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Dropbox (DBX)

Participants
Lev Finkelstein VP, Corporate Finance and Strategy
Drew Houston Co-Founder and CEO
Ajay Vashee CFO
Olivia Nottebohm COO
Alex Zukin RBC Capital Markets
Mark Murphy JPMorgan
Rishi Jaluria DA Davidson
Heather Bellini Goldman Sachs
Billy Fitzsimmons William Blair
Zane Chrane Bernstein Research
Call transcript
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Operator

Good day, ladies and gentlemen. Thank you for joining Dropbox's Second Quarter 2020 Earnings Conference Call. [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 Lev Finkelstein, Dropbox's VP of Corporate Finance and Strategy. ahead. go Please

Lev Finkelstein

or as key materially to of strategy and unknown long-term the and uncertainties statements prospects. strategy, our include and could features, year profitability afternoon health employees earnings Form Good our financial to second pandemic this in Dropbox's that results projected ended execute impact the Thank and the subject on to financial for relating performance included of expected and business, of that Today our results risk results, be XX-K those expectations the our and for free Dropbox our XXXX our cause including the XXXX COVID-XX Form well our implied differ cash factors financial overall growth future the call on described risks in from Statements will ability in that June this call. developing distributed related quarterly are and our statements, will those December quarter ability including to the were offering These and regarding our ability potential the positive risk XX, included XX, sustain public in to and as known factors during to future to business, you. product and new quarter earlier. welcome forward-looking XXXX. generate responses platform XX-Q discuss economy, future results the our and ended statements flow, our by extend particular, actual call,

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

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

Drew Houston

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

homes, during On Olivia also Vashee, is will Officer; with the us Operating to contributed please sound over from us last so are Financial quality quarter, three years. background the Chief Dropbox Officer, join next Ajay Q&A. noise any our us me like he I'd has issues to over to forgive call for in eight for the our Ajay all our Similar Chief start or and last Nottebhom, the thanking remotely by hour. dialing of

collaboration market he'll in As to nascent leaving time Dropbox, just When employees. getting the we family venture were started, was you've more announced XXX we spend transition still this capital. Ajay to cloud fall seen, then and we've likely the a us that had with started career and and be

transition. was operational Tim discipline established scale experience Tim and Ajay's new Pandora as confident over incredible the Tim successful our of Dropbox leadership two talk resilient positions our excited and three leadership Regan, until here makes have He happier foundation tenure, I'm XXXX. QX ensure relatively he gotten role strong ecosystem. skill profitable hands. Accounting over mid-October and company CFO employees role. this Ajay investment with without his business a public X,XXX step exceptional turn and couldn't senior on be has the at nearly at financial remain needed in about new with Ajay and our to team Today, Controller product for as We our Tim as of will and be and our that at I'll QX his new touch welcome On our strategy new that our has guidance a note, he into our him. the we for advisor to decades to previously held and grateful in his and will the Officer years Chief will provide the a let's September last business XXth fiscal the Dolby company, all Ernst are CFO. and have brings During In Young. capable will smooth world. He transition. seamless go-to-market call. continued his a expansion company With at the of for remainder Dropbox. to officially & and helped to review model team results, couldn't demonstrated and We're and an on that, has this the highlights

move team officially I we've an to incredible to these from results, at updates one our in navigating the health number unprecedented we're Dropbox home policy priority of work environment. extended through end year. also want our distributed commend of operations around the job work for provide remains to we and the Before circumstances. entire and some doing our I a The quarterly safety managing want how our employees

provided ensure deployments we features we certain few need during also focused COVID-XX. their larger-scale on We've past customers months invoice done. the over they we've of manage users their products get helping to And times. they terms to relief also extra the been frequency at past hard these providing customers changing best like Michigan. at tools important the the of impacted most several support our new our been cases quarter, work by work and and our Over and In aimed by on-boarded unique workflows University to have launching extended most payment extending educational new

Dropbox world their digital work. shift reliance represents of also our and as to-date institutions efforts Michigan University transition on the look with around deals accelerate one they educational to environment. a largest deployment make are Companies distributed the to of increasing to transformation remote learning Our the their as

Just a major to significantly weeks retail XX,XXX Dropbox over their company few seats. luxury a European with deployment ago, expanded

XX% higher platform. the their conversion and desktop using platform. our Slack, part are shift our and product note team underscores lends figures, of and quarter announce for average and than I'm than those elevated that to the now excited employees users facilitation individual pre-COVID remain more deal, Dropbox historical content larger new connects now remained our popular the consistent We're and our itself encouraging wherever that tools than value levels. unified to over work the like home the and XXX,XXX a teams have our which seven-figure As plans desktop of gives workers to accelerate their remote these rates past that tool company proud on to we and of collaborate also collaboration. knowledge our cloud another for them and volumes as with one Zoom, plans Atlassian. the the Across of were fortunate to application, critical QX business And XXX,XXX teams that the to more is are new I'd cited they to well products are. and which from trial the application cohorts a have securely driving

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

the results operational of We underscore and and healthy expansion, deliver strength as our of collaboration strategy, platform, our robust discipline. balance also drove profitability. growth efficient margin we These global to our continue go-to-market

move better And added some personal Let's of features number users lives. in the users QX we and on our a our SKU focused both manage of quarter. to work more high-value need introductions. product highlights We're providing from their the value feature tools to Plus product on they to consistent through give and to to the

we First, with of and them. and to their them securely and to Dropbox enables users and data for their users sync only can across apps accessible Passwords. devices encryption login zero-knowledge Dropbox all store websites protected launched credentials ensure Passwords

and with information. secure users launched a stored for since computer we knowing or PC Vault friends can members they continuously including back Mac, downloads your that Dropbox. and and is subscribers desktop, their three These layer access the available cards Vault, we've with folders automatically of accessible the a extra only family biggest launched also to code the important their And folders most an our Content like users' made in designate up, emergency. inception. now automatically enjoy are changes hard We insurance are in Plus Files folders drive and directly the and represent the passports documents cloud financial folder trusted and that personal and to mind updated personal finally, files, and locations. content all in their security can synced of its back one to peace allows to SKU into of features in on PIN between to updates feature and data are made the of just event their both you

improvement growing be experience HelloSign the is we Not And for natively To embedded e-signature effortless surfaces users primary the end-to-end functionality HelloSign file is this folder. create product make a we a important HelloSign saved broadly Dropbox now progress Family around only to fields to which lives workflow currently globally. now the with a Dropbox signed can identify share we the final two of a into signed businesses SKU the This personal continue in shared to We're and space Family. family's up to beta improving plan under terabytes This members Dropbox the last and select each private can let's keeps easily to Members Dropbox document product out e-signature strategy entire they for addition has quickly is world. integration appropriate with one opens plan the localized the to In content. launched new member also Dropbox, across quarter, recipient to testing also for the e-signature. the to languages to additional makes also file content new second also and big user accessible our send bill. tool bringing the six the that and photos, connected product past beta more with Plus the to place one HelloSign. digital quarter, In Dropbox organized half own family on user into launched is out overall need Dropbox once with plan, the does whole of Family experience. brand one documents. users Dropbox opportunity, automatically international make fully when into SKU against the videos for XX share year. and and capitalize it space within but QX, roll their this live Dropbox storage completed

helping We And been driving of and more also distribution levels. also made additional focused customer our the of workflows. to the the we more service of connect HelloSign of solution, adoption more have and exciting digital the the to at see the ecosystem beyond during improvements helped Across EMEA also Center, for of by these this QX XX% create to than our engaging, both App core and center products Dropbox well core QX, period. expanding experience continue higher to partners position app as adoption and usage Dropbox suite. our our APJ XX% product same trials can to where a expanded to increased we SKUs. regions. users' propel broad new HelloSign HelloSign we learn to to the channels discover, to in of on retentive our the QX the than product and solution experiences, the users like remain account launched Dropbox usage Dropbox It's HelloSign's about by HelloSign include HelloSign e-signature And relative we've to increased within platform. support trusted API And hours value as leveraging fax the to committed HelloFax place increased Investments

turned Smartsheet Canva, summary, to commonly we Dropbox ultimately Now great just ahead. that or to clicks. as about our cloud the say work opportunity the shift shift tools like also in Dropbox remain HelloSign and clear In quarter, ways easily working workers We're delivered will new as to more shift significant to all It's knowledge better distributed workflows. me account link need to can be their have a this strong their products and few important both most a mobile from to Google their to to new another customers demand organize and environment. and the lives the for manage people use partners with

many and I'll Ajay since We second working see excited to the to have for I'm over turn half completely reoriented new share what to now work our product of of our design and the on through we've and more been distributed experiences products to opportunities financial walk in roadmaps it March results. year.

Ajay Vashee

my your It's going years. for next the and to support partnership hire through the one over like on how Tim. am as prepared every couldn't you endeavor. be to I'm first alongside its I next pleasure an the to working reins been and past lead Drew, absolute thank Dropbox all of Tim to miss of company and excited move you CFO eight team, to I'd pass also more convey help was to phase. as the Dropbox my I and

execution on for healthy the quarter Total billion, We year-over-year ARR have the $XXX.XX year-over-year On would XX%. XX%. constant with results to would $XX our ARR numbers, was been million XX% million QX year-over-year. currency with million. $XXX and currency period. ended of strong an quarter growth and up the XX increase basis, of quarter-over-quarter for to balance XX% constant continue paying users growth and top-line focus of was our profitability. to a a basis been demonstrate an growth delivering year-over-year On increase and have revenue the in Turning a ARPU $X.XXX QX

as We've this With manage in Our the and value touch learning large been past supporting users drive quarter. on convert to they strategy some we ARR small sustainable and our implemented monetization our strategies, continued focused universities. customers let's remote businesses and our retention. growth transition the work to highest methodically go-to-market to global to from reflects on also that, of

learning paying Over customers HelloSign data series Dropbox users, experimenting the of folder up-sell been subscriber. experimentation by which control set. list XX% targeting from a the types, with to aggregates initial period last activity model HelloSign HelloSign shared identified group. notifications And its to the HelloSign's and few model and our file likely for months, and been feature signed Dropbox a Based model at promoting science team most higher convert certain a that engagement Armed a trial The capabilities. characteristics, our growth on HelloSign e-signature a has identifies the benefit with promising. up the would relative Users of team rate are us deep has Dropbox context, the install to about with machine we our this surface Drew selling in-apps of who the XXX recent to HelloSign that excited cross users. continue mentioned million HelloSign over base into earlier, and integration are prompts opportunity for registered

critical to a We're company approached Let's of leverage organization. is of a range their verticals, creation integrations education Dropbox Dropbox across move to Europe QX, customer. across collaborate media, on to number native key workflows, highlights. media Dropbox Divimove plans cycle including that of business share well customer to find some how way ideation to optimize we retail. now Adobe, nine part had manage efficient and to Dropbox Divimove's as a and the offices across In the as our like excited to asset concept features life media will generation a more construction, from company final of wins delivery. Transfer a new Divimove, with be they content with a

productivity, migration Divimove closely are the their services we increased with facilitating to to addition move provide Dropbox content seamless to platform. data In also they working as

customers focused how cloud-based collaborate solution Tokyo Tokyo building evaluating work their workers. provide field two They solution is ensure a and enterprise They Dropbox After addition, Kogyo announce were provider content would around distributor customer. also Reiki storage for could and a rich teams a on-site services large their their implementing that turned on collaborate. Kogyo our In secure projects Reiki modernize to HVAC a Kogyo partners Dropbox deployment types. to competitors, pleased and a is for Tokyo for Dropbox other and now to and share selected sites. multi-year Reiki to against we're file large-scale that for Japan-based Dropbox

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

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

gains depreciation unit Moving higher gross fiscal gross XXXX. by including quarter gross of revenue. percentage as points for of in increase X second efficiency P&L, approximately a be expect the XXXX. the to was an the The quarter compared lower with to We points with than our infrastructure driven cost to X XX%, percentage margin now margin of hardware, margin share XXXX increase

work Moving to as ago. and was home well or QX ago. marketing QX, non-income of decrease a greater due due of to was expense ago. revenue, taxes. year in XX% quarter G&A higher to of revenue operating work related lower compared spent of expense million was in was to $XXX a to percentage based new to XX% efficiencies in by decrease COVID-XX. revenue second as million related as spent due in The event testing. by expense XXXX, QX, S&M from product as as compared year lower or a relative $XX XX% The of quarter savings, QX, in decrease well million from to driven related driven home revenue, headcount XX% XX% a offset investments to was revenue The expenses, year and XX% was of in R&D compared the development or $XX savings,

EPS ago. in $X.XX operating $XX we per an XX% from year $X.XX the record improvement million were This operating QX, ago. we on a Net GAAP translates which diluted $XX note the QX quarter. was in for I'd a weighted year a from earned up XXX to once Diluted that together, million, margin, in point XXXX. from share average profitable QX. profit $XX was second income shares based up outstanding, also XX again percentage Taken million million, in quarter is of

quarter. $XX with flow, million $XXX on CapEx of to included Capital billion. our balance to QX was offset QX revenue. $XX cash and of HelloSign. Cash flow expenditures million These cash $XXX which to QX, operations cash were quarterly or In we pay of tenant of XX% in investments spend headquarters, $X.XXX of deal ended was $X from flow free we short-term the related continued in through Moving and cash million, our yielding of acquisition XXXX. allowances. will on QX consideration back hold of million payouts improvement corporate of a the portion by million occur

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

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

to turn let's Now guidance. our

the the as risks move this appropriate. While may we've benefited and resilient that, factored of let's certainly mindful our Similar year broader the that we half second macroeconomic into With guidance emerging remain some tailwinds, quarter, has and we our of last bring. been to on. unpredictability business from

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

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

range previously billion raising For $XX $X.XXX guidance to to was approximately to to XXXX, our currency $X.XXX basis, the billion we On would revenue revenue million billion. we range, full-year $X.XXX of billion a $X.XXX billion. higher constant that be $X.XXX estimate for billion are a which $X.XXX

million million flow previously We are which was to our the operating was headquarters acquisition This to XX% to range which guidance cash as to previously HelloSign. holdback $XXX of to million. includes range, guidance deal million $XXX we XX.X% to consideration raising $XXX XX%, and our free $XXX spend margin to related of are payout XX.X% related our range, our corporate non-GAAP the build-out raising to well one-time as of

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

conclusion, to perspective, XXXX environment. Finally, outstanding more product potential the million average and we deliver business for changing amidst well, in made $XXX do we've continued a enabling go-to-market range turn our about from their to Drew and both to XX-day to to expect the to continue global million especially back We've weighted based to our trailing innovate $XXX share forward. average shares diluted of In on closing in value work excited I'll our investments be perform best rapidly our a I'm users, remarks. and them now it going price.

Drew Houston

the behalf take I'd moment team, customers, Q&A. and Dropbox that, management Ajay. our open we're a opportunity. well profitable Dropbox, for and best model their unprecedented we're believe to you, up times our partners tackle of our committed to to users these At With Operator? continued during with do Thank the entire like product we the I'd work innovation, self-serve and to positioned to call team. thank like helping our business On

Operator

comes [Operator Zukin Instructions] first RBC Alex from with question Markets. Our Capital

Your line is open.

Alex Zukin

And taking on questions. with my these calls, missed. pleasure it's working a for Ajay, you you'll be Thanks been

Ajay Vashee

Thank you, Alex.

Alex Zukin

your business for of of from fair for is in number, value a that the Is on of that just And tailwind durable? quarter like time. was could the had brought an strongest ones increasing around quick - and to that maybe it to got COVID you're some So and it now starting has to respect see us this be proposition tailwinds I've the - kind with think actual you follow-up. the - - net quick when the to strategic a say need that that you've headwinds Drew, the market, fair that the combination given tailwinds add me. two business SMB the about think

Drew Houston

the surge certainly see measures Yeah, be the tapered Dropbox continue continue to since our some that COVID that Thanks, demand. beginning work the addressing to general, elevated like content and an trial has SMB works universal since of And and distributed broadly, you worker big platforms. even we've in like in seen with experience since volumes do it see distributed mean, elevated. we're every a COVID, organize I improve to off more their the of saw all as business to work I Dropbox as turning to QX, is Sure. need operation. been we mean, we that but for opportunities knowledge And needs with shift for is Alex. place essential part Dropboxers of

So experience we've COVID work forward. lot re-imagine see opportunities strength and post of seen continued to distributed a and we going resilience

Alex Zukin

Okay. the weren't last And to is market, pipeline conversions. you quick you quarter Ajay? pipelines maybe maybe, very but or that you early the just SMB of or Drew elevated the actually would make talked the about follow-up for assess ready were more how of in seeing health driving whether call then, positive, your And is, that then kind signals deals

So now a two in both to talked things? those of few COVID months after

Drew Houston

Dropbox that to receptive so that operations, tends employee home can discretionary been purchase. businesses Sure. general, in and start less have SMBs But environment - to might can in and critical again, knowledge we're it's mindful happen chime be the not really can workers second the think, from a in I Well, with macroeconomic again, Ajay and in. what broader SMBs of I Well, half.

front. good feel that we on So

Ajay Vashee

paying provide noted net in important QX on in a metrics the maybe has little And bit the stable improved play retention relatively Ajay, of for from trends, our And as us higher outbound case top some of our deployments our last volumes as we one paid on demand, than QX, to and level to users. now we to this business paying The QX plans. on you to the commentary churn the workers some the that it knowledge that resilient, business-critical answer trial of ever. provide saw also we that quarter-to-quarter Alex, jump I this as really revenue that just talked remain call. conversions demand or commentary managing tailwinds deals Yes, in been because to higher content role funnel rate of result so really as was to of and in is help And more relates quarter and we them, ARR Drew and the in had for an well to those would just business did to to we And university and on all some large well. question your as closed that pipeline, majority question. note being then around period and make is said, subscribers users

so optimizing is priority growing on profitably number specific remain total versus our will ARR focus Our and base, a quarter-to-quarter certainly there that for our going forward.

Operator

comes question next Our from Mark Murphy JPMorgan. with

Your open. line is

Mark Murphy

best the working wanted wish all in your... to I with you great you it's been and Ajay,

Ajay Vashee

you. Thank

Mark Murphy

us you you what extent, what new absolutely. app that strong of extent maybe asked to might large you were XX% Alex factoring could the maybe extent, say the and the understand acceleration move in that to tie see I remote wanted those see on a the of hone touched to we curious we of, health and just kind trials any that this, it outbound about, conversion nice driven works in to of role. have of adoption deals extent, desktop in? at acceleration the on actually Yeah, and ARR I help ARR when know the constant could very congrats to what in but currency. Again, of on if And nice guidance. Future quarter - I to was of a growth. couple what chunky could we that? look it And kind to had there's then, growth that

Ajay Vashee

remained the combination and volumes a both, for of up and really with to conversion in and those across some is of of of to from our relative come break It's tailwinds QX and and some those individual historical Mark to with Drew mentioned rates answer of I conversions COVID were trial you. levels. it XX% through can consistent work began Sure. levels pre-COVID QX kind tailwinds. Starting those team we the see home about plans on above, average apart all those

part both was API QX then to e-signature that also so about to e-signature were And products their their HelloSign, And usage it up of product of tailwind solution as there. well the XX%, QX. as relates our core as

those was always A were net every us at launch this really successfully of been that there also that initiatives for a has had were of those is million outbound the quarter. working deliver successful one tailwind, was strong. our the two cultivating tailwinds we and that we're number are there's also that's helped this - $XX also, on growth team reoriented past and quarter. sequential and more traveling And products to our and of from has really we that actively pipeline, a of business So demand growth UARR been a telesales leveraging handful and team tailwind things initiative initiatives

able they So were of convert number those opportunities. to a

really, a a allowed accelerate quarter-to-quarter. net all was So basis our it of growth UARR that combination on that those factors us year-over-year to

Mark Murphy

value how for ring data encrypted the that some initiatives, that since how mentioned you just the something high that is potentially of I you're be about sensitive Drew, information presumably, sizing targeted? wanted the thinking Passwords? And pretty ability to and you are Dropbox fence new about an just Ajay, ask would set thinking opportunity And to it's maybe

Drew Houston

Sure.

a customers that, huge around to Vault, see to investments a lot it's universal our security and we and things have we to strengths a motivated trust that pretty fit. user us for playing make made of as workflows Dropbox and continue there lot natural plans. are have higher-tier of and were And Passwords, already these are more of our an using information lot While and in to a Dropbox a then we're do our what Passwords like lot opportunity secondly, we solutions areas. kind storing then and experience focused this to saw build in more see these seeing a And add a requesting or - around Dropbox and Dropbox people value provide focused one, of more them to it Dropbox customers

A to way. platform-agnostic this the again on they a a want to Windows strengths be and to so across and of areas PC. alternatives one but their might be platform platform, ability might want And think using iPhone lot play at that lot customers of we customers to do our work the one these their other be - device in work also across tied

then broadly post-COVID ours. I'd and look since of more one of work. highly both cases is relevant even work of working these much these Dropbox's for core we're way. passwords while as from the a between strength cases literally you when and is about blurred at managing both say And big in and another look personal or like at lines were more feature platform-agnostic work at personal see your we as then And strengths features supporting securing the have and it's home, also lives used introduced possible you used things blurred documents, home the So where

So and we reinforcing our is look another. maps personnel one product road at work and portfolios

Operator

Our from Rishi comes next question DA with Jaluria Davidson.

Your open. line is

Rishi Jaluria

wishes you congratulations for best deal, both wanted on wanted with land. pleasure about my by working role. talking long-standing Also appears I'll thanks, you if year a bit more chose competitor Tim and mean, with you Ajay Michigan first cloud my got especially deal, start again. I replacing wonder the are impressive to over vendors. relationships really but been the I the I Google because presumably though they've new not and a next in that even you to to to extend echo motion Microsoft on-premise a and cloud on color Michigan can little give

especially color a on coming universities are many you semester? little more this end So that? so about bit I've virtual follow-up. opportunity, then And how broadly, thinking got going a higher maybe with the And

Olivia Nottebohm

this we're the thank We students their Nottebohm. for and both and proud partner excited education. was to is for of to the were of is area their of deployment, that's partnering focus campus it question very closely we're as well an And take need actually and This It Rishi. you us they out question. them what this Olivia for faculty with with was as something I'll remote us. for University that Hi, meaning build cross for Michigan.

Other education they that much hosted about does CIO I lead thinking their CIOs number nice morning see technology forward how it's on and education front fact, University going and - conversation Arizona and had In a the into very wins us North to ourselves bringing this Western, a them. of State education we've foot, few. of are they're was to name think and were much of education partner to as a and with a forum Pennsylvania very just

exciting love and them. take they as the the graduate, leave that graduating other about Dropbox that part then institutions is with these think classes this I educational of

evergreen it's being the where come quarter model a of graduating then, population course, as and they refilled in. of is So an

this So business we're overall. opportunity about excited

Rishi Jaluria

the wanted I pretty a on sequentially operating mean, I then, Ajay, margin about little guidance on detail side. margins talking to you're And more bit next quarter, for operating meaningfully. go declining specifically guess, I the

wanted that? Just and declining would little a Thanks. more QX on color from what are to get be driving why to QX it factors

Ajay Vashee

provide QX. to context spend. question, It's shift Sure. we're a to little that say, be made generally the going generate that to more that QX this speaking, And moment some in to a launching I more things over by to year. fall. timing But from Olivia just really it's driven And expecting are bit marketing decision some a campaign of to great will spend in we Rishi, we I'll the turn efficiency on and

So being FY XX% the guidance our the quarter. to of last from raising driver XX% up that to this are operating is 'XX margin to XX.X%, us XX.X%

more before based QX, targets this long-term delivered getting you in we those raised now target business. year. more we see, and the range think, results efficient are earlier So we as in our to prior on And that a I within can well structurally we've executed

business. as the trajectory of it And more a some feel about context Olivia so a definitely, good over we're And little that to to turn spend. on I'll on bit give profitability marketing that

Olivia Nottebohm

Right.

be both, then So funnel. we putting the will Dropbox also, off it moving those that work. that, We're an a business be the for about of we really to top knowledge some going awareness ensuring into through, drive are and marketing early have excited specifically so We're the we're of remote funnel that top of to but ended conversion campaign for solutions at campaign, fall. up the the we launching for that really out awareness investment spend pulling

Operator

Heather question Our with comes Bellini next Goldman from Sachs.

Your line is open.

Heather Bellini

wishes. best And Ajay,

missed. be wanted terms of I quarterly annual for years. little trend over noteworthy just to about everything will ask pay? any you're You a bit the Thanks seeing are in versus that

Ajay Vashee

I have. context Ajay. free is any and with Drew, then can This you in to Sure. that feel chime start

as larger seen shifted the a that has I demand has cohorts more elevated these remote our there plans work and world been some we've think for for learning to monthly post-COVID those remote of cohorts. a mode, in higher

billings you some dollars that of that seen variance and of billings, so drove quarter-to-quarter, the rate. might absolute the And like things growth have billings

that monthly annual to between we're mix majority monthly, basis because from higher mentioned to the them managing hasn't knowledge lot are so But group both users a to lot. revenue improved XX new I being user churn a have we've seen pretty been for earlier ratio kind gross annual. whole that Overall Again, with of and has pretty changed paying in and quarter-to-quarter. that QX. takes vast a stable across That our QX being there new move slightly was to uptake perspective. for from lot our important million said, from perspective user relative respect and a content. quarter-to-quarter, to Net seen workers on retention. a of And So paying as retention on gross an us it stability there a playing paying of a users, shift On paying that. their we aggregate it

Operator

comes from Our next question Thill with Brent Jefferies.

open. is line Your

Unidentified Analyst

on Brent Thill. in is This for

to that Ajay HelloSign users. more you. have cross-selling deals was opportunity. Dropbox assign the know had a of all, I mentioned I of couple you're First wishes One best on to questions. you guys

to on is? how currently users a opportunity wanted what have - have How get the as some And color maybe, Dropbox follow-up opportunity many the what's HelloSign there? and maybe, cross-sell I'll So, many then well.

Drew Houston

we lot now fully Okay. you COVID strong HelloSign elevated demand shift and been e-signature. and is Olivia, to Dropbox. the really integrated start please continue a HelloSign for But, and demand And of into work, I see chime given that yeah, obviously, we're noted, in. excited remote as to can for

So our ever most without - natively businesses. now in we ever without QX, it's one embedded Dropbox. growing where HelloSign and into brand store to important send workflow leave safely fastest or launched is seamless so easily in having having Dropbox and to product, of sign experience users agreements can our the improved And their one leave

demand elevated seeing there. big definitely a So, and opportunity

Olivia Nottebohm

outbound products than we the more customer's HelloSign's deployment. XX then the one closed where side, deals into at we least on had Dropbox of bundled And

e-signature really, a single enjoy can that a right and become have experience get demand they where very Solutions is say, our front. seeing we we're free now Combined and much motion us user off. I'm paid every on more then the and model excited kicks So that user. on can also Dropbox more the right? and they have begins So, to opportunity organic, And HelloSign, - would self-serve three for experience is that really I that

own So have for use do for customers there see there the and even our this don't to is part great, it's actively we that's cross-sell, existing because of themselves. element to

Unidentified Analyst

it. Got

Drew Houston

QX. API in QX than Hellosign XX% in was more I usage e-signature products of solution the even increased even say by QX. to and And just versus going

sell-in see So it's that. good been to the

Unidentified Analyst

one quick you tailwinds that and Thank sounds maybe, rates great future, on guys you that's sustainable home. And growth work XXXX I And it as the from - going to you. do you forward? from it follow-up are into like guess, these me. seeing from some believe are look

Drew Houston

platforms. for works see all we're worker organized because of an of the home, any of is number platforms universal competitors knowledge a many across need that don't office solving addressing Sure. we're have tables place And air it's Google that needs this from every scattered now and post-COVID, this with us need, is me, again we even working docs right? an our their that other The for and Well, so big and docs problem. bigger opportunity content

HelloSign stack done and and XXXX, the opening that's my And distributed said not the the for second, And or purpose-built content the None and shift are of of shift So the opportunity of in I all what platform together. moving this we're building to more a Passwords your handling in using are we're remarks, it transformation. or the to to big a think, with transformative the in content cloud. us. opportunity, and into that. is good first unlike higher mobile for looking we layer examples And in organizing things of as that workflows XXXX our that's around agnostic we've I Dropbox for an all like and brings work shift And environment. your inning to tools,

I things the new we think designed for pretty and differently - world. So

about and We've roadmap update around we've have that's half, we'll the space. this So doing. in a second smart-work been reoriented our product bigger our what

Ajay Vashee

add that And that. And we target answer I on Drew, remain a we fantastic a year. a to a absolutely I just on related add this earlier would just think, achieve trajectory long-term note, it's outlined on

next to XXXX more continue billion certainly, And we we in so, trajectory deliver February. have over be by call on guidance to $X our and free to we'll as on a share cash flow it when in that annual issue relates year,

Operator

[Jestic And Citi. comes from our with Rico] question next

open. is line Your

Unidentified Analyst

while Pritchard. And question And call it's your usage revenue on intensity. Walter financial because you I'm angle, of cost the revenues team, I'm on Dropbox essentially looking really flat in - million. your and year-over-year, as A were increased year-over-year. it, you thank the you've were at through Hi, keeping $XX for revenues

really So servers like install capacity. AWS or new procure to you're rushing looks it doesn't

about what So your COVID? you average us tell during user can engagement per

Drew Houston

financials. I can speak can to speak to engagement and Ajay

As board I the seen and broad HelloSign we've desktop new shared app. things our across the adoption like earlier, both

again the are from up well. up of Dropbox prior actives business and that the quarter teams we Adoption XX% new weekly quarter-to-quarter was progress as made So in app desktop and there. XXX,XXX XXX,XXX

the desktop across the of some the new our a us are And to measures of all foundation for those look also new at. So products board. adoption new drive apps we of

have seamless of surfaces all more and partnered having the or so, HelloSign experiences having allows with integrations us And our to seamless products.

Ajay Vashee

the on good And to down bringing margin past I cost rollout cold to so as and The done we're unit always always we're and efficiency compute just lot tier on unit that new both us incremental utilization well few layer gross we've and that few on of our past increases. over a year-over-year years. well helping the like quarters cost focused as front, storage, a of innovating drive that as the would efficiency relates that's our it job of things SMR infrastructure as of as technology as add driving that our the and storage

Drew Houston

Actually, have customers engage higher who thing for collaborative integrations. for engagement because I folks would that or more use same better to say, our retail same us value just see we is users, important lifetime thing and

then are we by and selling plans lifetime So value high more value. indirect both focused and just on retention driving monetization direct increasing monetization

Unidentified Analyst

is it And that on did increase, then how you on about what to an And trial convergence us mix? going sequential ARPU quarters, extent in bit going can tell was the have evolve effect the to a little forward? less that what than prior

Ajay Vashee

this question. you some really for demand deployments that acceleration a point is I scale Ajay. in can that larger the it higher Sure, products and It's of just take our say would resulted was I made. conversions.

Olivia so mentioned. that And were larger There University other talked of scale we about EDU departments Michigan.

ARPU are for those to a user be of headwind getting all the and a benefit headwind growth to value ARPU for will they year. while and platform. the ARR certainly are revenue, modest so a And paying our were Those underscore from users period, modest the

our and outperformance of be to the and gross to is it's front that to strong, premium new users average meaningfully paying really new plans so users And continue on time very ASP so over new those tailwind effectively ARPU to team the that's that which us paying lead ARPU. our to and for ARPU the driving paying that organic attach user individual from shift mix for blended that that continues team rates

expansion for remains. runway So that

Operator

next Our Ader question comes William Jason Blair. with from

open. is line Your

Billy Fitzsimmons

This is on Billy for Jason Fitzsimmons Ader.

well. who continued - points you something levels trials changes your flow obviously that into making start likely data quarter was key around quarter well. compared quarter around that last One you and that's with this announcements because as last of guys the provided was the targeting one this And to that interesting as And loan I pre-COVID to last engine that to of increased changes you're mentioned users your mobile quarter to convert. on-boarding more conversion mentioned you

close So mobile kind conversions from details of because since takeaways I'd but seen side be imagine in provide in for early that and the months customer or the early first implementing changes or here rates are asked engine, some understand, it first feedback And you've future mobile of conversions. any those past conversion on it's I you. outlooks couple might mobile Thank changes driven in in those I initial shifts good data customer of changes? any to of aggregate kind are though there thoughts

Ajay Vashee

individual just making one get Dropbox experiences mean, are of I other still and subscriptions opportunity surfaces into want are experience And is either improving represents upsell free seamless. folks and help the majority that the mean I'm on, streamlining all And Yes, the the that experience. so the we overall our we're our way across teams. a - of majority of business biggest to focused certainly simplifying work and users or then we opportunities. examples on look And lot users more one embedded I mobile value at is that our of

engine higher - optimize and streamlining plans invitation we've match also like progress we've to conversion process. engines and And conversion of streamline so things onboarding are So made a to users value to lot the continue process our on.

that front. progress steady dimensions on number make the we So on

Operator

Zane last question from our Research. with comes Chrane And Bernstein

line Your open. is

Zane Chrane

Hi, The with net rate. for retention more business dig Or of that the holding primarily the by fitting consistent dollar in. expansion with users? Thanks. that into than among is mix your function a wanted expansion mix renewal consumer to steady those customers plans and customers your quarter-over-quarter, I consumer the plans? with just kind business of me the Thanks driven to faster team. is business on increase was growing shift relatively

Ajay Vashee

to is we've those expansion revenue is retention churn we've the Yes remain Ajay. retention rates their it's drive across a and in great net question, rate stable Overall, the gross seen this able been to us relatively business One factors. Dropbox teams adding also existing licenses And their mix expansion teams, of always drive we're deployment. to driving towards the more business of shift both on touched a continuing you team. to twofold

So team more licenses, gross deployments we're more new every relative and converting as to individual. period

so mix is shift that And over changing. time

Zane Chrane

expect triple point the to that's you growth really the retention revenue we stabilize the the and digit? across accelerate really And margin dollar where like net expansion. It should into seem inflection rate when could

Ajay Vashee

since we don't continue retention so our or provide been metric steadily. provide color guidance - we so Yes, with and has has it formally on the we'll to been don't formal against improving IPO that commentary, trend net pretty we've certainly report pleased that but and trajectory been

the we have sense that for milestones something we we'll it that's some so share hit us that And certainly to that extent publicly, makes to consider.

Operator

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

Drew Houston

you forward you we again thanks Well, for again Alright. with joining safe everyone this afternoon. staying speaking We healthy. quarter. are us and And look to next hope

Operator

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

disconnect. You now may