrics macro able funnel we've to I in on on rates, are think and business of the ARPU, Teams, of to we've focused the through -- elements optimizations about just so the And where say talking consistency it expansion and I'd improve a been the lot last those of we also these a positive reason higher stable. lot as opportunity that reminder, for of retention where higher bunch funnel can year. are there's show dynamics double-digit these up headwinds over a the we've Dash. lot Teams rebounds has been of -- the terms a just like or and trends been a that percent pretty

So in SMBs, I'd I stable. it pretty dynamics any mean say monitoring closely. we're it's new we haven't seen but major

Timothy Regan

still trends as in to And environment many ourselves. doing expecting space customers of SMB challenging briefly, saw are costs last demand ways our a are factors in as year, similar then for what reduce to our looking we guidance the we Matt, largely

Operator

Patrick Our from the Citizens next line question of comes with Walravens Bank.

Patrick Walravens

but a dynamics year. billion talk I the have San and the it's sort that of we raised little neighbor largely competitive almost for bit And about valuation realize you in of Dash? $X one greenfield, $XXX a Glean that million Francisco, last Can end at the

So And you from see how see do better? do Where where fitting them? you are differentiated you that yourselves better? in like competitors

Andrew Houston

Sure.

a certainly closely, And have advantages. our We more we believe I've saying, million base. first got track customer you'd imagine. been we accounts. existing just than lean business X.X as is So we've I number of as mean,

about that the not apprehensive a we're be privacy technical to lot start-up. in assets from things. all our here, scratch we starting and to leverage infrastructure, apprehensive our lot the other from going start able many brand see security that we're of giving When context first and our look security are to information built a a and in we product, of about trust at of and we've the chapter a So customers

in so shared also can out these surface universal benefits, also -- one AI of that basic out can company give when a find rolling we content. rolling quite adopting every a challenge if your lot And lot it search well of it is of a you And has tools a then productivity at understand customers and lot that improperly -- company more have but that safely. AI level, can

that x-ray of giving everybody lot opportunity that content never this been before all so customers And remediate should want and shared, vision to all and really have an doc to identify it. find prospects a that compensation

And Dash you offering And every a that we or a identify which dangerous content across been scale -- functionality by process there most an only remediate content than was the the seeded Protect much year manual two, last mass being every able of else. called and across identify all product for Glean bring gives anyone major and visibility acquisition we very Dash is made that that platform. improperly greater to global part it's you company three, have that's lets you content then shared or or to Control, and linchpin of call shared that's a then lets and be Nira noncompliant; that automation a the unshare platform. companies And opportunity what's or into at

as So we see big a advantage. security

also lot excited an now providing the started for We And evolution -- your again, recognize that. able customers top And our a experience anyone by We layer files, think I'm really on product broader from in organizing push natural intelligence organizing recognize to to all than is and then we're map for of XXXX. this Dropbox. of be also our beyond we're about content your going think to cloud forward road customers and I our files ways. a and expanding

space. there future. will for early universal long competition it's that's really be the more problem be seeing. that the to of to about time going -- it's just strength. But a we're believe a validation sure is our and we're So a excited plays think Obviously, well signal it this that what I I'm a competitive we in

Operator

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

Sonak Kolar

AI product. on This natural any Murphy. near-term perhaps other you as there that versus opportunities Drew, building on like the how AI extensions in-house domains is maybe portfolio? acquisitions? discussed for adjacent feedback for product past the Dash around beyond Kolar that Are Sonak it had to exploring you And Mark seem evaluate in process the any core relates

Andrew Houston

Sure.

I lot analytics can So of in so bought And lot from for of the or we year an link we'll the over to company that. on this you but optimization. share work companies bought that I state more have -- is Dash build that and And there does a XXX-degree -- and your of natural a we is a can it mean area allows different can that we foundation, Reclaim pretty company. called adjacencies a up specifics where benefit time, say time with good of example are all of you adjacencies unprecedented Dash. then -- there's view apps there's number that one are a top AI last this is have

for like on. projects key what you your day page here, you start of here's browser, feature I'm But are one can all lot kind of open and a -- content a we working we where here shows cockpit also search new you you addition give there in to And that Dash search then for do tab that a whenever do a people from sure. your all different in give in the is you the

And build that. able top area we really to surface point that to agenda. my that as here's day, my of be additional Here's being see experiences very starting on for as a extensible valuable

their lot And their everything see deepening of they to so other lined day, a have up on, or things lot what in and requests like working all they're that tasks are customers of and for next interest example, agenda a bringing or when priorities. else functionality my my they in

be but back about, So -- for example we into and of I same, to is that what turn new the a things in an lot and And for okay, a acquisition, an categories distributed we dating decided what's we I have going to also, XXXX, Reclaim where work my of to emerge open that years, there's lab of a Dropbox think we've be lot do What's become to going see? think laptop a XXXX, possible. lot different?

much large the office. course, more you're screens in changes working is mostly offices when there's language even out We're of distributed. a so model. after then, of work And lot Now that the instead that of

and to more So share that's There's of with lot some we're this neighboring kind have early and of indications headed. year. optionality lot a adjacencies of Dash, where we'll a in spaces

Sonak Kolar

Dash. on follow-up quick a as then And helpful. Very

business. on focus retaining So the core some of far, the base a of lot like seems it or upselling the existing is installed FSS of

understanding entirely Dropbox? versus traction existing new of split the you've so customers net early the days, seen while rough it's So of to sense users any for those between far,

Andrew Houston

Yes.

different So important, TAM existing much may using users unlocking FSS different and then ceilings. and they're -- say, be I'd folks have from we're both trajectories Dropbox your both going who are FSS And slightly not of a point, larger to tracks really to reaching today.

home an advantage massive existing We cycles. existing that observed pretty We a we there, relationship. have FSS have sales field customers, already certainly short

I able time line. to compress that a we're of think lot

larger working. what then that's observed net that AI. reach up to new content piece customers big effort search also around that And often so customers standing pain is and we've a is bigger and because points And see larger we're already the company, and the we

ARPU. both. have might they Again, also different So newer might have higher a they'll higher pursuing be but The customers cycle, we'll trajectories. longer ACVs, slightly be sales

more share and as get So signal. and tracks are -- both this important, we'll we

Operator

line [ from comes of question Goldman next Nevavlich Gilly Our the with Sachs. ]

Unknown Analyst

a I focus this you before. further see business? the in a -- down a that like question after, There -- be seems kind a follow-up to cross-sell somewhat down had I and growth. to layer or drill, that please. have FSS like as support maybe future how you how you're renewed layer from Dash investing Can addressing And on renewed question of of extends can Sonak's on a opportunity

Andrew Houston

Sure.

generational opportunity So Internet. transition. think seen consumer we parallels to between transform ago we're see that prepared while opportunity successful see into a really in SaaS said lot and what as a remarks, kind of a there and my a you've our I this important yes, we doing we a in and big transitions And launchpad business And core the Dash. as a are of for little of lot

generation software. product it I Photoshop the and was be downloaded continue users I modernize So shifted and are mean to one the they things like and next I of Cloud think think it generation. to then cloud, relevant their bought to then good computers Creative packaged And onto example. they as the -- a as Adobe

pretty are transitions but platform And these common. difficult,

and audience limits, ended from initial I have a that drawn being conclusions streaming one bootstrap I might liability about think think a of Netflix could them is helped another went but mailing their to example kind we think audience where DVD looked victory at have about really having up its lot, asset you as what a that seen in as wars. an it -- business the

are they both there DVD shifting many or along, able things unlocked than but to transition, product -- user larger modernizing XXXx that but certainly, was a TAM that great were about I and XX been. And their base them streaming, bring could think one they the ever that by have then their of initial mailing to existing was

mechanics from already opportunity FSS and more both packaging And experience synergy that bring of so the we of then it lot there's we're -- pricing customers, improves we But product extends working bundling. and lot integrations retentive a we're do that, our and or lot creates looking a at a experience see there's a all importantly, the and to most of all ranging to you lifetime. of which on DASH benefits to see their the and the mechanics how

area we'll, quarters. in to an more again, have the share is this So coming

Unknown Analyst

more like that. a It of migration to it's Yes. maybe sounds like as opposed

motion. the thinking right maybe undertake little review So it. FormSwift many know reps was want sales able also that the additional that be be to organization? might actually full the bit a if second any the you about way the I disclose turned a Dash platform? selling that had the Has question of focused product changes of of single How your in you impacting up are is of might to I But versus don't more might contribution. on bit way

Andrew Houston

Sure.

people it's that, less with nuance had migration like to think of Just less away. coming mean, creative these of have -- architecture, using kind of going you important going files I anywhere, big files where and -- stopped like not a DVD here media, who point, I Netflix, files, we're and back that lot just not on An players. -- it's construction, leaving are certainly think areas are the think I strongest, for I customers industries a is lot are all really

of the an portfolio nuance Dash more additive of a and the mean, broader think of an can top as -- focus we're -- FSS. a where is focused. of more certainly, than value a build but selling something provide the I with then bit it's we which we the our primary what expansion is an migration, provide of value I I'd motion, Dash products, So is just on of it's Dash. already that say opportunity we important see too, of there's selling more big And

Operator

question from our line And Nguyen Alex Jefferies. comes next the with of

Unknown Analyst

FormSwift listen I initial revenue you mentioned to that contribute points remarks, X.X your headwind will to year. If this correctly percentage

X.X% imply decline basis. a guide constant revenue year currency full on Your

were if normalize X.X% to FormSwift, terms revenue. that I would imply of currency in So decline in for constant

have the that you back And little before is a bit previous than softer in what quarter.

being So incrementally you function I weaker end this sense of being more guess on to I'm a just time trying the demand? are conservative? more get Or a just Is guidance for around? of is conservative that that

Timothy Regan

Sure.

end So for a range points. guidance imply the roughly our do basis of of FormSwift, our high math, at we and FX XX does normalize decline if

pressure we're into historical our with as 'XX we reflects being our we been have we visibility I'd commentary perspective, team that approach embedded on offsetting expansion which the business part line new earnings call And And in in mentioned and a the the what today. downsell else Drew where last due far largely seeing to as relatively gave trends, say an consistent So and last from his it's what the remarks. in into Teams in churn lift November. is guidance philosophy is with to gross guide, have with sensitivity, seeing our respect that of extension price we're that

to the also as a revenue. we're the Dash, see it that And flow will where our through optimistic But outbound very about opportunity. of and some to build the back expectations. about given time scaled up so state we pressuring team then just the take sales our it And and long-term ARR then nascent product, sales RIF that's lot have part of talked of we've

into that some So gone the no those to when guidance. our of factors overall guide. again, have the change are But to comes philosophy it

Unknown Analyst

Like just follow then What guess with here your the of terms compare? of I free there to XXX you free have translate any check that guidance has cash on unlevered cash that cash your flow -- I'm been the above Can roughly in change as flow Got you if can cash figure I just million, flow? sorry, what how is $XXX on free at would it. trying levered rate? which million tax well? $XXX that flow, to cash And guided free you or up above is like

Timothy Regan

Sure.

have the expect that in thoughts into, think of term for that spend $XXX which $XX our for that tax about we're revenue more million deteriorate versus as on flow, for free November. net spending definition related thinking do our to contemplates FX, it, in since our a have levered $XX well gave gone this million remarks year, and call factors, unlevered I changes of does clarified account So cash which as benefit. so latest cash associated few that than accounts by the on free if flow that of interest did roughly this which the unlevered the payments think our we million we debt loan, we last interest we you the But to

a certainly that's that in. baked new headwind So we've

as for to backfills roles. into well Dash as We're business fund critical the certain seeing reinvestments

higher lease of increases for $XX baked few all a items, of So That's $XX then And final that's factored in onetime are merit our installment million including payment the RIF. cash and the included. in. taxes we our Francisco and have from severance San do million

the million, relative some by thinking offset major $XXX said the $XX benefits that getting that's the we're decision November we there, But about FX you're of if on from back million, FormSwift. to in the our headwind million, changes $XXX of but

cash You saw what No from rate. changes major our tax we in XXXX. also about asked

do as course, as pay profitable, get though, another So and we'll we more incurring that's taxes, that's we headwind cash delta, get not profitable. that more have be a we of to higher major

Operator

Investor Peter I'll Head closing back remarks. Relations, to for of the now any call Stabler, hand over

Peter Stabler

Thank have today. speaking Hope look you, forward good Thank everyone, We quarter. with for day. you next to joining you us a all you.

Operator

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

Dropbox (DBX) 20 Feb 252024 Q4 Earnings call transcript