Dropbox (DBX)

Darren Yip Investor Relations
Drew Houston Co-Founder and Chief Executive Officer
Ajay Vashee Chief Financial Officer
Yamini Rangan Chief Customer Officer
John DiFucci Jefferies
Mark Murphy JPMorgan
Richard Davis Canaccord
Zachary Schwartzman RBC Capital Markets
Heather Bellini Goldman Sachs
Justin Post Merrill Lynch
Sarah Hindlian Macquarie
Karl Keirstead Deutsche Bank
Alex Zukin Piper Jaffray
Rob Owens KeyBanc Capital Markets
Rishi Jaluria D.A. Davidson
Chris Eberle Nomura Securities
Call transcript
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Good afternoon, ladies and gentlemen. Thank you for joining Dropbox’s Fourth Quarter and Fiscal 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions.

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

Darren Yip

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

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

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

Drew Houston

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

over Customer also and call in and me our Ajay teams. us performance provide and with announcements will we our a update you review an our Q&A. I’ll Officer and momentum cover from during our for and XX.X and Ajay Financial highlight We the and our are with business recap the and fiscal financial business Vashee, going Chief on XXXX. and join revenue then XXXX. users product partnerships. into provide achievements Officer the ended XXXX in with I’ll On results strong Dropbox will QX Chief Dropbox. and year Yamini ecosystem $X.X Rangan, have million XXX,XXX year QX billion was generated XXXX for our guidance paying Today,

architecture and optical our interface intelligence engine Our enhance integrations and experience searchable to for Dropbox premium also teams technology. users. for and through initiative, continuing and our Dropbox Paper making experience facilitate machine Dropbox year our and a character innovation We images and admins. we partner our Last the of drive We ARPU. users, introduced our collaboration the the increased improving continue plans help our to user new using DBXi platform our for seamless sharing launched and recognition capabilities new adoption apps more revamped for to mobile showcase search within

and expanded and Zoom. Salesforce, with also partnerships We Google, our Adobe, our open ecosystem Microsoft, deepened

science of growth extensive of upsell SMR we and technology network were our to advanced continue leveraging We first companies optimize also our one addition, engines In at models. grow around the points of data presence by to our world. deploy scale the conversion and

model global new our results collaboration the and free company, of highs business year Our cash operational strength our gross and go-to-market discipline. efficiencies reflect to us In record and flow. efficient public as our allowed expand investments fiscal our to first infrastructure a platform, deliver our margins

We’re a delivering and healthy that at of profitability. balance scale companies operating growth we’re SaaS and few achieved have a

we are people from to apartment, and even forms a new customers. HelloWorks investment to account even while But with experience. to a tasks, we built products start on building resulting weeks has of users, off customer Dropbox done. better fax simplify employee. today, HelloSign HelloSign content. new documents platform HelloSign well workflow XX,XXX Dropbox on through on place thriving online millions to most part over with collaborate in and on already experience an offers e-signature serve. a focused a costs life; get or an still through come our inefficient We’re of and people a important as to focused as then the their improving and together processes everyday API, fragmented acquisition to deliver to few hiring document signing reduce to a major time also an their great an rely already of and pen people and the opening for Millions paper legacy these HelloSign things HelloFax, workflows e-signature on and and document business XXXX built an a complete solutions ago. content. completing we’re HelloSign user-friendly important workflow buying customizable expand fully and helping as or of Together, use has collaborate markets Signing can business And

wait Neal, to we CEO in And did. joined HelloSign and after working to with of their CTO, Dropbox. the HelloSign’s serving like to Joseph start welcome team excited We’re we early XXXX, of begin at SVP Combinator, GM Y COO at Marketing got and the as together. Box, just can’t and their Enterprise

Dropbox continue deliver even that users, and experience a QX, for our teams the to admins. of number make to better innovations Turning we

video collaborating their commenting. and which toggled on video video each flow the provide interpret users of lock leaving Comments that their which feedback. a specific to Dropbox time allowing manually files time-coded timestamps at commenting, First provide users teams feedback. is launched their we offers back files to a comments, point, input without between for way We platform. a way are forced video were pain this surfaced needed and viewers better clearly as address To in to observed seamless forth interrupted Previously, actionable for notes. annotations and point on videos to they

the is experience. admin Next

within an of control kicking customers allowing We’re initiative personalized layer IT Multi-team more deployments and organization, in to to excited off individual visibility, multi-team their our easily settings. accounts first flexibility in teams Dropbox managing process. new this to Dropbox admin, announce manage while a retain provide business with admin enables we���re to their and multiple step

to the and it autonomy. while need the employees, step We’re admin multi-team customers easier expansion. making to effort By with they capabilities to onboard accountant their is enabling and manage work for in a flexibility making in users to friction admins grow offer securely important Dropbox reducing concerted new an employments,

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

incremental patterns, customer it software-based levels as less We’re maintaining SMR improve the costs. that system. frequently how as how durability tier usage always high from costs separate innovating Moreover, across our and to primary After deploy By cost. stack innovation expect this require of doesn’t infrastructure we while have hardware at runs optimizing to reduces come and storage analyzing the experience drives internal it’s and lower recently the a on same content our reduce to tier infrastructure this us new to and storage storage accessed customers replicated, network storage reliability Dropbox. developed new data modifying we our software store blocks us allows in the and

that compute new and to storage by Switching users’ infrastructure. expect reinvest expansion our we Dropbox storage position XX% center this to workflows. our which we We the reduce into tier continue ecosystem, of international forge planned at to partnerships costs to to XX%, our gears

believers our then, from extensions. and in interoperable launched are categories new that our of annotate Dropbox platform. sign, one uniquely so can with open category partner we’re within and firm them critical already important the And of fax differentiators curate started manage set to Last integrations. quarter We’re using to is leading a partners our Extensions, users and edit, applications next power of workflow initiate and and customers have we most we for Dropbox. documents, business starting Since

capped the our and through commenting number QX The This off from edu students core a for our WeVideo. now admin keep over into new the our future a with enhance across to Pronto work the and platform. is strengthen tools tools the better because announced product while is vertical To platform generation support was the and summary, to I’ll Each partnerships strong turn worldwide. our fuel universities announced great efficiency power of for we and admins, students results. our use quarter multi-team another like faculty integrations innovation These of that few new community, and to video In past graduate We Dropbox research them gives walk and with financial teams workforce, new experience that CFO to year, today. XXXX. bring education our features partnerships Turnitin, and like the seeding it us months their next with it class launched infrastructure. our Ajay, of education partners incoming users, are a of Dropbox software to edu quarter, institutions that workers. important with evangelize growth. And over introduced and students secure with customers to knowledge Dropbox we the opportunity also the software collaboration use

Ajay Vashee

Thank you, Drew.

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

from period. We teams plan also tailwinds following some our grandfathering choosing their of continued advanced expiration to to remain the see on

expansion. a combination is and growth through revenue our paying to drive As strategy of conversion user a reminder, ARPU

our Our continued growth value care. verticals retention. drive number strategy we a our across convert a and to transportation, methodically had highest QX, to and of insurance in including sustainable ARPU health monetization In range users reflects of wins

in growing collaborate the sharing Spanish platform securely them Cabify market. selected of LatAm we’re Their XX operations enterprise and a For has would our to year the seamless deployment best-and-breed hailing within platform Cabify with teams. allow company that presence and adoption tools, capabilities ride past a strong countries leading organic quickly to product is example, service. with external our collaboration has the and its grown in partners. to Cabify, their needed team due rapidly over Dropbox announce excited the new

which Dropbox chose evaluating also the automobile will of QX. largest enterprise in improve or insurance internal due Dropbox organizations external of vendor in ease-of-use country tools plan One the our files. APIs, and integrations enable a our after chosen out collaboration views into The and organization’s large services was the open on number will customer the roll to workflows. and as preferred to

will agents exchange email team, replace for organization’s their claims Dropbox the the members. files and large Within between of

Nationwide addition, recently XXXX. in Children’s first Hospital In adopting team Dropbox its deployment, after expanded

Nationwide’s Our to partnership provide key ability to Dropbox. a a with was secure HIPAA-compliant continued

posted the X-K stock-based Before GAAP release I was may and filed margin efficiency indicated related reconciliation driven materials furnished of supplemental for which of was XXXX. depreciation The five in higher by our to Form Gross was that want earnings and be offset headcount the Investor investor found with by hardware, of quarter to compared was otherwise with our as gross on Relations share increase results cost a including of move gains statement revenue, non-GAAP to fourth P&L. the an XX%, the the in margin website. measures partially compensation. income points today with which infrastructure that our exclude increase all in quarter unit to our I on follow expenses. unless percentage our SEC note non-GAAP A lower

percentage a primarily of new quarter QX to XX% revenue development ago. and to revenue million, increase driven year and was R&D $XXX expenses. expense in XX% or investments Moving Fourth in of The compared headcount a by testing. higher product was as operating

headquarters this to In that highest that recall expense existing occupied we and proportion our This rent rent categories, headcount the of overlapping for is carries both was the corporate new S&M the associated of expense fourth QX or decreased addition, spend but revenue expense new non-income rent impacts due in each when campaign. largest than allocated of million with our to of property by took we our percentage new was The overhead. compared based year. to it as lower G&A expenses R&D, $XX XX% since and million $XX you our global ago. of quarter Until headquarters. lower nominally of of decrease our in or The lower revenue and began XX% later of June in QX expense brand we initiated revenue XXXX, percentage possession the outside was year year, XXXX will we property. a the expense relative recognizing taxes, higher result in may in one incur of our was services expense of marketing offset XX% spend. partially G&A prior point a the

the income up based quarter year-ago. margin margin an translates was $X.XX weighted gross percentage for was fourth period. earned the eight million on EPS from in QX. point paired we profit $XX million $XXX together, lower of as This by which $XX QX operating Taken driven is S&M XXXX, $X.XX XX% a quarter. in This the shares spend per improvement share, outstanding continued from was of Net $XX million margin, diluted in improvement up with Diluted operating in QX expansion to million, operating XXXX. from average

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

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

year-over-year Let’s move our seven full was our Capital for spend from included headquarters. seven points $X.XXX year Gross was was from to operations expenditures million, flow $XX or $XXX flow cash up our Cash XXXX prior XXXX. of in year, new margin from percentage XXXX, growth. also operating XX% points the XX%, $XX and $XXX XXXX. were million CapEx representing of yielding on was margin Total million results. million revenue XX%, up in percentage of on XX% free revenue. billion,

reimbursements Excluding did headquarters or for spend, had $XXX capital $XX lines additions equipment. also XXXX during flow would million free the In any we cash been landlord have improvement from receive lease not million XX% our new of to allowance of center our We our tenant data for XXXX. revenue.

how Before welcome team walk excited through to for I Dropbox. to I’d are guidance reiterate we XXXX. to our like HelloSign to

share will our acquisition revenue want our details to contribute some Given their that it guidance to calendar I XXXX, QX of results. and include HelloSign’s ago, financial on how the performance few help the we will was we business business context of our closed weeks approximately to Dropbox’s projected top In provide HelloSign’s contribution year. recognize This purchase HelloSign’s the for part a to accounting be year. HelloSign XXXX, of amount from guidelines line to HelloSign’s the expect we $XX throughout will reduce a because material, In revenue. revenue write-down don’t million. significant contribution will write-down deferred of we portion as about

opportunity disclosures results a provide closed about to key to and In drive HelloSign’s performance. we expect report around basis, combined addition, revenue year we together. excited we a metrics based the not on term, to when We business entity. HelloSign’s we’re revenue. financials XXXX Longer have financial synergies our we acquisition, partial of reflect planning forward On our to as explicit intend are go a the

the Now of note HelloSign. year, certain our that for compensation, acquisition well quarter impact exclude guidance. non-GAAP turn to Please the of our let’s margins related expenses and stock-based to operating upcoming the as as

free Non-GAAP of found posted margin in be be may be $XXX bonuses. price. supplemental as to the margins on the shares the the quarter due in Investor $XXX payout Additional like quarter, operating of website. $XXX day on share would With remind to of investor fewer there range of to in and we operating million, year-end average in to million X% mind, the of XX seasonality to based average that to everyone diluted flow XXXX, quarter million outstanding in there seasonality to first detail X%, to revenue reset I first and are range payroll of our $XXX expect because for that trailing Relations in days be weighted as and in of to our taxes range to cash each million. the well year the the revenue materials the is

incorporates margin also integration to and HelloSign. guidance related operating synergy Our investments

year Turning full to the of XXXX.

in continued the growth. one-time of corporate margin $X.XXX Non-GAAP to to We lower XXXX to headquarters. in we This support million to expect new revenue be year be those the as of first range range related free and of cash quarters $XXX slightly to $X.XXX the to XX.X%, be through two with to spend consistent our to to be a the open XXXX range million. XX.X% center billion. of Fiscal data margin in $XXX of new the build-out the range includes million operating gross flow

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

our average want XXXX in In the ongoing $XXX our Finally, to of commitment balancing weighted I we based price. average be to million profitability. to conclusion, fully million growth expect reiterate trailing day on share to diluted range shares $XXX outstanding and XX

investments business term impact the we while this to the targets. those one now and as on we synergies, remarks. margin will by as to to spend time track On expansion note, of the in I’ll remain well our it trajectory our year-over-year of second year year HelloSign, half the expect related long closing margin We’re and opportunities from in with decrease turn be for HelloSign headquarters operating Drew the our XXXX. resume to unlock we achieve excited of the to about end this back ahead investing

Drew Houston

Ajay. Thank you,

and We’re focused it. the all to content expand bringing and our by around communication together platform on continuing coordination

work. we our tools team open is to to and to reduce products between committed use our ecosystem love, the friction the users expand to Our developing continue people

entire year for making be and collaboration XXXX. such organizations and behalf pleased ahead really making, Chief I’m for moment all the I’d our that, great our team all the thank our forward is We’re platform across to to to couldn’t that to With of sizes invite like year. industries. preferred we’ve more Yamini, a we’re I to XXXX progress becoming with for take everything Dropbox validate an I’d results team, our management of help On Q&A. of another accomplished, proud Customer users, and join the partners and incredible Dropbox looking me Ajay Officer, in like

As reminder, including focus and marketing business customer sales, functions, Yamini a development. partner Operator? oversees and our


And DiFucci John question of with line Jefferies. [Operator comes Instructions] from the first our

open. now is line Your

John DiFucci

you. follow-up guess, first the then I have Thank Ajay, question I is for Drew. for and

else being something lower think, Are want of for there’s but marketing? margin for there I a – And you is is some you you in get takes guidance would, the increasing we of I there So beyond in economies to just that? in integration, get they’re sales lot guiding But know, would XXXX give of year. happening investment lower gave a and Or Ajay, the HelloSign’s you’re to that offset something economies would else scale just there? margins and also scale the due and margins, that. to here,

Ajay Vashee

roughly the is talk about Ajay. the to lower for on. a margin is each I’d seen for This the of that points HelloSign we’ve we us. every to of rate, margin that One, something part current would employee-related Happy one historically. due is earlier operating couple and year payroll taxes. high made at reset question. level like to our at see our And year be dilutive to that’s of Sure. we really their year, take point a year, This And reiterate philosophy that every higher income QX and seasonally operating run costs

margin reserving integration overlapping our investments the the the headquarters rent I talked corporate expect as that investments expansion also and course and looking synergy for decrease HelloSign-related exit over in to we I we to make half the impact our some the to in existing year. of year and say, guidance for reassume flexibility of ahead, from trajectory expense new as second will our operating the us XXXX. as We’re of well to year-over-year

John DiFucci


that is overlap having like sounds rent a here, an it impact. effect, So year-over-year too,


Ajay Vashee

Yes. Yes.

John DiFucci

Okay. on question And then, Drew, a HelloSign.

has be But It as be or sort functionality of Dropbox? to along customers. both. So the thinking to for workflow to actually Dropbox the becomes from and plan that company its firmly sort own. workflow on there talk we integrated your is of way; just meaningful as of its and simple we’ve functionality SKUs can or some own? part workflow. question e-signature, stands do will very you pulls it is you one wonder, And just evolved as that this greater way, file, in too, to it trying this it’s heard even a charge about Dropbox, certainly, the it’s share once than like sync – included a And can and But this and with of second stand incremental like collaboration in in part separately on then I’m e-signature something

Drew Houston

Thanks. alluding And some of excited. why and highlighting I reasons think you’re we’re to the

opportunity scale more certainly and of lot add combine distribution see sharing. we this exist of basics to with product their and HelloSign, the lot our and a go in the already and can platform a we that our and beyond Dropbox our content the – existing and their or we And by or value all a with future. storing and and value business access in in had felt so And products opportunity that business of where great a both lot

a more meaningful HelloSign It’s to for where pretty in surface still of companies and lot moving closed we of that the a there’s to up ourselves over but have and our couple and through functionality us weeks partnerships. in opportunities of and product our transaction time both ways stack early. integrate. buy more core The like our our certainly product customers turning in products ago, we we see area So

Sync So of those second answer more a excited plan why you’ll lot quarters. the hear here, we coming reasons that the the are to that. and to charge we’re opportunity separately. short broadly, are is yes. Smart about in plan. Showcase more and in or We tier is Smart plans stand-alone well, business – HelloSign think a part features in do like or the our like or, our examples to expand The or lot Showcase about SKUs and to go be ARPU And a our of HelloSign in of intention think is We there remain this for business. that sometimes, benefits functionality, as Sync be our it – are Paper overall, sometimes And features about and separate higher like will that we it’ll our go HelloSign strategy higher

those are So important ARPU for growth. levers

John DiFucci

lot a Thanks great. Okay, guys.

Drew Houston



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

Your is open. line now

Mark Murphy

do you to, you. wanted fraction targets, are is using Extensions line, more growing think of XXX adds the do of million the Or paying thought paying if of base quarter you HelloSign little that? this per do user product if of here to that would along what think cetera, to small cadence enable trajectory Dropbox; succeed, of you if opportunity is high-value level? faster version that only user all this a users gating Paper, Ajay, et and you the factor you to paid to kind you this help to thank And think you do than free sustain the XX% and continues level? the the XX.X that’s this a scale the strategy Drew, when consider which of representing Yes, with step XXX,XXX pretty up with the million above likely it

Drew Houston

Mark. thanks, Well, Great.

terms front to continue opportunity, growing of And far of addressing we’re – adoption. And higher-value starts for of in driving adoption a believe we it as a good of So the subscriber we in expanding and both in TAM terms us. HelloSign’s early and growing by the in see think we example of we’re – of ton our that expansion base problem, us, of use plans ton as and innings – of a and cases, solving that. there’s certainly universal with and opportunity

Ajay Vashee

Yes. second Mark, we And question, but to some of paying the context. formally certainly to your guide provide answer to part don’t happy users

paying in any is drive to past, one period. strategy initiatives expansion. Our and that conversion in a of may through revenue we’re I’ve mentioned in And combination the quarter, growth of the depends levers ARPU as outpace Really user other. on given deploying these that the

rate wouldn’t a run on I So either index necessarily dimension. to

as we’ve strategy, and your more convert for will ahead, see valuable more reflected Looking LTV is volume and conversion to platform that time. our strength I to philosophy you’ll will think as people the this with and to want more in ARPU. perhaps We focus users, more think and continued we well our over successful And directly, be question us answer as profile, best a continue been to growing users do with on driving be bit high-value that we our conversions.

Mark Murphy


and quick with for Lastly, all impacts this just duration that to in as a is of follow-up at either numbers, deferred normalize if to were material? billings FX those quarter respect possible it the for revenue

Ajay Vashee

an in while correlate to be that to are but us. question. related don’t lower directly items between various are And quarter, to great us, drive there background subscribers. And deferred there billings previously, higher given bit our can can the mix the mentioned call. revenue annual for consistently additions they’re and revenue billings or a on give I’ll not is sensitive I’ve context and a revenue that’s example revenue. highly that monthly a balance those as for of growth to Sure, for growth little And And predictive of

as So way seen We’ve small that to as and billings well movements revenue. prior a sensitive deviations a in between can result impact billings and are changes one, given deferred billings periods revenue, shift meaningful and in in this certainly skew can period revenue. as last FX in can FX the relative more also mix in to

billings So Mark, normalized question, QX. for to would with answer QX growth our been in actually FX, your very have consistent

Mark Murphy

you. Thank


Thank question next Davis with Richard the our line from you. And comes of Canaccord.

line open. now Your is

Richard Davis

a product question. Maybe Great.

help little of right a of from the have I content to the kind it’s I people, it’s touched time? the and time, sales sense a Dropbox intelligence. that. that it’s for at pain kind that the right find guys? So things So something mean, but could on you right right? Maybe content it’s guys of otherwise, salespeople, at like or one you get something makes salespeople, that – kind hear for this bit, of Is maybe

Ajay Vashee

more proposal present content. branded contracts signed machine there’s content, would is even And of things about to quarter examples some content think of you part relevant of that. a quarters. a being talked address an with doing you, way. Showcase people of able incredibly navigate those that some to over I getting as access of the do of salespeople what think about their what with need in or improvements in positioned Absolutely. kinds as want HelloSign use do to been with most We’ve talked we’re you some certainly client’s the about we’ve large cases. even well helping to do what’s we’ve with far or want surface made to making and search I intelligence and are their the couple And And that important salespeople helping say we’ve investments this to all also and certainly, content, last And

kinds cases and around different – of use years, the with more done to help We’re all over we’ve content. more

expect our We expand into both partners. first-party products adjacencies, and with to through

Richard Davis

real And quickly. just it. Got

and You’ve et about the you’ve changes it improvements, on architecture lot done a and call. of cetera, talked

logical cost we’re So is terms it that there out runway think as of on savings, for kind of us this of improvement shouldn’t We kind front? continuing not running of to like the in of – right?

Ajay Vashee

at can high answer This is I Ajay. a that level.

has to important think infrastructure will to a in very have been be important team, investing strong continue infrastructure us us. and I to and we

examples of that’s in storage across things our wave and innovation focused tier us are that and it’s of we’re new software like on area hardware that, Things priority good beyond. certainly, next So stack. the a XXXX – like delivering but for SMR,

Drew Houston

I’d we’re be foundational the in in or then in you of machine investing get kinds and investing investments whole next ready the both and say innovation. And of cost and need Yes. generation – for learning compute to to we’re making we’re efficiency –

Richard Davis

Perfect. you. Thank


Mahaney you. Thank next question Markets. Capital from And our line Mark of with the comes RBC

now Your line open. is

Zachary Schwartzman

customers XXXX? Was have Paper, on year? gained amongst Showcase, which guys. video through or the the which Trying incremental improvements Hi, for a the specifically, else? with customers Thanks. product this year Drew, products adoption of Zachary better your Mark. Schwartzman something most it resonated in feature and Yamini, to how perhaps commenting strongest have traction your It’s idea the gained

Drew Houston

seen. and look Well, so say that’s been our yes, integrations adoption SKU you’ve and ecosystem. at our strategic our that And we the a and has great we’ve with from of higher then couple really making this growth different been the of standpoint standpoint, point, in engagement from Advanced a pivotal I’d ARPU the plans, proud progress a lenses. and tier an been from conversion we’re from more

year, with we Salesforce last Google Zoom. and announced So and partnerships

Dropbox the for programmatic road a where ecosystem. excited about really like open-partner We’re all some Extensions, things and whole we those have maps

at that the as more Dropbox kind they that to SaaS tie do our they’re so problem the customers different how turning world’s all this have And that tie product when together and and the tools together. mayhem around and experiencing, and more all suites we the of office company look to they’re

So us a and the – a of investment area thematically big for incumbents. huge against differentiator those that’s are

Zachary Schwartzman

Great. Thanks.


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

now line is open. Your

Heather Bellini

of for you. noise. the And thank a I had couple I background Great, questions. apologize

on The first, you share noticed you the I what any the quarter, was with level? And talk did you even of you wondering a year. churn of consumer could there kind if see Paper. level, this if at us follow-up changes then enterprise then any changes on had the question course And over I could the about

Yamini Rangan

and the users; churn. any do consistent at Overall, business revenue we our the to take We as question quarter I Heather. retention drive of we see of number seeing a initiatives of Thanks, from on number engagement perspective subscribers. the as given with Sure. are metrics, metrics. can the well of very consistent those, both

in all. churn metrics So no at change

Heather Bellini

Paper, are is you then higher-end was How Great, As type you. you. right? that And thinking to this for follow-up offering need then kind about start I do of about, to functionality? to see to that, see question my premium a right. thank you able of maybe kind Okay. migrating to of as what Paper we Drew. guess All and could just to guys that kind Thank to selling functionality, SKU? for over right, do a be you functionality time, continue of higher-priced be able product, additional customers And be that evolve

Drew Houston

great question. Yes, Sure.

So are think levers. value more ARPU when about a about – I few think values different for customers, creating growth and there we creating more – our

and direct and are And there directly levers lifetime which like driving higher-tier only monetization pretty Sync, our are because higher-priced Smart – so so for paying available more and value. Showcase there’s and plans on plans monetization are then people those indirect drive

early is rate an or latter, that engagement we they the that core retain of the Paper think noticed that drive the part even strategic. convert where it’s at it experience, is And that customers Dropbox better. Paper the on So the Business twice of and adopt rate we to example twice convert and can Dropbox at

the which value. part that engagement, Paper like lifetime products free retention, of and which or drive be might plans of drive lower-tier drive other products product part So

an engagement and So have to we we want monetization eye certainly monetization. through balance do, towards we everything and

Heather Bellini

you. Okay, thank


Post Merrill next the question our of from line Justin Lynch. And comes with you. Thank

Your line is now open.

Justin Post

your on can you. and Thanks. over your thank go-to-market that And sales now you then me is year data how are give Great, the point headcount you team, a initiatives out last key for as grown year-over-year. changed right has Maybe XXXX? to look where the just much what how

Yamini Rangan

as the initiatives. go-to-market Great. the question take as headcount I the well in terms of can

unique to we outbound you continue viral team. very then the adoption, know, very headcount, as have use as team on a a So with targeted go-to-market strategy the with where self-serve and land start we

very where deployments targeted are see from where and the we sales growing perspective we So growing and marketing leveraging. areas therefore are

very in investing as countries in expanding as headcount success. well specific for sales we’re customer So

the key that things Going areas so for point engagement, back those we in the to driving really from was invest us Drew is a one making, of sales perspective.

one As the the far as initiatives are first well, go-to-market is engine. conversion around concerned,

continue one scale, side. conversion have we make the of so largest the investments engines conversion productized, which We is on to at

around area investment expansion. The of is second team

heard, XXX,XXX went year, big us. and last in probably a to teams you as us, For we the opportunity for is that

continue in new HelloSign course, as then we’ll final the teams. area, is to investment acquiring teams that So getting to invest expanding hands of outbound product we’ll continue sales integration of our make as teams. current and well And the in within the the

Justin Post

Great, thank you.


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

Your line is open. now

Sarah Hindlian

to initiatives plans or All drivers right. higher-priced ARPU Great, drive the quick the after to user look between thank as starting I how your conversion, market, online I do in that plan on coming how paid as team Yamini. paid shape you way better about you. Zoom, about Drew, And at how feel conversion? Yamini, you’re going or when with of see agreements you. the partnership enterprise want of think do you’re had you’re follow-up looking When others, at year, particular, more particular, of to adoption? number in for start a you then have you either you a this those a

Drew Houston


start advantage I’ll a suites just it reasons have that partnerships see with as similar engagement. to drives to is which asset, and But of users love contributes and the other We overall, ecosystem, because our bundles our of the differentiating and that both from having more to a differentiator are the having status choice, our that some that ecosystem. valuable engagement really create product see office deep this, experience the mentioned. a and we for experience and our and and or I value lifetime products seamless integrations an open big we the integrated ecosystem both So

a Dropbox the so of interacting – number in are ways. a people then we that product, from our there’s lot more can surfaces retention, So that they because within more do find of drives at it and

on Business So to one platform. where our can is application something third-party or retain differentiated at teams have second, at the it’s integrations – that’s kind thing, for the to teams migrate teams when we XX% link of rates. a a And just stay look hard with reason higher be it’s and those themselves Dropbox of to

– lifetime that through metrics big drives it’s it think and in value, largely the strategic run. we So it’s long advantage business a both both near-term

Yamini Rangan

way of And They engine in talked through also conversion is conversion actually the is in the to journey. education unique use where is really paid part we’ve the a are them customers happens we second leverage them on We this the starting user. about to GDM, products, on one the users. users data approach science exposed thereon, as of we higher-value we see and that question ways the features is free from to get there that’s acquisition. us conversion on leveraging as to share collaborate able Sarah, and our you And that to get and businesses. drives we paid and then a And And use before, help which your point, for think that algorithms. taking and more, more so much onboarding team begin conversion what prompts our from of the to really start

have able the expansion. We where really approach teams particular growing to are are at and therefore, look continue outbound and those sales deployments deployments that

model scale forward. customer land that basic self-serve expansion use we’ll working, the to continue journey So is and to whole very to data-driven from to


Keirstead And our next line Bank. comes Karl Deutsche the question with of from

open. now Your is line

Karl Keirstead

Two Ajay. you. Thank for

as you’ve FX, on DR that FX First, the and billings Ajay, tomorrow DR revenue hits in amortizes into the back to past to to hit the revenue today line. said call a translates reported

XXXX that that’s revenue hit just to at XX%, XX%, there’s FX an of look out. guide your calling So when worth I’m I wondering whether

Ajay Vashee

FX question, rate reflects great say guidance the environment. revenue a our Karl. Sure, I would for current

the of the recognizing color we’re we’ve update will guidelines, when on revenue to mentioned trends as a more write-down that in from think also certainly, the year. you’re guidance over result, continue billings year. revenue be seeing we in point is guidance on XX% longer movements to our a revenue revenue them compounding contribution accounting seeing that And model just you closed and recognition revenue I term, for little them, revenue would course HelloSign helpful, be excited how and the business partial HelloSign year opportunity the deferred A integrate their XXXX a significant acquisition. together, for consistent that trends just we’re And drive a one synergies I about past and XX% well, over I contribute to as growth and that and on growth of So this to there have that the we earlier, we exit note very revenue a from us due portion XXXXinto have that of we rates structuring for as we expect just to relatively and FX likely materialize to based revenue purchase works. deferred certainly, we’re the Quarter-to-quarter, we that beyond. are our as and year just as guidance know, mentioned the issued, we’ll immaterial in smaller in impact given that

Karl Keirstead

gross correctly, Okay. Thanks, room still heard cost you in my you then XXXX out XXXX lot Ajay. the got I think, unit margins And after, back guidance, question, on flat can tech. left That’s we with a XXXX. that margin if in storage go you efficiency second basis seems I of just to helpful. rolling your gross said XXX-plus point the a next-gen increase It gains if

investment. there So some are of areas offsetting obviously,

margins could think But think an in some XXXX investments. One would center in elaborate comments and data I you’d gross getting his little well. in as uplift a bit? be Drew more mentioned international you

Ajay Vashee

of bit a reiterate just can I color. what then Drew said, provide Sure,

we us to many the new that storage across frequently continue roughly one to going storage cost a of that to we we for example ourselves, rolled to allow that by benefits tier unit accessed data that stack the hardware is XX% infrastructure innovation and is and deliver get from stack, certainly, tier continued out this our really reduce pretty managing of less So have new exciting XX%. software

earlier and the And savings infrastructure. along ones have compute for we view of reinvest innovations come rollout QX. into international first term. we of So and factored changes, what back quarters with to delivered year margins lower in are plan these longer mentioned relative that’s being then of to other gross into the what our year, like two been the margin slightly I SMR, expansion that about through to And the to

we what in again being in ramp to delivered about that think point margins the in and the than up But then the delivered roughly can starting year. back are You QX. past half lower QX QX one expand certainly, through beyond and what we’ve of

Karl Keirstead

Thanks for great. Okay, that.


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

line Your is now open.

Alan Wilson

of added just related that which I other from couple if is million into you But reaccelerate X.X my there there’s paid years. un-grandfathering churn you This what X.X is asking increased results, Wilson how is people down question, way net Maybe on explaining, at. have curious going million maybe to think this users last for of year, be for another or kind the Alex. gotten some any X.X the probably first might the anything I’m potential view XXXX. and if of headwinds million, to those worth Scott

Ajay Vashee

that questions a answer I Ajay. you and then few on follow-up is that can touch the perhaps comments of This made earlier I any have.

one launching through the launched outpace expansion. year, we’re levers to drive user on initiatives can of and over given quarter revenue is Depending conversion Our a or those strategy a other. combination that in a ARPU given of the growth that paying we’ve

help ahead, index for ARPU. on breadth more feed. M&A best over platform, to and volume our more up to I strategy more want continued looking many with them see in theme the conversion, to theme say, is something And strategy that we’re as profile. and that and capabilities that think been users really conversion we think as gearing would the very successful this LTV growing our that’s do for convert high-value We’ve and strategy, I we how you’ll want of play of one we’ve jobs will our elements with the we more continue you product time. been and I extend that and with successful as well to reflected I in strength of our users And

be more As more we more we deliver something to be value, think customers. that eventually, will and it’ll users that valuable

Drew Houston

just going going I teams, become work really cases, as – that Ajay users higher going focused this we – public. focused general to just our the after just And at on so business would use users on more market, And after saying, add more as just to after convert was those than to we Drew. is add really, I add, I ARPU. was go going much going in a way and was focus

Alan Wilson

four months product unrelated. of about you’re kind we Where that early Zoom maybe after from a with last announced do any we benefit go-to-market Drew, comment three know the anecdotes and that quarter. partnership to I able stand seeing? on perspective? integration regard you it’s early, to talked to be And may

Drew Houston

to And in mentioned, you really a one from present being as within being partnership. to Zoom the communication of get able and Zoom early step the Well, meeting to it’s able Dropbox. Dropbox is within initiate content pretty basics

interesting time, about And we road map and and because And go use basic to those very excited common are those to so have and our integrations, creative the that are deeper over we’re more things. have. cases those a most do customers

with really I time more to similar find area we’ve what we’ll about, more more Salesforce, that got and you’ll road integrations. excited over you’re hear a maps pretty more and drumbeat done Zoom so – all to surface where product build and both and Zoom of And Salesforce, would we’re see about and in going and more say we’ve Google

Alan Wilson

you. Thank


next our line And Capital comes Markets. the question Rob KeyBanc from with Owens of

is line now open. Your

Rob Owens

Since taking expense around answered, of margin Great. Thanks the rent a curious that question. to XXXX and just function when most would have for double expense rent hit as my been guidance end.

Ajay Vashee

the there you’ll dual And see make year, that’s move being roughly rent expense think our that abate. as about half it the second and when to that Sure, start of quantum this we I as two headquarters current would space in percentage points. we into

Rob Owens

player spend around a space. given And you’ve in that marketing got for dominant thought HelloSign e-signature process incremental

Yamini Rangan

certainly, could take question. Yes, I that

of to So So a think building, lot also as get base, to users of campaigns, really a e-sig an of our thought awareness users. the is XX.X customer the the initial also from and friction awareness but paid to those you million spend couple identifying of the perspective driving areas basic is campaigns quarters about building but our a have just users, workflow not and from around we right? lot process right

planning We’re fairly on going on and quickly. executing start that, we are that to

Drew Houston

say I’d product, driving they to surfaces house for for and we ads most have that. or within don’t we’re incremental then the effective spend those our so are – kind Yes. distribution don’t have are And marketing levers of going

Rob Owens

you guys. All right. Thank


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

Your line is now open.

Rishi Jaluria

Thanks for guys. my taking question

start of made. I Let a with you you, me Ajay. to just comments go to couple want different back

inclusive margins for XXXX. HelloSign, on X% write-down, like revenue sounds X% deferred of expense drag it rent So the about dual drag is a on a is margins. about

which that I’m so done those I onetime-ish e So if be XXXX, about absence would at is I above me kind in this the both something of what of XX% correctly? tells that you’d Or together, there square in year. margins missing? these about b you’ve Am actually far thinking operating this factors,

Ajay Vashee

a Yes, level. at you’re high thinking about that correctly

into HelloSign add even this we’re synergy and year. integration that the I’d investments component that one the is think making I in

that your So investments certainly guidance make the in we we are up. adds but to reserving some those math provided, flexibility

Rishi Jaluria

either Okay, to time at XXX,XXX IPO XXX or the seeing Business thanks. That’s helpful. for And Yamini, Drew then grow of from XXX, now.

should converting like Dropbox this directionally think And maybe combination? for get net a that? existing new, what’s it would that driving we sense to Just business, individual plans you’re to about users growth. is from How

Drew Houston

to think that spoke I to. the some a of testament it’s making investments been we’ve Yamini

fundamental model is is scaled first go-to-market our adoption and So with is viral fundamental efficient. really or model fundamentally self-serve –

becomes we’re working a company. in Dropbox department, work. it at So on team, a start team – people able becomes as a home. to the bring – and using then They start They

along to of that that And the really been the we’ve conversion the and journey an where – engine people you from And a of to one journey. invest. phase user more to that’s efficiencies product-driven that effectively. it faster lot that’s making move – and due we’re So we increase very going as continue investments a remove area each of user friction to mentioned is in think or

Rishi Jaluria

Got it. Thank you.


one that comes Securities. Eberle And have we for Chris from with time last question, Nomura and

is line Your now open.

Chris Eberle

what percentage Business Hey spend? Can some taking And question. side? of other currently enterprise translate revenue? words, more us teams HelloSign it give does to XXX,XXX idea more for does guys, thanks of Or to In does give the help is you number you the tied enterprise that how on consumer revenue exposure?

Ajay Vashee

Sure, of the this can part take is question. your I Ajay. first

of the If individuals, paying you look so paying at XX.X users, majority they’re our individual users those of plans. our million for are one subscription

seeing we’re products. teams’ shift and larger new into basis, period-to-period a from larger on subscribers gross mix However, our a

landing one. day the them right and on users one, for better day for better getting We’re in them on the at right product SKU

so an really journey at plans as better adopt expansion into philosophy we’re plans individual, team and getting We’re work customer over time. then individuals of if the and encouraging them at account managing using drive focused migrating team one time, Dropbox on and to someone’s over also this our of

question. So to I’ll what Yamini part certainly, a is the of for seeing. turn your teams second over shift towards it we’re mix

Yamini Rangan

a bit acquisition. terms add happens Yes. HelloSign color the with in little I of can what

engine. One HelloSign lot of XX,XXX are self-serve excited not the very from more sales-assisted because similar. paying model. of that in so really the motion. terms a or to Their very a vertical we synergy about customers more there’s one and sizes, why similarly a the shift acquisition reasons engine we’re But it’s a by the perspective, They is is importantly, perspective, lot base in a our similarities way It’s other. of businesses customer complemented a all synergistic go-to-market have of a from are really

go of about So go it while to products market. really built the our market, family our excited of doesn’t very HelloSign we the into makeup are getting shift to


And you. Thank with turn remarks. conference to like the over that, back Drew closing to would I for

Drew Houston

today. your support to Well, forward thank all quarter. and us right. We you All joining look speaking you appreciate next with for


disconnect. Everyone, for and today have conclude all Ladies the in may This program, wonderful day. and participating thank conference. gentlemen, does a you you