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Dropbox (DBX)

Participants
Darren Yip Head, Investor Relations
Drew Houston Co-Founder and Chief Executive Officer
Ajay Vashee Chief Financial Officer
Justin Post Bank of America
Mark Murphy JP Morgan
Heather Bellini Goldman Sachs
Karl Keirstead Deutsche Bank
Hannah Rudoff D.A. Davidson
Pat Walravens JMP Securities
Scott Wilson RBC Capital Markets
Luv Sodha Jefferies
Call transcript
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Operator

Good afternoon, ladies and gentlemen and thank you for joining Dropbox’s Fourth 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.

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

Darren Yip

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

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

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

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

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

Drew Houston

earnings welcome afternoon, call. to and our everyone Good

on our Vashee, review our I’ll over results me and and to financial and is guidance QX XXXX our On achievements in call Chief we will Ajay performance the years. recap update Today XXXX. scale Financial the fiscal for Ajay our with how an plan Officer. few provide next provide business and

was important for XXXX Dropbox. year an

we profitable During We teams. in generated invested build with foundation business a strong XXX,XXX which to revenue $X.X growth. billion the ended for over and over year

a products to features delivered center further also the We at and workflows. position number of of our Dropbox users’

together. you Dropbox best connect spaces new to and the tools to new Dropbox a Docs new that desktop experience to it when unveiled all of connect into organizes smart Dropbox, support workspace including like This included all contents, intelligence files transforms which that’s machine users’ beyond Slack need The their organize we importantly, bring uses and app you moves and includes all Google Mostly work important content. them cloud the surface workspace breed for your traditional cloud an also everyone a with tools and content the your to integration Zoom. and folder for shared

not to just we’ve across teams. an fragmented, together saw across We bring world content operating We’re opportunity what done. applications the that’s with in a that’s Dropbox and but new everything and

on we’re finding desktop seeing users and that active more the available customer And most of and show help our that desktop more Dropbox more features a relevant team new in we’re cohort engaging new highlight users your wins. traction. suggested like of on with basis app experience now this content that is your tabs differentiated intelligently you with the drive people Millions the to our we’re using are weekly active making users content We’re you’re and great and mates. and frequently seeing folders collaborating of some experience early desktop

with deployment over largest When wall-to-wall a as and independent Microsoft solutions marketing differentiator workspace highlighted Google. closed exposure we a evaluating our key QX, agency. to smart exposure UK’s In

expand we On integrations are the to our past results. deep companies Atlassian, customers of our continue new existing Adobe, Dropbox make integral experience. introduced strategic the ecosystem into integration new part and We part of an already All integration and Zoom an help partnership these and users’ content tools our Building and to like at over context. ensure build we’re bring front, from use Dropbox the see partners to Slack work positive integral Google. users the year starting apps robust on partnerships Microsoft to workflows with like a

adopted have to users more to more they’re who collaborative be to likely suggest plans Early engaged. and signals these tends deep convert integrations from paid our and

announced admins also to HelloSign content to for by expanded gives sensitive platform we with need custom the businesses we our SaaS secure in a environment. tools BetterCloud enforce manage BetterCloud we welcoming scan best security which the and of enable they And new With Finally, critical Dropbox policies, to processes. XXXX, breed family. automate and partnership data

people delivering better the HelloSign their workflows even simplify already while together we serve. markets Dropbox a to as content we’re an place with experience of to on Millions and expanding important collaborate use document most their

as continue see demand efforts and businesses. of now well one our as integrated is and We document growing fully to products. into strong workflow eSignature is our HelloSign for HelloSign fastest Dropbox go-to-market

and product to We’ve flows can interface. seamlessly have together. user new we through with and design newly pleased and including and as front, request the been redesigned Bharat In And scale our a in our reshaping the fall, Dropbox team. leadership and on people users about HelloSign excited are Dropbox continue way. Dropbox or our to organization engineering opportunity we strengthen the GM HelloSign’s focused Mediratta send Young as signature they’ve more SVP joined progress Platform. product Timothy been joined and Together CTO of drive growth SVP Core of

strategic Suite and leaders hands on a to products to Directing phase our multi-million announced I’m Olivia and Officer. and have as next Cloud thinker included we enter SMB thrilled recently a efforts build Operating as our joins G team of that their new of from Olivia Google go-to-market Google helped More on where we scale Chief us Olivia Nottebohm great is portfolio Drive. she growth. our and business.

in We track we also long as with January. of SaaS. integrated Tiffen CMO than a years Ariba. channel CMO executive and a more to experience company’s record success the about data is partner is our Most place our bring thrilled welcome in right I’m XX recently evolution. She’s new for with of Kwan what new next and in Dropbox marketing. chapter leader SAP our accomplished an of leaders Dano operational driven these in have team and Tiffen

exciting we’ve additions new to of proud work and team while some do. made been year Overall, everything and we’ve clearly Dropbox great we our it’s have for to still I’m accomplished,

we strengthen Looking market the continue ahead, investment and bring shareholder value. to want and we ensure thesis Ajay I deliver to to

cash we is growth. As and of to basis. in We’ll higher drive free to a on of invest driving profitable adoption our products business in And and be our end by productivity new become the XXXX. a GAAP flow continue goal year, this

of flow Day last This our $X XX% margins With over of generate by extends orientation our and targets meaningful XXXX XXXX drive This methodically increase XX% we we term we announced a in billion. year. free accelerated is Analyst mind, to to new beyond over into as also longer extend margin markets. to the that non-GAAP continue we expect platform to expansion and now innovate operating annual cash plan at

investments announced focused has our make million think to as approach plan. addition returns shareholders and $XXX us will authorized Board share enabling In today, We and disciplined compelling growth. earlier of also to this repurchase deliver Directors while long-term

we that to product plan and said, turn where resources. focus strategy our highlight investment our With let’s XXXX and to for

to teams. drive adoption will Our us early an is to experience Today new our over with foreground a our primary that and are with desktop provides rollout millions adoption on seen just team in portion because focus users wasn’t of in our XXX,XXX a active previously Dropbox. this base be experience driving way of new business important milestone year user expansion possible. the This help a we’ve desktop app of

desktop we’ve that land new Now to the app teams. within begun

the our to streamlining optimize process flows and the in members. of adding reduce have to Dropbox finding team boarding new business on conversion by invitation plan product a simplifying and We of up and We experiences to efficiency. do friction process this drive to tools the the higher team further setting

make For requiring an of possible from virally example, for We’ll to spread product be instead it the admin to members. add approve new team and user-to-user.

BetterCloud well one users using or to products the further we’ll We basic hold partner as still as we our also the plan base. extended as products be to sales. skews promote highlight our workplace one like And individual such better plans. have Dropbox like Most of our in with user version new to HelloSign legal add-on able drive and history up as to

a user upsell result, team to both and a a into within base As drive our opportunity there embedded plan. remains existing business conversion large

Driving value personal registered but know business primary in for adoption our providers of include users important subscribers our as deployments they’re we’ll while users products business importance member overtime. an investing of plan users, portion And XXXX address mechanism cases workflows. well. an is for our over part of introduce of our we adoption. as in XX% of businesses teams Dropbox our personal high personal also our subscriber Dropbox driver us continue to the new formally to for XX% used team business journey will XXX within to grow million depend be our our of over a substantial of and focus on a unlocks use only work, team on who to address that integral our not but individual highlighting customer And value

unique problems using in at at it a these We and turns have technology and face lot issues have that into out users a while both common. work home our these

with too. customers fragmentation personal their Our deal distraction lives in and

returns These copies year passports our Dropbox passwords accessing workflows managing this of home. those we’ll to up and open points most digital to at challenges. opportunities start secure the information’s important us or of Like some tax pain collaborative to users across your services. and or such for extend capabilities address So as sharing of

our monetization our value expanding proposition the overall While opportunities of and platform.

milestone profitability. up, a their We And the clear focused flow was users smart more discipline scale, to for ability business accelerating deliver the drive a free to year we for our our New cash help balance stay a as work. important Underpinned we’re To begin expansion launched on with remain Dropbox. most investing in growth and by while XXXX future workspace and the operating committed product we wrap while our of confident core in healthy Year, vision company margin set things generation. category strong a to at to

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

Ajay Vashee

Drew. you, Thank

million. delivering On profitability. quarter growth XX%. top line for across our of execution demonstrate balance the healthy QX, been was constant and have results QX year-over-year $XXX the basis a Our year-over-year growth up XX% strong XXXX rates revenue a focus average and currency to on to relative Total would

all of excluded of referral the or transaction from offerings that is believe our indicator and ARR, users this our volume products, business like with the be our like the key note insight total or based first revenue As from metric. ARPU. Success revenue streams I’d recurring and and distort the our paying total complete of planned types earnings performance we’re annual may will the future adding formally manifest contribution ARR of partners. year. into add-ons, We as call users of initiatives is in to most from including a new these our metrics provides ARR certain that but fees best to

mind, up We ended in the the the period. for and QX paying in ago $XXX period. ARPU year billion this users XX.X was from million With with ARR was quarter XX% $X.XXX

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

Let’s we government, move our range real highlights. some across on and to In wins verticals customer of finance including estate. number QX, a of of a had healthcare,

HIPAA organic I’m commitment operations, our our to a instrumental exposure be that product US will with our mentioned all was excited to the past of skew. Compliance subscribe to to over preference, companies the marketing factors share employees. best headquartered were years deployment customers company’s XX,XXX design class the enterprise sharing one and and company few of a the customer. among in our signed important products seat technology to addition Dropbox a deployment. Dropbox largest In teams Drew to adoption Strong enterprise and medical sales, is over in decisions three-year tools This Employee to multi-thousand deploying this now recently that landing

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

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

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

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

was to XX% to with lower as decrease revenue due revenue, G&A XX% QX of S&M of QX which expense in G&A the million the spend relative expense year million was or The or XXXX. $XX of consistent percentage quarter to expense compared was a in revenue marketing is ago. in a of $XX year. prior our XX%

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

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

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

headquarter revenue. have spend of cash would been the XX% Excluding $XX $XXX TIAs of free million net or flow of million,

equipment. data our In center QX, we to lease added million for finance $XX also funds

in We as funds our be and basis of XXXX to decline an expect on lease revenue additions to finance X% modestly and percentage annual to revenue thereafter. X% of a

point billion would Let’s revenue growth. with was XX% average our $X.XXX representing margin prior currency XX% our was XX%. Total rates year-over-year across results. margin XX% in one move full XXXX have onto was year. Gross relative XXXX the been to operating XXXX. year-over-year a constant the for And basis up percentage from On line growth

and two expenses. from point our non-recurring margin in reminder, operating XXXX a As included related headwind facilities M&A

Capital flow of was of XXXX of operations from flow Cash tenant XXXX. spend on or XX% allowances. $XXX million $XX were by million $XXX of cash headquarters new yielding million CapEx free $XXX in million was expenditures revenue. in offset which million included our improvement $XXX

funds headquarter have $XXX TIAs cash of or also million, center XX% revenue. to $XX flow finance equipment. we million added of In $XXX free the net been spend of our data million would lease for Excluding XXXX,

Now let’s turn to our guidance.

relative quarter to growth first currency across year-over-year approximately $XXX QX basis the we to be to million range of the expect constant year-over-year we growth. to to rates For XXXX On be of $XXX of anticipate revenue million XX% XX%. XXXX, XX% in XX% to or a the average

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

the to is would bonuses. and everyone yearend margins remind QX like free cash taxes and seasonality flow of of payroll to reset that each there payout year to due the operating I in of

constant revenue $X.XXX million across we On relative Turning to to or XXXX we currency be to the approximately be $X $X.XXX growth. to the expect average full XX% range rates year year-over-year XX% higher. FY anticipate the approximately to basis in XXXX, revenue to billion of a

more the year into app focused adoption driving will year. These this on the outlook we’re products as desktop some as As new incorporated well our of develop bringing to Drew throughout as our market. new noted, initiatives be signal we

XX.X% well of range the our We in of includes to be HelloSign. $XXX consideration range points expect of payout in headquarters the of than one-time X.X fiscal XXXX range of to related free operating to as the as flow new related be holdback margin Non-GAAP This our approximately to acquisition out corporate the be $XXX to to cash margin million spend And to gross deal million. XX%. XXXX. higher build fiscal

be related XXXX Excluding $XXX year will to free CapEx flow the to to these the we million. cash our last out $XXX items incur of is expect build new headquarters.

price. based we beyond. of share Finally, what XXXX To weighted echo as business on to XX-day and outstanding average in diluted average expect be we in shareholder to $XXX trailing to million shares we’re invest XXXX range million committed Drew delivering value $XXX across mentioned earlier, our the our

operating a by we XX% operating levels long-term up result, XXXX. XX% categories. expect XX% margin to of our from As to to of each which we’re there, more get and our To efficiency across we’ll XX% productivity higher target to raising drive reach expense

Accordingly, we’re to drive headcount revising the team revenue XX% Dropbox, we our over our to flows previously. Across prudent coming to ROI oriented with XX% spend adoption conversion from and to expansion years R&D launches. new long-term be we XX% for plan in of products the invest R&D XX% down optimize high new of as

prioritizing from XX% spend adoption long-term to Across of XX% monetization our XX% to our support S&M, new focus XX% S&M revenue the We’re down we spend revising our growth to target and plan to for previously. to most initiatives. Dropbox of strategic while

a annual reducing that maintaining of free X% to on I be an clear potential XXXX. to highest preserving put our on be business we want note trajectory rather can investment efficiency of $X want these G&A investment new efficiencies that we’ve over carefully development against material engine flow targets, cash new also across our long-term XX% revenue. by in growth our we’re generate drive of and spend as basis product in while and where I target improvements product to bets. the won’t Finally, execute growth us to considered we billion we our

and model. operating a flow our commitment to to efficiency long-term cash business profitable growth, delivering self-serve of only inherent the margin updated free are testament demonstrate but Our targets not our

returns This in our this program earnings intend press on underscore repurchase board the indicated as authorized million to our only Finally, share has that quarter. we beginning execute release $XXX a not management future back balance to confidence that allows the the our have board deliver sheet shareholders. in also us team strength to of but our to Dropbox leverage the and of

excited continue core business as opportunity I’ll ahead the and for category. pioneer our and about works it we to growing closing turn large of to remarks. strengthen now I’m us, Drew the smart space back

Drew Houston

ahead Thank XXXX We’ll first in with and on have proud we our driving focus of term. a allocating as at public you, registered line two to margins as scale, longer company and million huge XXX over efficiently we Ajay. opportunity top growth achieved as of well years capital in us. our improving a continue I’m what users

the desktop I’m new is Our our app year, introduction later products just and new excited a our this personal about future. of and start

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

Operator

our [Operator comes question with Justin Bank Post of Instructions] first America. from

open. Your line is

Justin Post

A questions. couple

shift have reason monthly just are around you how billings cash when long-term on free you thinking we And the that. I and think philosophically $X growth or it’s secondly, gave any more higher about XX% on revenue that to and for drive just you. in outlook, less growth, the more flow guess growth First you changed confidence spend with line billion margins not to about margins. try and What’s R&D higher why and Thank seen that? in then

Drew Houston

do an really this balance generation been bring of Drew. [ph] I and in with I’ll anything going changed on the we’re did the we’ve ground in year I profitability thanks we’re mean and I This investment inherent reflect uniquely always and to put that. see positioned first opportunity the healthy But for time we of profitability think efficiency question. that growth terms after opportunity a cash that wouldn’t stakes huge business. strengthened our and philosophy. say delivering thesis the our is focused is and the part take our in we to in long-term market wanted couple

expand margins of as productivity still drive And just that us while to drive scale, clear, really want we be invest. we plenty efficiency, room leaving to

touched continue levels. we these investments So as on, areas as growth Ajay have healthy to in well still at our dollar

Ajay Vashee

we’re plus answer tailwind And Justin, and that in repricing still mentioned exercise. just of be related question seeing revenue the through a there while given part I subscriptions to or note across revenue predictive the working consistently a repackaging quarter billings so as revenue. recent monthly of correlate move today. previously higher on And can to second was lower initiative that would strength your annual I growth billings are QX, items But but to and not for directly in don’t growth There we’re billings billings us.

Justin Post

you. Great. Thank

Operator

you. Thank

next Our with question Murphy Mark comes from Morgan. JP

is open. line Your

Mark Murphy

and on Drew are they’re people are day more more app as try engagement they or that new other change into move they’re more in in into you curios past, little more how to more that rollout the you that Dropbox overall per time taking the you the actions app it foreground, screen spend just you’re been words, the finding Dropbox in seeing? a or minutes finding maybe frequently does had more the getting than time

Drew Houston

broadly and our with talking people new that pages is with strongly the a - we’re engagement those increasing. suggestions just increasing been collaborative certainly features of machine engagement engagement Yes, of things are engagement learning engagement that we’ve early both [indiscernible] - kind in as you’re happy like and not about. higher just in value smart terms cohort - our With kind signal is driven with the of our seeing importantly

been to and that’s something Dropbox to continue we’re So the objective an innovate new certainly drive going of on. and

Mark Murphy

Thank you.

year terms the that the lumpier paid activity the [indiscernible] and other pipeline in As wondering which on would numbers of comment the in words QX a user any of outbound kind affect enterprise level follow-up Ajay. quick for deals was just how you characterize outbound I performance ago. can

Ajay Vashee

that revenue well call. reminder on and and go-to-market investment volume and the and both is large Self-serve [indiscernible] self-growth with Sure. engine close we our built represents a just total those I to can as plan both as our that’s model and as our existing for and an deals newer efforts our in to primary to our growth products. continue XX% scale the outbound say channel we strong that scalable of balances of self-serve efficient our model disciplined for the continue a through through we

So just saw QX. lot what channel a in of in respect consistency with we to that

Mark Murphy

Thank you.

Operator

Thank you.

comes Our from Bellini Goldman next with Sachs. question Heather

line Your is open.

Heather Bellini

I’ve just in questions. nice two One gross this see the going quick from to you’re margin. year improvement

of still off kind of of below I was just benchmarking Do to made seeing. detail a any gross be you’d comment Q bit If question. equation of and And XXX,XXX this paid last of be kind is coming what year call think you that could comment [indiscernible] be in us you that’s Mark’s little you the could of of following that that to an where comment give I ongoing regards half users But have helpful. something times saying maybe the lever should previous you. and signed, would P but kind expect can from on kind kind we sub see first the just then that line we of if Thank would quarter’s the expect on kind - it which mean you kind basis. a you up been margin growth we to secondly, just

Ajay Vashee

Sure.

launched new and storage last have to long-term investments efficiency cold target we’re revenue us GM for gains you’ll it quarters have gross to of XX% target SMR We’ve revenue and we margin gross efficiency to around users. drive continues margins. to continued So today at more of XX% the Right long-term that a of and be our margin your drive XXXX. so over that lower to to XX% gross the things with like that in start few as across continue paying part by we XX% and end driven question the and been expansion relates to of those range and see first in the tier now more in and

overall over couple initiative Yes, our we noted repackaging of of our slightly consistent as you’re that’s growing and correct where paying that it. our on revenue result you’ll paying repricing with user when a continues net total last call just see growth That going would us commentary a forward. and and base next our initiative specific to would resourcing and tailwind expectations optimizing lower profitably number for is plus a I user versus that be quarters to quarter’s focus the be we launched priority note ARR new and

Heather Bellini

of [indiscernible] to Okay, be to comment said just trying so what, is getting like on call? is clear us towards to that the you XXX,XXX type QX you’re steer level what the

Drew Houston

reality Yes, the hold, guide we of is don’t comment that made formally today. the formally don’t We we guide. commentary reflective but prior priors to metric, the

Heather Bellini

Thank great. Okay, you.

Operator

you. Thank

Karl Our next question comes from Keirstead with Bank. Deutsche

is line Your open.

Karl Keirstead

margin I’d love to go trade-offs. growth long-term back to that initial the question around

you XX to could year, fall that’s At suggesting what bps XX%, margin you the improvement So a call points is - about this moderate slide the Day scenario. only Analyst under in XXXX do year XXX a growth XXX margins put obviously that operating XX in basis you to up which XX% a go the to year fantastic. over a from in

deceleration XX applause getting to might fairly So XX obviously volume that if to around material of via improvement. dampen the a the the growth margin

pointed So still revenue double-digit in and can Drew growth maybe story? be if think a a do I you Ajay, could question fairly to Dropbox XXXX

Ajay Vashee

a and and Why about don’t answering margin long-term talk expansion questions drive can growth I Sure. plan bit and you how we that points we’re making by the I were today. that of thinking about around how to then some start

we efficiency aligned cash we’ve and inherent long-term focused new under we’re accelerate the expansion So the and made delivering bringing balance our drive and ensure to to that’s unlocked are to growth continue on flow profitability. free that market to to guidance generation. a leadership and business in and operating start we XXXX to with always that and profitability, thesis revision in I the healthy that would investment we’ve just Drew reiterate said growth way of We of want to margin reflective margin our our focused what opportunities targets strengthen and been more scale

drive And our plan in as well so year term levels longer more higher each as we to this expense across categories. operating of efficiency productivity of

Dropbox to across focus So to in spend can our we and reduce the conversion we our considered mentioned our expense team engine won’t prudent product how spend of drive the investment efficiency we’ll monetization in we optimize in new be new growth flows Karl as R&D our product material our as execute the highest drive you’ll we new then adoption as these to carefully investment we’ll ROI strategic potential growth more bets initiatives development, it and prioritizing new we across support with signal preserving S&M guidance growth bets as I while really course improvements rather product year. as earlier we launches and targets we factored where business and of across see Dropbox the those we adoption invest and and into of relates high growth, oriented over build most that top the line are our while and

serve. level I would expanding needs and methodically that solving focused that markets we And highest customer we’re large on say at and the unmet

prudent the committed are Our we’re workspace HelloSign, growth by on certainly acquisition in that launch over billion longer today. and maintaining of think annual being focused of In flow this. category the delivering with XXXX expectations free setting revenue term Smart I double-digit cash good of examples to $X

generating productivity leading under higher and of spend. investment returns and We’re in aspire and of levels business the to

Karl Keirstead

ahead Yes, Terrific. it. Got go Drew.

Drew Houston

happening there’s around the the focus anyone I this about distraction work. and there the mean to at said Ajay tools solving and being questions that long-term that’s and fragmentation what there’s at don’t aspirations. frankly customers opportunities we proliferation our as of challenges work [Indiscernible] see able no

the that And we’re just uniquely so positioned beginning. for new we launched while we it’s and think the Dropbox,

Karl Keirstead

Got and follow-up. Terrific it, maybe okay. answer my then

Just on the of should might somewhat as no? buyback, XXXX signal in Would fair of be cash year? quieter that, Drew terms or use M&A interpret we or that that be Ajay, a

Ajay Vashee

returns generative engaging really efficient an invest an new to part we’re continue can say of share products M&A cash nearly have plan business $X. I that and deliver repurchase do growth growth that both. of we free a to as of on billion and we can company, Ajay. generate flow gives cash securities we of XXXX will the is on our while and and this to into plenty strategy shareholders. balance for that Well to our be confident in going do case have to been marketable of always X has currently dry important cash millions top in forward our hundreds which And we of dollars powder back the example, of flow sheet us

Drew Houston

on I and - to our Yes M&A. say do wouldn’t willingness commentary

Karl Keirstead

[indiscernible] terrific the on Congrats guidance. your it. Got

Operator

you. Thank

question Rishi Your D.A. Davidson. with from next comes Jaluria

Your open. line is

Hannah Rudoff

is my on Hannah thanks question. for taking Rishi, for This

you of you provide off, you’re First could guys is talk on can if measure quantitative what in drop cross [indiscernible] top of seeing any about there terms [indiscernible]? new

Drew Houston

well. are continue Sure, that do so to products important these

driving better - today and they we early rate [ph] a Dropbox on Paper’s that HelloSign papertize retain more at we’re an we convert process. then customers we’re people there directly monetization users Paper of say subscription that a skew among so is where and a use HelloSign that’s adoption that Dropbox twice of So indirectly in monetize value in customers who and - that Dropbox example rate, separate and Dropbox. the and [indiscernible] are that focused The paid I’d to and someday in

Hannah Rudoff

Great, thanks.

Drew Houston

both now and a It build that to adoption gives things. would of experience I those a differentiated of and us for add new both. And Dropbox new them promote the drive both surface more just integrated helps

contract document of all on it products. with like one lot we So to to where our to more - new “Save” users send for is for there’s a able surfaces - example this signature with can connect that hit out HelloSign you being click, it after or

Hannah Rudoff

sense. Dropbox makes of any a there lot is to And then that customers now? of notable can functionality feature lacks you Great, build out right that lot [indiscernible]

Drew Houston

of iterate being the we’re a experience that to in I Dropbox continuing so use desktop the - built instead Well and helping. new operating to completely new system. The new and app folks scratch it’s behavior from think core on guiding

lot and tradeoffs on, we’re Those kind as like that’s to progress. HelloSign strengths introduce We’re our the figuring of and mean as and does happy still functionality trying tradeoff. but are just a possible make people Dropbox so how play also for to our different of gently. out do the but design we’re iterating things simplicity transition new with that paper seamless I we

Hannah Rudoff

thanks Great, Drew.

Operator

you. Thank

JMP Pat Walravens with from comes question next Securities. Our

Your line is open.

Unidentified Participant

for so my [indiscernible] question. is for This you Thank much Pat. taking

strategy about your if you Just go-to-market HelloSign, on little a bit can what’s talk there? Thanks.

Drew Houston

a It’s [ph] focused based a for really most of bunch and and is its’ using and is still on at different pretty HelloSign their segments. underpenetrated. we’re there’s we look sweet of straightforward for eSignature that across part of our say particularly really I’d self-serve SMB a customer’s - There’s strength paper market its watch certainly very We HelloSign lot eSignature. spot pen demand all the our the SMB workflows. a when

most excited being to with One the was about self-serve of combination we’re our base. able introduce things HelloSign to the

before, upside whole innings new Dropbox of that We’re in I’ve said excited introduce and the all go-to-market other HelloSign across to new we’ve the there. early the so customers, kinds the about and potential of as our and our levers and Dropbox to we’re opportunities

Unidentified Participant

Great. Thank you.

Operator

Thank you.

question next Capital RBC Wilson Our from with comes Markets. Scott

line is open. Your

Scott Wilson

of I her I’m attention hired companies you and of expect can where you into Alex. maybe kind of you of Olivia’s a areas complementing as on or for recently strengths yours Drew responsibilities receive you the the Olivia to ramps of speak first COO, might your see delegation less more role. guess kind fully

Drew Houston

Sure.

will functions. couple of go-to-market comes go-to-market. as all running weeks And just ran SMB she she - and started just Google their running contacts Nottebohm COO. and than where she ago hit be our we lot for ground from She So our the she’s of and sales added more Olivia Cloud,

be the And more a she’ll that be a so of for company running me there’s partner broadly. areas and for number she’ll responsible in functional

pipeline grows. only time in new business Dropbox our core that sure proportionally lines and we’re making and me So will proportionally excellent product the to operationally making all that making business spend complexity be be like a I’m more spend development the time dimensions on Olivia of sure more make that that the frees able now those development. helping and product up Really to business company of throughout of across as multiple increased. sure has do of new our sure scale products and things

Scott Wilson

the And mistaken, ARR in than not if your Great, a sequential follow-up less quick I’m sense. net quarter. for maybe fourth it Ajay, ARR your third actually add makes was was quarter I Ajay. think in the

churn be, kind guess how any And in of the I did should you given would guess frame I the we not, see question pricing changes. expectations relative business to you this if the pronounced to are bit So companies, seasonality feel that atypical little your typical general has quarter, ARR of a kind there? uptick metric that in software most XQ in you

Ajay Vashee

within a say no. Yes, And answered seen relates good I’ve Plus would as I the and questions. last as result well has I as retention subscribers can our expectations that, net has plus a as for say quarter meaningful increased initiatives. and the been impact, impact but the your to repackaging. we’ve repricing question of that’s well. something revenue noted we it modest our

Plus can healthy few non-recurring last I that So say periods the overall, that and ARR I’d revenue QX also benefits we’ve renewal these for that certain benefitted tail very In it’s we was HelloSign so and with from acquisition so then were a non-recurring subscriber in rate to note in repackaging that our one-time repricing growth and there. early in that in able new delivered year, grew rates. consistent been different total been part monthly year from of QX winter And benefited adjusted ARR and year-over-year from quarters. manage ARR strong factors XXXX, of XX% retention as in net so QX a and historical a to

Scott Wilson

Thanks guys.

Operator

Thill a [Operator have question we with Brent Jefferies. Instructions] from

is open. line Your

Luv Sodha

thinking you about do seen This user ask expansion Sodha how I over on new repackaging is growth? the ARPU should about we to ARPU get have like growth user year. Thill. meaningful of in year What Luv versus versus for wanted going Brent expect the for next net and are sort next Plus mean ARPU into you some repricing. new I net guys

Ajay Vashee

Sure, past in this I ARPU that question. is Ajay. take of I about can material talked driver Happy expansion. the say to that,

overtime our which licenses premium individual higher higher drive the individuals mix to plan higher shift ASP from case. our attach be continues to plan. and drivers of of very premium and the being a material we attach as from One to mix we and continue teams to higher new teams’ and drive towards as of expansion ARPU premium continue so that primary that to a have users well well higher our paying higher driving driver rates team It’s the us as as skews rates

scale into continue that is going So throughout the ARPU to year.

continue see conversion has well of driver primary to as basis. just tailwind always revenue user us paying ARPU a XXXX. of case the will that course you’ll to continued for volume The been the growth a over be But so on

Luv Sodha

if Got it one I just follow-up, and may. quick

Have the market good terms motion know be crossover or with market Slack color Slack. you to I there? of you. or some In kind Any led appreciated. guys partnerships some Zoom of mentioned of kind Thank would into Zoom, going [indiscernible] traction together

Drew Houston

is something that to and Sure. investments. big ecosystem There’s where to our an growing certainly is continue make opportunity area going we’re

integration same thing Slack and within both Dropbox the popular are sides we’ve Slack the really the Dropbox Dropbox both integration so that I integration the between Zoom with and and building starting the say Slack, and announced can and point been has So integrations integrations our others the recently. on about with

So and driving the we to do we’ve that’s and turning on been we’ll now and - focus can on experience product focused sure good on things and making spoke this go-to-market. initially we’re be other adoption

Luv Sodha

Got it. Thank you.

Drew Houston

you today. next with All speaking support for right. again Thank you and really quarter. appreciate to everyone We forward joining us your looking

Operator

conference for concludes you gentlemen, participating. Ladies today’s Thank call. and this

may You disconnect. a have day. now great Everyone