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Dropbox (DBX)

Participants
Darren Yip Investor Relations
Drew Houston Co-Founder and Chief Executive Officer
Ajay Vashee Chief Financial Officer
Yamini Rangan Chief Customer Officer
Howard Ma Jeffrey
Heather Bellini Goldman Sachs
Richard Davis Canaccord
Mark Murphy JP Morgan
Jason Ader William Blair
Shaun Hannon Bank of America
Karl Keirstead Deutsche Bank
Hannah Barkdoll D.A. Davidson
Chris Eberle Nomura
Zach Schwartzman RBC Capital Markets
Pat Walravens JMP Securities
Call transcript
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Operator

Good afternoon, ladies and gentlemen. Thank you for joining Dropbox’s Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions.

As a reminder, this conference call is being recorded, and will be available for replay from the Investor Relations section of Dropbox’s website following this call.

the Relations. to hand Head Yip, now Investor of will call Darren over Dropbox’s I ahead. go Please

Darren Yip

Thank you. the and call. that Good afternoon distributed Today, XXXX second were Dropbox earnings quarter will discuss earlier. quarterly results welcome financial to Dropbox’s

for actual and including those that prospects. call performance projected to XXXX those the subject These results XXXX XX, business, for financial statements Factors statements, our our or could Factors growth our implied long-term call. the XX, known In . XX-Q be relating results, to XX-Q the and are during Statements on strategy, included from forward-looking unknown and quarter described particular, materially statements this uncertainties will ended this the Form future March include in that cause risks expected Risk June in and ended Risk year of overall our differ include to in future Form

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

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

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

Drew Houston

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

Q&A. Officer; On Chief Rangan, our Officer, with join is Financial Chief Yamini me Ajay Customer the will us our also during Vashee, call

results, touch about guidance and expansion Ajay and strategy review on continued financial provide our XXXX. of product our highlights for business will Today, our I’ll ecosystem. our QX go-to-market talk and QX and the fiscal

strong over-year, business. results delivered expansion. paying In year- across QX, user grew XX% Revenue by our we growth and ARPU driven

robust continue we of profitability. or collaboration market to strength also to demonstrate of We efficient deliver operational both as global our strategy the growth continue results go discipline. platform generated balance our These and to and margins

where the QX First help new We we begin experience make product lot work Dropbox, is a for can with that the and believe our at there announcements. room our new that had of Dropbox update for unveiled number using the exciting lot technology we experience think we a of improvement and users. a we better

now are these work is there better meant and in new content while reality new problems is too. tools are are these different means us productivity help our As to places. that apps creating all the together, tools Having all new scattered

We have should it's a toggling have and hard between who time doing keep out and apps forth teams coordinated to to figure back and hard the staying what. be different

activity browser there new we file and no interact are of And using the way folders no in your really files changed really of The files of the years. and and teams your comes in. to static Dropbox desktop is view on no people, that’s still and old where with tools, the bunch have a ones changed. were hasn’t bunch while we on haven't today new computer The a XX

magic with together you experience workspace tools have desktop that a you wherever in let content, all where over stuff This all Dropbox bring decade, into offers Dropbox your foreground The app work a magic evolves never has users your the them everyone place, connect and Dropbox before. new and magic their Dropbox a in our new For can that the had folder includes folder to have a a workspace users' all unified are. been is they one organize one to they an new have place.

content together. and bringing create, brings traditional within now one so Dropbox everything and PDF by files docs, and and workspace together, build access like on content well slides traditional people new this The is cloud First, as a new as users in keeping cloud content image Google history users sheets place; and both office of can files Dropbox. share organized

one with their the have store navigate. they everything in the in XX stuff. and articles, and Dropbox. pages not work lot it’s web box, And easier wiki will tools place, productivity rest to project and search to can one to Users online addition, management create news of search assets, In with shortcuts all together a across

the throughout other the tools companies use our Building the new part that integral Dropbox people integrations users' Dropbox We're brings together. day with and desks sure experience. apps on from the new Adobe Second, like an existing new introducing of ones. tools Salesforce, several are making were

content with shared send and our channels the partnership Starting the collaborate directly and in easily strategic They bridge with Dropbox content the items. to to be start between integration share Dropbox to to work files users and able bring new Slack, Dropbox context. new helps conversation. Users Slack within Slack with gap seamlessly on will seamlessly Dropbox letting files communication, Slack users Slack help conversations and

partnership, bring integration one to Zoom. another's to speaking our go-to-market relationship into products plan And users live customer June, went with their in cross Zoom our work of in with videoconferences. enabling also similar we facilitate We discovery to our

Dropbox. that Zoom will Dropbox, users add lives and join be be share and will during to they From on able to meetings, and Zoom's in able meetings, collaborate content

with more and more soon. teams also we and content, building to a Atlassian integration manage effectively the with of to will We in partnership help deep this on have enhanced Atlassian. process dimension their projects share announced We're

differentiators. ecosystem important about And most is, the happened of features to work put stay and that new it together, new making inoperable of we the All Dropbox integrations our built are firm people brings content just the these heart and the the in tools. partnerships so believers power finally, platform expand center sync. it team of all isn't workforce. At open our help robust Dropbox users' people and and one We're at of is and the

We rich transform folders into workspaces. shared

get highlighted Now can more folders to can users at everyone teams knows people can pinning are top content understand they sign mention happens by the be descriptions help use, doing. workspace collaborators Key the to what about by next. and it coordinated to adding the work so to of the even in

gain on web, visibility closed new within Dropbox desktop, the also seat. teams tabs a team file comments, what by activity and also on team progress collaboration and content loops, The new across info keep and shared creating see latest can mobile. The and alongside their Teams content including Zoom feedback Slack viewer users work. Dropbox in can activity and right share

a content, your new all teamwork Dropbox, workspace. tools live and With one together of in collaborative

individual users In desktop made quarter, improvements addition our more to plans to help last we app, efficiently. work new our

smart we added to First, plus our SKU. Dropbox sync

their the giving a Smart the sync while frees us view them ability hard access still by and files to drive content space desktop. computers in from on cloud, moving users right

using search allowing machine a to name. to just In plus addition, users, them brought learning full text instead file keywords of files enabled their search we

which back accidental to or plan, time. We is or also undo to deleted point edits the restore by that can entire a in Dropbox work Rewind folders even quickly rollback an account introduced capability taking account an

we of professional sync, less users powerful access plan, our to process automates of of launched which added smart items computers Rewind. an frequently extended history the Next, even off version and version more moving enhance an Dropbox

expanded list includes an users access premium rich to professional of now have file which supported previous, addition, In types. newly

and ownership protect Our a that information files, their professional the customers new sharing plan also marketing overlays allowing includes when with date clients. tool on work water to

individual increasing we're SKUs us our finally, across and help differentiate plans. both further And storage teams limits our

our Dropbox content to workspace powerful collaboration. and first together, an and new a important continues play the content role Paper, while Turning party Paper for experience organize to to creation bring is teams Dropbox as

Over months, coded with rolled These task can and a to simplify color will and of so focused. the key we've a handful updates help Paper on Tables we've image stay coordination organization. teams and teams data how project enhancements improve the stay assignments, markers, alignment, part working features everyone progress help of projects organized, past out are management new tables. few to and added further

its helping and to efforts construction. engineering field QX, SHO-BOND our is includes this business partnering which deployment Paper contracting, Dropbox efficient is in and drive is Paper Holdings, with workflows Dropbox In civil to digital specializing SHO-BOND to customer workers. to transformation wins. facilitate more for use a also this with Japanese firm drive plans

effectively productivity their eliminate need the addition physical image to colleagues. capabilities and whiteboards enable workers information SHO-BOND efficiency, to share embedded native Paper improving critical to leverage and will for with more In

visibility, with how are pages this Dropbox. year, Earlier to Next our is providing tools the we with and admin business their to teams, admins activity launched monitor deployment users engaging experience. controls,

a think to unique QX, these launched we feature Dropbox. in is recently with I capabilities actions, quick which

admins This devices, much time identified to admins files, enables actions, processes once link remediate like on page have saving they've to feature allows Quick restore previously actions their removing would in multiple team more. that on issues quickly steps. taken apps, wipe activity and

our Now let's datacenter footprint our at platform. the move our more announce Coast for datacenter facility Oregon provide went new our a the traffic. of in powers live cost U.S. on to I'm will end is and Oregon The the pleased fourth July. to infrastructure that that efficient West

an continues efficiency. eye base product quarter app. cost user maintaining us managing Dropbox our to we're the on summary, with towards We've new all our and an for best-in-class performance, been infrastructure and foreground re-imagined how In works desktop and footprint design experience global it's As an exceptional reliability, grow, front.

thrilled our bring our to tools love also be Atlassian the Zoom and into that users We're partnering Slack, ecosystem. to

Dropbox its we and we're evolving way potential. together we're excited With the work about the new

to over results. walk will I it our CFO financial turn our to Ajay through

Ajay Vashee

Thank you, Drew.

demonstrate balance revenue by users the line to Total quarter at delivering profitability. year-over-year our and $XXX driven ARPU execution up million for a increase results in QX paying strong growth total healthy focus of XX% an on and was expansion. Our top

up driven by year modest expansion $XXX.XX premium, larger ago. new by professional $XXX.XX We the XX.X our sequential with timing headwind X% a paying paying is a users. There by ARPU adoption outbound primarily strong ARPU of QX, ended deals. QX advanced The year-over-year ARUP users. some driven of from million was in plans and QX in to was

to our market product business confident remainder go we the note I in of to perspective, the remain both that growth ARPU in for investments we the drive XXXX. ability are given continued the and making from

executing ways Let me highlight on a a were strategy. few

ensure First, proposition our optimize to pricing deliver continue plans value best to users and the we our and business. our we for

believe prepared remarks, raise the we we in price we plans subscription product a As made approximately our the of with SQ plus recently announced of and set and mentioned plan across users additions generating Drew XX%. We to with new doing features our his number are to plans our by individual to enable Dropbox. delivering value our value our the will committed expanded customers work we that feature remain best where to continue their across

to on began the made HelloSign's progress efforts. customers in into integrating enterprise Company offering all we've globally. our HelloSign, we go for XXxX SKU supports QX, great to In of Moving market

of drive has began base. We capabilities identifies are And in-out that and HelloSign's to to installed global testing of the Dropbox most which designed science team also with campaigns likely large HelloSign. finally, product customers use a awareness series been to experimenting our model marketing functionality data our

ahead had to our were team adoption expansions teams are e-signature and range of product about us. also healthcare, still wins we the verticals, of and data of customer help and In forward, workflow our Going including drive inform higher a collective it's retail. opportunity the education number across pleased and this QX excited a progress and efforts construction, of early we with targeting while will suite, HelloSign of believe

dozens to customer started XXXX deployments Dropbox leveraged of has few of and enterprise with private across Dropbox they that features its XX,XXX meaningfully the a these been state partners to in in excited QX. has is domain an then, when and of share domains. highlight usage of employer the a since To manage to Dropbox commitment healthcare like verification Dropbox users. Partners were deals Partners increase capture Since largest initial Massachusetts account

most their formal the entered agreement license enterprise with a up With enabling Partners into user expansion three Dropbox, recent next years. continued sell, over have

as and making information Dropbox faculty more campuses, In to and addition, recently as connect home research students. its a collaboration unified XX-plus the University City for platform selected of New accessible coursework and York to creating the

uses, Tuning like public university with that work Office is XXX in Dropboxes their already the integrations and urban with decision the and leading to us. key factors institution nation's tools Blackboard were

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

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

for Moving margin margin of continued increase compared driven to was the an the offset gross support was infrastructure gross of our with primarily teams. second X investments customer points quarter XX%, we've in increase our which by efficiency in the The to quarter P&L, partially was percentage made unit gains hardware, the by cost XXXX.

be with second the year We expect roughly of the gross to margins half in consistent QX.

temporarily HelloSign. also And new quarter incurring categories. which our facilities all first a of we to full our expenses, existing related of we to for expenses expenses period overlapping reminder, a OpEx recognized was Moving are related both as across and headquarters QX in operating the

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

due $XX million uptick in QX in well as or was XX% quarter, revenue, XX% fees. App of to as S&M expense Store slight a The modest year a second to compared headcount, ago. higher was in the increase

based $XX of outside to a XX% X taxes prior in of a was and expense spend. due expense hire The G&A year. of G&A and than million point percentage revenue non-income our was revenue as services or the increase revenue higher percentage as

Taking which $XX in operating This operating translates of margin, together, to points QX XXXX. a percentage are we million in in lower X in XX% of profit is XXXX. QX

deferred and operating the the our well write-down earlier, related of HelloSign from margin purchase accounting XXXX noted of the integration as quarter of the impacts associated included in revenue. facilities its expenses I second As overlapping as

EPS Net on million, quarter from $X.XX down diluted was year-ago. the share, a shares income average $XX Diluted for per in cents was $XX $X.XX based million million outstanding, down weighted from a year-ago. $XXX QX

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

added free Excluding lines flow lease cash have or capital spend million would the revenue. $XXX to In headquarters equipment. of million TIAs, for of been net XX% $XX QX, we datacenter our also

expect We be digits as percentage single lease forward. continue to annual on high basis to revenue an of a our capital going additions funds to

our guidance. let's to Now turn

be quarter million. to expenses to outstanding For range to trailing of to of day this nonrecurring margin $XXX to range expect our million average the shares XX of to and million of in to our third price. XXX includes related $XXX on and the XX% revenue the be revenue XXXX, operating X.X% Non-GAAP share in approximately be range in XXX range integration weighted new we diluted based of million headquarters average of HelloSign XX%, the

of XXXX quarter. currency For would guidance, continues the full reflect last $X.XXX $X.XXX similar $X.XXX to to we are $X.XX note was the our X impact to which raising year previously This to I billion billion billion billion. to range that revenue headwinds.

of of our margin XX% expect range X.X% headquarters nonrecurring We in of HelloSign continue related non-GAAP to to and this integration expenses to includes the revenue. operating be new and range XX% approximately to

new one-time million corporate expect free range in would excluding flow of to headquarters, million range cash to $XXX includes build the million. flow to out spend to related $XXX spend million be our the be free to this this $XXX We cash $XXX continue of

approximately generate to expect FYXX quarter. We in XX% flow third the of free cash

investments In outstanding perspective, XXXX we conclusion, Finally, business trailing price. range shares to to and in share our go expect both made the we fully well. product the million average performing to the on XXX diluted are million XX average of be XXX day from based market weighted our

QX we excited us. of revenue them opportunities XXXX, work. do users to to And QX deliver a innovate I'm best our the more positioned and value deliver business about and our the trajectory to enabling we across believe fiscal have well growth to of and we year-over-year ahead consistent we're continue their of

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

Drew Houston

We across what that's Thank you, best an the bring and of with new teams. tools, content the where and Ajay. We're Dropbox operating people the into want fragmented, not to new across tools breed we've everything just bring done. they ecosystem work that’s opportunity world see to but together

working. more at of website. also And will the IRR We're about I in here available Dropbox's you about I'm Francisco. more committed building. public on of our invite designing company we're XXth excited as September to that enlightened Day soon First Analyst way hear Details mission a San future to really feature be on

with Chief And Operator? invite Yamini, I'd me that, Customer Officer like to and join Q&A. for our Ajay to

Operator

from comes [Operator John Thank Jeffrey. go Please first ahead. instructions] you. question Difucci Our from

Howard Ma

Thanks taking call you've neat Hi, is this for actions. it it restore so you smart Experience of are part and guess mentioned is deleted work. the Howard quick for that question. Drew, lot I and of ability this Ma including to John. new sync so, a features the like Dropbox

go-to-market versus it's of you think in down, how do R&D stakes do philosophy do about features greater inflated are know are you am our spending samples? in you used mobile to spend, functionalities increasingly kind of we're daily Thanks. still think will really near-term so these of how that manage for you lot I R&D wondering, in our And has because think what lives? things how been in a table within So, -- do the overtime. and the become these come We

Drew Houston

We new entirely product an highlight the say app. I'd was. first, probably desktop standpoint a launched from Well,

So which biggest new what product. the our we change call made we've the is ever Dropbox, to

Dropbox smart we've while. And front, the that highlights something the has think say And a and our it's a had so conversion improvements I quarter. a I how We'd this much last of plan more turned been from drives the magic workspace. are to we've It's mean, to something great feature metaphor into product we important. for pay moved plus are plans about that big on more sync a a folder from which magic our

we're really solving you're work suffering found with for re-imagine become people There overload experiences that are, are Dropbox advantages. experience because of us a all workspace a a fragmented. living the lot are from problem bigger of information we of questions a And much our that we the couple asking our this and customers to be at to incredibly

So, first content. any is kind to moving beyond cloud files of

to experience. can your So, does your in projects, everything PowerPoints, your Google Docs to definitely a boards, need and you Trello we're really only you have native company with the next that next this

And day. a you're turning you workspace done is Dropbox out of a it's where second content from to place living put when all

early And people not see content, able engaging Zoom what's it's other experience but to Slack the going excited be files a being app, really to an about. the able so being start we're on is and and meeting. but activity, a and people final more just much to the content able people and see This Dropbox access still see from

we're I'd and started the was thumb this people find like because transformative drives we problem so, where we is And forgetting solving and that. product say things what the maybe pretty change

higher a as my across work different at see you and working me ecosystems value problem one, is the helped now which much tools. But life organize

front. product been and the on so, product actually we're a it's And quick, great

levels R&D rd reflects of making very that on we've expect think We our some the to investments been I change proportionately much. front. and don't

Ajay Vashee

invest can I committed includes that existing related just in our a of expenses high Ajay. level, part across a three the across from new give overlapping included year well is includes R&D we the ago. expenses efficiency in business for would on R&D. in second as those of At corporate were both high additional remain certainly color categories And more this major and level, to financials driving your little and our integration we as headquarters, question. of facilities bit neither spend a HelloSign the a at Yes R&D. QX I remind and

One Drew the new is experiences to. apps that talk the just new desktop like product

the intelligence We in also we machine whole invest DBXI. learning initiatives that of call and lot

in for spent, that us. our invest conversion conversion engine also our We that's fits engine, R&D self-served team in

driving and tier of conversion initiatives our lot continuous infrastructure, data made of flows, announcement is there. and and storage we're we around then cold SMR area investing a examples are and science also in and an we're where optimization and finally, So, on this that innovation boarding focused

Drew Houston

Yes.

on I'd this steaks. follow Just parts in which from our will products we're I should to become say, at still stage just very up point. differentiated table other

in You're to Doc Google see anytime not support going one soon. drive

Operator

go Bellini ahead. next Our Heather Sachs. question from comes Goldman from Please

Dan Church

respect think can to Dan growth, impact for magnitude for bit with us Church expectations? is help was Heather price on do a raise relative color about us I to the drivers base? you -- a how can help room and And the what's lastly, This questions And the of you. new May, increase you churn your taking then for installed the And time? wondering to adds you ability there then quick couple how your little for the of how respect give to Bellini. prices if to us much is customer to some has on question. been relative run? With understand Thanks ARPU ARPU in over

Ajay Vashee

those I’m to take questions. at Sure, this Ajay. is a stab happy

can perhaps of individual plans. reprising and So, more start and some plus color on SKU our the we with packaging our

plan, SKU away plus reminder of across we raise a pay capabilities announced repackaging and we addition want to product this. new a As approximately the do of to is those for our of more our plans with that call, quick made features and that we the users number our and in to subscription to platforms the us plans, we really of individual our recently expose the XX%, for by price our

our really June well. July. The upgraded are Based plus quarters. in subscribers higher features at renewing price being work rebuild points received existing continue of plan two began The That changes and cycles will high the in the the for process at the next level annual packaging and of our on outlook will positive I incorporates as early related guidance our around signals and to our and it churn. efforts subscribers to latest included last was further quarter to both forecast our the baseline pricing conversion pertains guidance in say numbers and and

across going we thought improved business question answer part QX. gross then will forward, there variance of growth the the new increase ARPU do initiative around continue recent fact, In a certainly And in we between ARPU churn and most our this and ASP of ARPU. your to second to ASP lot and see wide variance new pricing and gross headroom also and packaging servicing a

So, we go a ways to there. have

I we sequential the relative probably delivered think that QX. of with ARPU around QX that interesting part just in to question

our just to strong skews plus the from success adoption continue very events tailwind our over our we end by larger period early will the year, make as premium initiative. just well some the really expand would in modest looking deals, that, QX quick those by seen that outbound that note And sequential of a the some I as timing ARPU have and and ARPU confident in items, QX. expansion repackaging net in are SKU And on FX re-pricing course of saw we of reiterate, ability to users headwind ARPU from in driven new of to to headwinds professional we two ahead,

increases, say comment for then around we though, will on of to little the that your us the evaluate pricing question future like price in we have early part refine and a to continue I packaging and past. our the And will approaching final future, just initiatives,

Heather Bellini

I quick the really out vine it it think call had deferred to just I then there Anything growth quarter monthly billings behind growth just annual? versus of revenue XX%. And was, follow-up, XX% a revenue makes is

Ajay Vashee

growth of to for we QX. can that apparent And previously, that's pretty And a I with growth, revenue the deferred directly And and related a revenue given that actually drive revenue issued can just items that's higher think billings lower, for as quarter, guidance consistently us. while of it. revenue. And as not revenue in be they're mentioned to don't are predictive that or I part large billings reminder, correlate various there a

addition the between revenue you example, For and sensitive noted, subscribers. monthly as highly balance, mix are our to deferred to annual

and So also skewed impact as to small a revenue FX movements deviations meaningful to billings way, billing shift mix sensitive revenue billing in and for between are can in FX can and revenue. more results relative changes that

So the forward normalized a for see result And we've with X that FX points percentage as higher. accelerate going initiatives. to recent billing been I would flowing billings note QX, in expect through have growth we about success QX driven would our growth of

Operator

next question go Please from ahead. comes Canaccord. Richard Our Davis from

Richard Davis

to your your like the Talk and fill or experience the for part forward for that that a the Quick don't the the if Hey, other do like using like or teams interesting Zooms who obviously, that. t about and on looking hanks question see of Slacks just very us to you in using stuff little much. think you're us good. partnered you, use It's good tools things bit you've viewpoint, with in the collaboration some how of really make how of product using other And you yet? systems? whether that roadmap? And cool those tools, terms great

Drew Houston

So, different that between broadly use or forth with where their the these a their tools or is project different apps Dropbox that all tools these we top is And they need places. work customers, back with communication our that to integrate and from on or data toggle us the cases. all struggle the other we and are we see, see scattered in

we the role see our bringing particularly new it together. Dropbox, as so, And all

make then, before Dropbox integrations, Zoom can can make we Slack because -- And you Slack June. from wasn't many that ways from message more start Dropbox. Dropbox in And before they deep someone so in useful the or you usable more launched a possible send meeting and

some the of Dropbox And tools, for new second QX a integrations Dropbox to question on to and of as adoption use seeing about, kinds part and sort engage being already of of offers over the extensions that these lot and with potential extensions adopted those our driven we these what Dropbox have a platform. partner bodes then yet, a folks or surface ramp see use area in launch broader extensions, have driven of and those more The our Dropbox apps.

new broadly which and to a engagement see you we one that problem Dropbox experience more approximately partnerships is drive the and do as solving you together? a opportunity the lot see how no more generally and really desktop solve an this engagement So pull drive all

Operator

Thank you.

comes JP question from Please go ahead. Mark Morgan. from Murphy next Our

Mark Murphy

your Coming and the the did last growth and your QX your by deceleration the in commented year, than confidence that or stabilize the head in last given structure it are rate it is how increasing XXXX and that end revenue off ability more quarter. Directionally, of to then for increasing revenue moving try guidance curve on into of QX you to consistent with couple as think of compound of and by quarters? to by I you XXXX

Ajay Vashee

expansion profitability guidance and us guidance more now and structuring consistent when for through consistent conversion call happy well in as to we QX our continue to investment to specifics of M&A. a and at and were high level and And in respect them. would this with that past. XXXX and you margin what Mark, business we're to leading more be focused philosophy And continued QX that will unlock issued we continue scale certainly ahead we growth that on the formally is very have is opportunity questions, our say large guide talked to share us longer-term Ajay in engine to the more as our delivering QX. ecosystem on answer through that's have to Great I growth products opportunity with will and on seen doing the

Mark Murphy

Ajay. you, Thank

Is in as to Just it a quick the as include think from impact quantify sequential you which follow-up. possible I’m ARPU I describe outbound QX? larger much deals, some assuming what later

Ajay Vashee

that later the We have close some in deals quarter. large

QX. net period, in what would of can also driven some expansion I headwinds those two in and have We saw is FX the ARPU we items, say

group metric ARPU gone that in The look say in to for as can the margin. period second if ASP continues meaningful public, periods lead users, it prior new paying as and thing on by I has every gross that we've new is, effectively ARPU at you

to the So certainly be to continued us continue extension. to is and there there drive head ARPU for room

Operator

Thank you.

go comes Our Please Ader Jason William Blair. from next question from ahead.

Jason Ader

might as know? the will the is you know business? really a before to big then you moving we making about Drew, when, Dropbox it difference and know your curious think new whether we on long do I’m guys How needle

Drew Houston

We when answering at indicators inputs of variety look that. a

addressing. move think adoption. happy really second to I question, resonated press launch driving how with we're First, is new that that but And needle the it analyst customers and more problems then and in lot happy solves in will focus itself, we're Dropbox see word our really now really of to your we with our the a new

to it have certainly out June, will to when be it's that major in change want many to are that that do people launched we in do you So a be product audience the and to need the roll as about you some more but broadly year. Dropbox, we new we not that, experience. early a to to so how we rolled thoughtful And hear And to as it's change communicated access to out rest throughout make well the possible, respectfully.

be that’s new And sure focused broadly the Dropbox be So coming the available. more much on making all quarters. for in we will

Jason Ader

be are the side to adoption, first this to? with of thinking some business? terms specific in you there Is about it? And that how it roll team that talk things to Is out? are of can the going And how the going you are you

Drew Houston

I of we're broader I website. out our that to as far that. we're you're migration change well, as many it's the by technology, people letting to can striking important initially possible. like rollout, but a you aback and But users, do Obviously, kind massively it But again, and new to we on taken so in as because we're it's products whenever So, already people as really it experience mean, balance. people, of opt cohorts mean, and want into get --

in And the the functionality help new so, we want right to way. people introduce

a able was Dropbox it tomorrow. still anyone way to also, way Importantly, yesterday who that using certain use will be

close files, and shift first again, a morning a the apps work all place about that bit it's a offering, the want content sure your educate on a open or make just mindset for then people cloud Dropbox, time to for we we're unless not just not to night. we that you anything and what work spaces we're one thinking or as dimension, the place one for once do we're for continuity, So of anything some but a taking living we of to as but you that gamble away hope is to not

engagement users, from we're metrics paying so really right at has early in those and now things the we And, response customer look qualitative just all signal then like positive, both attention from trending what been per direction. user, are right is that to and also

a about you'll So course. lot them hear coming more

Jason Ader

quick full-year impact any there one guide then Ajay. to FX? What housekeeping and for to quarter the was from FX in And the impact this revenue is

Ajay Vashee

good Yes, question.

point roughly to in guide. the in for headwind a our impact QX about revenue quarter the and So, that's FX the X.X quarter from same the

to would currency constant and X%. add about QX, in So, for growth about year the X.X% the rate

So, constant towards year. for X% the growth currency rate would add the guide

Operator

Thank you.

Our comes go Please America. from ahead. next from question Bank of Post Justin

Shaun Hannon

said, the And unpack on Shaun guys if win I wondering in higher you how at the am is QX? ads here? you side know of net are you can this the individuals quarter, Justin. side? little through bit, the enterprise that Hey, the enterprise consumer you and a subscriber to I for rates end what can compare deals seeing Hannon but

Ajay Vashee

was our engine, Yamini large we is share pass will Yamini. given aggregate. will it a the quarter, number Dropbox, primary in then of self-through Ajay. quarter that I I I question and this larger this which is and volume addition take in say to color. Sure, really of in the engine over licenses more any deals will to can growth for always through of growth dimension part of the first your close consistent on And

Yamini Rangan

healthcare efficient and attention a expand and is that in we tech Ajay What something talked and remarks. Yes, is we solid this education motion had really are the be continues quarter here that quarter and broadcasting motion performance wins is is that critical in side, to outbound and of another very we earlier I to saw and paying our and think in particular number is well. during of land his notable about working efficient, wins

So, usage as originally now are we feet want started significantly a larger enterprise X,XXX expanding feet they as company, And deal enterprise Ajay about, partners a began deal and and with XX,XXX then broadcasting adoption. queue which organic with of healthcare, with their an that's smaller talked domains. number which European

So, performance the really are and making see QX. motion the expansion and is well, we data investments that is model outbound also in to driven good we continue so and in efficient land within scalable, working working

Shaun Hannon

I question be, just plus on that last re-ask then question And want to guess the tier would churn.

appreciated? give street there half. what of I really better so think is will looking a are a majority be to sense of us can it second anything greatly sort think for seeing in consistent you of yourself, the net up the makes I guys you want I ads get and

Ajay Vashee

quarter back from include conversion went of incorporates been pricing positive I forecast in points the public seeing expected to Directional we and packaging us there. QX, really guidance, will last is our both reiterate, latest Ajay, what year. thing provided around we're in has our we and say the signals efforts a will some just instead. color really improved. a very baseline some second outlook last rate across I did we this so that churn and did I for the a fact that when business in is stable and couple churn One improve we related churn

Shaun Hannon

enterprise there what one the like, other relative quarter a more this little closure to Okay can, to on and on on advance on the if the I a looks and standard teams like subscriber side last is I pricing want signal tiers just per basis? get it seems

Ajay Vashee

customer. negotiated so. with enterprise kind were the It depends the it's for our on pricing customer that So, that of SKU deployment targeting and and

Yamini We so any team are color. these I’m very with margins disciplined do want manage larger additional sure And you with works about Yamini's closely to team. my add not how deals we and

Yamini Rangan

And where reflected verticals number well. actually adopting overall We on think are Ajay we're again in what terms the really momentum. of it comments I about in there seeing and enterprise examples a had like vertical University we future. student similar then adoption mentioned where of in on that the is to seeing on we terms these but cases CUNY we're pretty is of a Sydney, used depends number ARPU And the faculty of this it for we're as the good momentum, Florida, CUNY, of of University in ARPU Dropbox. side talked seeing staff of are education is verticals terms growth all is where deal in negotiated the made is education it it said, Ajay side

Operator

Our Deutsche Bank. Keirstead next from comes Karl question ahead. from Please go

Karl Keirstead

like that’s Ajay strokes broad turn context the in in XX, in little analyst you of conversion a over first of guess see elaborate what half conversion the change just I’m do the months. color likely that? us timing change for on result maybe out we just maybe I what's changes day give specific understand back or plus half Ajay, little if at mix bit more the plus Question figure a look will Maybe just you the as of of when the is could the price the here trying as but next to XX be to we XX bit can versus a you see trying to price would a second ARPU

Ajay Vashee

level, in features of Day certainly good September, It’s upgraded we more and a the but a high June. Analyst at provide the in plan and our plus question can detail were

we're point, conversions converting began new the renewing the price subscribers a plus in price plan higher beginning higher so points in existing June, at And July. at

on for into will next more the cycles month few outs the subscribers a last numbers how can that So on for ins the that based and annual month bit our little color the XX of period and continue a provide and and Analyst that's flows Day. quarters at our and process we

Karl Keirstead

first like of sounded second and set little for this then on Ajay half bit quarters second I arc a half you stronger. It calendar when year. the the margins Got maybe margin ago, just remember weaker, couple

but So a skewed, a looks XX ago bit not margins like bit a of guide similar. better have the quarter big weighing XQ versus is put been two XX jump XQ is a it it's operating bit you more little XQ than you up quite little to there anything might a thinking in occurring that or are about or guys that the little

Ajay Vashee

and and can similar profitability consistent and absolutely level, focused from the perspective towards. on driving committed say been Quite balancing at what here growth I margin remain a driving internal high expansion. just we've to we're

was on includes to in reserving to marketing related some initiatives question our that spend your and to specifically, September. are and conference QX, new desktop Drew in to, the that upcoming application relates talking adoption we it product flexibility As user late

operating But guidance I net and of facilities, would note margin of expenses. would XX%. our that HelloSign for the midpoint be about non-recurring related That's 'XX, fiscal

we as that's, meaningful indicated. that's and signals and year-over-year and about the that up for as X you noted, with pretty So that's sequential plan our points year-over-year consistent implied guide year to what drive margin QX, we expansion previously we exited

Operator

Our next Davidson. Please go from Jaluria ahead. from question Rishi D.A. comes

Hannah Barkdoll

taking questions. for is Rishi. This Hannah Thank on my guys. for Hi you

was could if to how you talk about in performed the the what if you've seen off, I to you with could quarter? algorithm speak success And identified? wondering, community's quantitatively the First you've selling

Yamini Rangan

know identify to use we how data as science our buy. users the to don't folks adoption It's general of in well that community's to propensity drive use for algorithm, as

algorithms XX So XXX to community. motion look landing as deals. it with to identify algorithms bit the typically, we the that XX a well conversion the driven XXX works as those deals, the when And is by at little

we So, sales how efficient it is outbound and data scalable, driven to a well. That motion. such do continues have

we the other, there, that's broader really within are Now with success focused adoption is partners that in mentioned. driving QX care teams, and you've we on what that health seen outbound those wins from with

type propensity then and go of target multiple we adoption we look are leverage drive sales our there engagement. algorithms, to So, then outbound with communities the at people through our the continue algorithms to those it that and use we to of those starts teams,

working overall the we different and algorithms are motion, well So, progress. are systems the of the with overall pleased

Hannah Barkdoll

Dropbox effects lot in could you device seen the then, the you've quarter? the free limit of on conversions And from talk a paid about you've Basic? And from to three as seen

Ajay Vashee

Ajay. is This

a break that investment we we science. this and that's us, our device that's certainly year and up-sell we of So, is launched having initiatives the and as a And driver it course growth our is driven we an drive initiatives in the on impact launched down pipeline a of the business. basket of Certainly, initiatives as through over year conversions earlier impact of initiative. the how conversion example for a data ML limit three we good but a manage don't one product that of many the specific and

Operator

Thank you.

Our comes next from question from Chris Eberle ahead. Please go Nomura.

Chris Eberle

QX? from increases implied you of price and us for some what idea ARPU impacts the Could QX give the

Ajay Vashee

Yes, this is Ajay.

in paying Analysts expect quarters new some So, ARPU we plus I color share over few the high our can tailwinds do at of last extension higher repackaging users. Day The initiative. for by of to our the we driver ARPU plans primary from of us pricing part and has adoption as a the been level, have can premium September. say we'll

XXXX that converting continue our as higher are is folks are to for to professional rates going advanced and that that higher the and folks our tailwind of that and converting at base So visibly plan have to we remainder skew well.

and driving factors those of some pretty both QX see significant expansion across you'll QX. for ARPU us So

Chris Eberle

the to between street Is there's think there consistently your number more about between that in guys between keep Or I just registry and disconnect the a those guys here? of balance and I the is should up pretty When in net How what XXX,XXX subscribers miscommunication XXX,XXX come next down think year Got that you putting about balance one. big there the you to two? been XXX,XXX throughout one paying that? think is we it. growth to other think or balanced number? year, the a something And even

Ajay Vashee

quarter to consistency you the shipping the certainly and Ajay. net is that how has we're important driven in fair both over the paying initiatives a we quarters. both in This we user important. are in us that managing are based entered amount of few been new They been last those given That's both the will been ads not and are initiatives. we've see intentional. They us on that’s levers varying degrees There

the depends It's in we're in initiative. funded as we pipeline, been into the on experiment ARPU launched. out results pipeline the really some of of that well and graduating and live rate that growth a of initiatives the what basket what's been we expansion of there's variability And

for think quarter see you'll us I to quarter of see against both so, us the you happening expansion will you both with rate levers business. execute on forward to that And be see based what's important going vary but will

Operator

go Our ahead. next Mahaney from question Markets. Please comes RBC Mark from Capital

Zachary Schwartzman

the versus why Great on new little a Mark. UX? can about for thanks. of Drew, could towards the the today Dropbox you Do product Schwartzman difference the change, type virality of developer talk original you change, market improved the between an rolling has Zach ways think It's this product successful Part so And consumer I for engagement of Dropbox. think affect ease-of-use you out tech-savvy foresee? that you or the as become this original headwinds have was guess, individual much to a Dropbox? less proactively market? natural what do of And everyday as reason

Drew Houston

make that in that But cases consumer team not subs ease-of-use when spot cases and has you at collaborating in the we're and because use that importantly, end focused want using Dropbox focused I work, are Dropbox like Mark, teams think are sweet se using folks the distinction at work gotten certainly work. first on think Thanks us experiences use the certainly that that and XX% user consumer certainly here. while we're type we best I folks compared to per is our using what when we on at

progress all terms reflected that of focus made -- strategic in over the and numbers. last So few and we which in good year's

And would've on used case so, we of the new these been beginning. kind we had product if Dropbox is in focused the built,

been has all folders dedicated a in the real-time background, whereas the I in expect the with the see been files app, the your on more things sort list people you of behind navigating we've of and file comments, historically, operated and you're you activity have just much is new system, of desktop, there Dropbox, static again --Dropbox a when said a of it's you scenes, instead just So, you see workspace in collaborative app. you kind

different generationally is have. experience We different other think from folks what it a very

this for virality want So and new is foundation for all we a then surface limited as drives as control because conversion kinds for system. foreground of opposed being alluding the you're that engagement this the operating now that and that entirely by to metrics have we to for we

within a says natively, out for have adoption button team the a us really signature that Dropbox HelloSign, as drive it it's operating easier So for like can when things to we as of couldn't that were, lot in send we for system. do

surface new adoption viral for the of, drive is there. we And to a to ability ours and because distribution levers there's generally think much Dropbox, Dropbox Overtime, adoption, And powerful to more the of much it levers like the apps. partners powerful we the better new much apps so drive our little especially there's in, drive think of of more conversion.

drives Dropbox being the our we're for the use Users be basics. something think having to to benefits new well. in you're even paid have out. plan. though able the So pay as when essential. used actually sharing to a it monetization the explicitly We able highlight rolling Dropbox It of is will to We new line,

it's of we're overtime, all entire but place about. really So what I nation described take will excited an

Operator

last time for have one question. We

from ahead. from Our comes JMP last question Securities. Pat go Please Walravens

Pat Walravens

for but and customer work the people. new I is work idea at Drew, in of maybe they this mean, they're look what But is for you. Dropbox? teams, that's like for the of lot

this So for the product? you what guys new was for best customers at think do profile you

Drew Houston

of Sure. in mean, then the this dealing the which this it's in the also more a sweet following on there's the we ways, points distraction experienced there and how it's our customers observing and the from information cluttered and a demand, and had as that environment, new had are dimensions, there's new also Dropbox past I overload they that always the many for tools better we're some is, always we've same customer pin lot and which the but work hand, on think came for lot ideas with. experiences things in then and there's spot one new a this are are lot new people fragmented, problem, I

ecosystems, of are we working think different More philosophy personal and we and life -- as our that on terms information personally that's both an you these a have So, granularly, and across productivity. different as all in information something your every role we organizing worker worker see we tools, needs. your focus

the you think the certainly people working group We also or focus have a so on you're about XX owner if manager a with, of we team that. of

in even even information units, themselves. and and a a and team or And small worker a of work as CEO of lot it's company, composed little an a person executives importantly, that still groups manages XX,XXX

generally about the value executing might for be targeting for and remains that workers collaboration how be might that -- do team and sweet same get really the we we alignment team to think page more So, personal and me end so, mean, on spot think a same really you user the prop, well. productivity the our your I manager information

get employees help having or work do them I might for apps between the on obviously to capital, return executive, how different do better how more a it from focus. And up those free cognitive from my an do my I like toggle be my and

that's IT whole So all and back complexity the too. the the wrangle done happening on of bunch side on well people end as stuff I've have a as

problems all and but the interesting, problems collaboration collaborations so focused think we really beginning industry on. see this and didn't -- So is that much bigger and we our -- new of of

Pat Walravens

you. Thank

Darren Yip

with really joining everyone, today. our at Day Well, your forward September. right. us look support you Analysts and to you, All appreciate thank We speaking for in

Operator

and This ladies concluder's today's our gentlemen conference. for you, Thank attending call.

disconnect. may all day. Good You