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Dropbox (DBX)

Participants
Rob Bradley Head, IR
Andrew Houston Co-Founder, CEO & Chairman
Timothy Regan CAO & CFO
Philip Rigby D.A. Davidson
Pinjalim Bora JPMorgan Chase & Co.
Luv Sodha Jefferies
Mark Chen JMP Securities
Heather Bellini Goldman Sachs Group
Call transcript
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Operator

Good afternoon, ladies and gentlemen, and thank you for joining Dropbox's Third Quarter 2020 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Dropbox's website following this call. I will now turn the call over to Rob Bradley, Head of Investor Relations for Dropbox. Mr. ahead. go please Bradley,

Rob Bradley

call our of described Virtual related good expectations the Call. opportunities efficiencies share other welcome that risk ended XXXX, could as included expected from charges opportunities actual including capitalize included September projected our this the a result quarter Today, were XX-Q XX-Q organizational and the those to June Form as shift including remote call, and for regarding on particular, our results prospects. and expectations operations, including Form volume expectations Quarter anticipated and business including expected or and repurchases; free future and our to opportunities; ability to well to during as regarding goals through future timing of quarterly Dropbox's key M&A to be unknown subject achieve those extend our quarter subleasing our our structure; the XXXX and a that ability partnerships; cash benefits to our and business; by uncertainties our this capital in sustain our Statements regarding generate ended earlier. employees risk products factors, Earnings to Dropbox statements business a and distributed performance impairment execute results, the financial to and forward-looking model; afternoon, flow; you, revenue allocation results income growth, and work First positive or statements, known and changes to investments; and our materially our and factors platform our of result and ability work our in plans, our our Third differ strategy future XX, our XXXX. to XX, offering These financial include operational ability impact to future and Thank those market trends, new our developing estimated may on profitability and will will of strategic results cause we discuss in our overall of financial features as for risks implied the are that strategy; in

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

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

Andrew Houston

Good and afternoon, everyone, to call. earnings our Rob. Thanks, welcome XXXX QX

the our this in me third long-time have outlook update start to have details and I'll quarter, him critical the and Tim role is to I'm and remainder of year. Officer. the our today key join of Chief me of by through some performance the our walking for Financial elements financial Joining excited the of then share will Officer Regan, Chief appointed Tim Tim and newly Accounting today.

could have neither Dropbox. I ways, had you challenges. I critical the distributed our And all call I'd else more opportunity distributed means we in our jumping quickly the on of to This than resilient with shift have the pandemic. transition has help how the that certainly year this a never spoke year. building Before and XXXX on by the customers we work them earnings the ever end fortunate imagined its would believe environment. has year, of in as to work, be we the on for into that upended place to like when approach to February, also reflect blocks many us to quarter, the In nor our were But in relied the XXXX been world was anyone bigger. to be current to

the model, We operational February commitments continue in our towards shareholders. on efficiency driving we made generating for our to be long-term and focused value

progress made. happy of I'm share some we've This to the quarter,

for month, Last announced have that First, excellence how First. First, more context faster up I on Virtual our seeing to of with entire our First anyone to success is our most overnight shift us the operational our we abrupt went organizational set to for believe with world shift. way from believe a working turning Dropbox moving greater and think could and Virtual about into working. But After continued XXXX. decision-making it possible. recent talk to way the in we to changes anticipated that, we don't some home start going distributed the long detail ends. and I'll I'd I'll which before over work portfolio on we're to workplace ecosystem well product continue this we're Virtual And dramatic in pandemic Tim. this with strategy after focus, positioned like share and then structure, will the

work. product enable core helps its Our distributed at

flexibly been Our to more turning our founding Dropbox customers have XXXX. work in to since

we helped It Dropbox was that customers. pretty when Cross just emergency so to helped crisis. examples. a our publisher this and mote servers, to And their of And many up running a these off in our product migrate response And Italian in their to get the Dropbox few to London was are able and on during in-house on Red transition help coordinate helped a week. the work relied earlier forced lockdown, seamlessly shifted first year us after

been variety as virtually adoption And As important. this across has COVID, all a result seen a becomes work industries. team's content more knowledge your in one we've organizing all never increased of year digital, of workflows place and based usage

majority our embrace they the before. reality didn't also we and to that aren't and they've were want to want don't the things things long gained, that they to have focus For said want return back flexibility vast new But They commutes. to the employees, way don't this lose go to know perfect.

ad-hoc bombarded day, announcing of this either miss challenges and think co-workers. saw I meetings approach. in we But we collaborating on adjusting a getting to and these. bonding we're an our fully with remote e-mails notifications, all and Zoom office by responded sitting the and being to both with all companies Many with hybrid or

come home remote fully employees. is building the to of culture. percentage And experience of relationships in-person leaving out cuts for Going a the unequal that's reduces up playing when to they from it employees the the benefit contributes team having both an office, physical to working and to large a space, critical remote also and if field

as our for culture. will opportunity call know most in-person building So that we the Virtual means we maintaining we elements the company how we happen best solo combine critical collaboration a to landed teams model saw reinvent this work, that to but home, and unique new work on still is relationships in-person focused First, and and healthy that experience. at a which of We remote

Studios. us increased spaces, turning collaborative gives our offices It talent approach the with team in we live. our But commitments most this that important of it and chose efficiencies to live We broader profitable how Dropbox to we're flexibility we mission. they allows access reach, create growth. truly is believe our consistent call and was previously allows to our has So this us out out to into approach the it work potential reason that

With to of happy we has that also to of go-to-market SVP points distributed our in news at share have people coming oversee work We to an I'm we our promoted world been team. really all he'll us for role, part will teams, permanently he'll the product go-to-market experiences COO, the an team will products the teams. edge work if our executive First, weren't in in we're have more us this that for our means about that sharing in from our about we'll I'm continue quarters. engineering, this to scope even direction, only In our the the will Dropbox her While and product, product to that my play be between now us with Timothy to Timothy. teams, Young, tools collaboration to will and built today how address better and out use design excited we're know Core Olivia create Nottebohm, engineering, engineering do pain as look the along experiencing. leading for expanded and and on is better distributed respective ultimately our recent reporting we opportunity and forward allow believe GM products This me which shifting can distributed teams, anywhere, build President, for of platform building build help help and strategy But to truly a ourselves. products report all closer shift our we teams. teams Virtual people customers. new design, this begin and to and

is more leader, new to scale. a shift working Timothy at strategy his believe operations. combination successful entrepreneur role. and on operator allow new work business the And and massive time a presents excellent this innovation, product the me addition, on longer-term handles opportunity. In him spend more structure congratulate Timothy like of distributed while to rare will to day-to-day We I'd experienced

the will resources order and First and a us strategy that to perform us to allow Our best. create streamlined opportunity our leadership our more Virtual at changes to give nimble realign in organization

In of currency results. driven XXX,XXX ARPU. across growing business. paying Now by I'll the grew QX, our nearly and Both revenue to to addition continued strength actual our and constant users turn broad we XX% quarterly see year-over-year,

shortly. and margin the our work. guidance commitment we that at also customers help some this efficiency update demonstrating like and that, I'd quarter, exceeded gains to our before provide our deliver in to an operational specifics of We operating on products Tim quarter discipline. home their those organize will lives discuss made progress But the to

Passwords, number June, including As you Vault and may new recall, Backup. we features announced a of Dropbox in

work Family and and protect early new rolled These members. features customers We new products and trials purchases. and plan. they the first, do our to are signs a across seeing We're propensity X Dropbox needs customers them from their address objectives: We're core and adoption At retention customer content lives; sensitive nice paid by are and our as Professional with to and organized and their provide share in they now personal products use our Family of we've main offerings available users store These help better Plus, these more positive. and to are in base, work, of have value users conversion, family second, strong of both stay improve higher we're encouraged with many our user and help the who generally early and Plans, information churn. all lift our our our the indications and use important who home at out both new seeing. seen lower also engagement

adoption geographies.. HelloSign saw in it hosting continues strong marketing QX, numerous campaign with an awareness of We generating our to product. and and fastest-growing in be are international We're also webinars

more help native new Dropbox of will workflows to to us We worldwide. the the HelloSign Dropbox their more XX work users thrive in to of allowed HelloSign digital to introduce these millions product ahead. market the adoption. being our ranked believe continue remote traction to as support as And excited and overall people number investments has turn to eSignature number report, Additionally, two expansion and integration the vendor to environment. QX, this progress. well see recognized ease and the one optimistic was opportunity about for In HelloSign of eSignature noticed in as our be GX's fall as We're languages

an exciting with our a new to on touch quarter Turning efforts. update developments to busy We on. had that some product like I'd

Creative new Tools Migration. X Data we First, add-ons, and introduced

keep to be Taking needs. multi-step we're And that often customers a more choice to from and offer tools suite to take add-ons, to kickoff finish made construct don't workflows. all track. trying That's post-production why headache to earlier projects we the creative complicated excited product particularly line today's can the for while year best the With on out media solve problems fits these to the work help faces, of process, their creative, media integrations social give community investments professionals. this their the

files. users As on workflow Creative work remote large output. and were media Tools their and Creative who this designed to get announce More Dropbox community challenges. with unique than viewing, commenting, media secure new large most, flexible working work large challenge, professionals quarter, to Creative help And simplify more our relies done, file happy work to facilitate creating more makes that including we add-on adds management. will create Tools to add-on, The our collaboration, this transfers that with remotely files roadblocks new efficient for easy. frame-based and to allow help Tools

this to permissions Importantly, downloading. Transfer with projects. and professionals Migration it Dropbox important allows Similarly, add-on capability usage was keep in work files designed And and custom optional points account. storage moving. from place With to also the securely files best automatically Data Transfer Dropbox introduced to We've and to let Dropbox, migrate integration, provides Creative Adobe cloud anyone Dropbox pain seen migration to make without continuing is to add-on to local with our new Adobe quickly for users media mapped potential a to files adoption those send and another this solutions Creative on of our branding, environment. a can this Migration without into add-on, increased Tools rights access product. and launch Transfer the business we're we also in Data of final customers Business. to large the creative even preview With pre-existing storage be way the structures streamlining partnered large for move, quarter. we deliver file Dropbox this quarter, Dropbox Cloud, users Adobe minimizing the other

from benefit In of addition, to will that data management add-on comprehensive admins. and capabilities reporting by this critical analytics are of users company

of engaging and the to position Dropbox The core expanding users' to to can on helping our about, by streamlined we've apps our our experience a our been is launched new And their and expand connect collaboration Beyond focused as connect marketing including apps to also we're to with improvements install part products, strategy apps our the learn QX, Dropbox apps ecosystem to continue management, continuing Dropbox. the deepening communications, cases, the use and center categorized create and frequently Dropbox, expanding workflows. trusted center, such on developers for been simplifying Zoom. platform. integrations where partners. process app project of of at and with Users to available their account, improve discover, is our and with more place focused find ecosystem also partners our We've the and design Dropbox number apps of of with trusted in used users to a can to together

our launches preview team back recent items to in a also distributed our is together before, less time more after effective. action they we're run, app to and the in in loop. share agenda strong, leading these progress place. as on manage the believe common on work And workflows. the an we and rest company, page distributed upcoming vision one can of some work an mission sign is turned or for towards We want as getting of that with great opportunity. put summary, many with Zoom's the apps, HelloSign meeting. meetings quarter. users making of workflows, users' We home their with greater smart experience In work users people sure new And the just And us one Helping to to details and map our use we completely be so help in important long Tim road cloud. workspace. everyone we're workflows will as shift the to reoriented to both have of to opportunity be for able launch important Demand we same an over more and the remote to world. as everyone work the allows their switching for meeting most our by tools see to financial people opportunities streamline the our few is Virtual it Dropbox notes our during remains as excited most Customers It's to efforts products Zoom, another we done. for organize share mobile make product for and to that This delivered time new They'll developing is shift improve will the to able and the more apps of lives. between have to we're clear helping example the now address new part in our work by their spend more the the and a walk of the were truly living through doing March, the ensure to First be users to to we shift need turn a excited meetings edge prepare our for significant As deeper and distributed product a I'll to that results. over next to organized even quarters. Zoom important Dropbox work integration

Timothy Regan

Thank you, call Dropbox. today with first this being to the earnings Drew. CFO my of I'm excited as join

margins in core targets our for long-term tenets we that free XXXX, objectives this February. In thoughtfully As repurchases. which been scale organization, organic roughly as and margins; and a of I many as horizon; investment we representing committed returning executing of XX% for you in of earnings shared cash operating capital during that driving shareholders in by develop operating focused finance to flow annual we the and to investing we our the many to our as thesis, an Accounting as know, Officer, against and exemplified as formerly between the of particular, aiming revenue some these growth; over to, in XXXX, $X helped to give, billion I've consistently allocating would Chief organization targets opportunities, XX% have free and doubling flow $X while call share exemplify financial are guidance follows: annual XX% longer-term time continued deliver improvements years, summarize capital also the with the initiatives, of M&A of CAGR company billion through on, to cash HelloSign;

on with achieve of offset least we at will cash to portion significant spend an our potentially we plan maintaining free targets, that work a ongoing share repurchases our to to basis to dilution flow generate As count. and ability long-term by of a share allocating cash annual leverage level our the reduce intention stated

M&A also future invest our and We we debt generate the and on our balance on capacity. spend expect in sheet, to opportunities, sheet balance utilizing buybacks cash do cash not

Lastly, up thesis. to additional the year-over-year model that investment an will line include million quarter-over-quarter basis, revenue XX%. believe would this these upside. would to for of currency long-term yield $XXX execution increase year-over-year and have and billion, I note I to turn and that this been future will investment constant $XX on million. that the objectives shareholders. with On basis ARR our Total of in generate XX% like bets year-over-year. in QX currency constant execution for targets at $X.XXX against that, an quarter value could quarter that actual financial ended product ongoing We demonstrate XX% was our With our a an increase growth results

paying premium over retention. improve was to XXX,XXX ended with new users, strategy in net ARPU the XX.XX paying adding paying reflects our users attract in users, growth plans new drive $XXX.XX. users our quarter. We ARR continued and to million Our QX

the I'd the we go-to-market to of strategies some recap utilized Now in period. like

one of to reminder, identify propensity motions high convert user within to go-to-market with a our users base includes self-serve data our basic science paid leveraging plans. As a to

that of new used a quarter, team paying users adopt cannibalization target users. strategy machine-learning Family third users data and methods the potential paying the During net high science simultaneously to propensity to SKU. This designed is the have to drive reduce existing

or their made which to segment various existing for likelihood to including These prompts. based move team data best a among by Business improving to used on millions where wins paid on of go-to-market were want offerings initiatives either Plus signs trial our Additional variety had in early model the efforts is specific outbound have categories rates encouraging fit plans. motion, within of users to wins upgrade through our hundreds predict were to team retail, basic the now software, telecom best customer The users. of by into sectors, I to conversion others. and some drove

We the to of customer. that as and are leading existing employees media company is prepare based TV security in an broadcast of Games. for product Japanese business enterprise excited the announce on their sales Olympic migrating enterprise is Asahi use now performance. solution Dropbox's and production, they a excellent Asahi, strengths Dropbox collaborative from Hundreds TV Dropbox will planning a XXXX

to purchased income P&L. and I'll I acquisition related the the the all developer compensation, development. and With that HelloSign. before the peers their and size university's evaluated The follow and determined they as choice, with of platform files was indicated, Dropbox the otherwise partner approach solutions enable intangibles the globally measures now due industry as top and part collaboration. see We to sync address our are a on, that manner. identified a now expanded currently research with to consolidate best cloud-first to video to top unless Dropbox relationship are customer. also transform their is relies do, a amongst that access research amortization And be the researchers U.K. in to continue review company. the way their game strength for game innovation Dropbox finally, initiatives and note in expenses want on to a costs. We content exclude enterprise X,XXX to sheer space education and hardware we research the strategic a legacy Dropbox of a this staff, working solution ranked timely And non-GAAP of that, to I statement in researchers developers best certain improve of But was provided leading their by Already university partnered stock-based leader rest and to the of as of

on be Our today excludes gains effect losses results of equity A reconciliation includes Form furnished in found net with adjustments. investments X-K which release, aforementioned income non-GAAP net our of SEC and the was may with in non-GAAP to our the the income also and tax filed earnings and GAAP margin supplemental the was XX%, was the to by increase Gross our points was efficiency with posted a website. unit share quarter materials which an X lower QX for investor revenue. including on infrastructure cost depreciation improvement of Investor of driven This Relations percentage gains as compared our hardware, XXXX.

of For operating expenses, percent $XXX or and year third professional of revenue a personnel compared XX% QX expense XX% in quarter, was year The $XX event-driven was as lower third a the spend. spend million to to ago. was due quarter R&D due XX% COVID-XX. XX% in by in ago. lower This or expense decrease QX was marketing to Sales of to decrease million services and compared revenue a driven revenue

closely align we launches. to most brand quarter the product late our our addition, with in In third campaign launched

increasing QX operating QX of our revenue Diluted particularly our growth; headcount weighted longer-term QX. up per is from reflecting from quarter an ability all-time Based income XXXX margin of over operating associated million now result the with improvement outstanding, income related high. Net line to shift quarter with for to $XX $XX and campaign XXXX. in payments G&A We being was In or a of to brand brand which QX the XXX affirms total, revenue, to our the million third ago. spend, costs; XX% $X.XX expense million shares the result, on COVID-XX; aforementioned diluted and per will an in third a quarter in the against $X.XX in was QX. of the our in up believe margins $XXX As light $XXX XX%, this increased share. respect operational targets. million, was XXXX. operating our shift efficiency, the third campaign execute was year was million, EPS with share average driving Operating income prudent from expenses XXX% of of this of quarter and to in the

and Turning were from to QX $X.XXX expenditures short-term cash million of $XXX flow billion. flow Capital the $XX million flow. in yielding cash XX% ended of our We million, cash balance was and with of or $XXX operations revenue. Cash quarter. free cash investments

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

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

Now to let's guidance. turn

trailing be be share to XX.X%; the in average margin to price. of currency For on outstanding on in million, the we the be operating diluted XXX XXX to that fourth average range $XXX XX% quarter of a the weighted expect revenue our million range range $XXX of in XX-day to we to and shares non-GAAP of million million would basis, constant $X XXXX, approximately lower; estimate revenue to million be based shares

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

We to operating XX.X% XX% to to was approximately $XXX our to range, we which $XXX previously flow to cash are range, non-GAAP $XXX was raising previously margin are million. $XXX which XX%. million guidance guidance free raising million And million our

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

thesis. XXXX, remainder believe the our this to additional for we items I against that execution few a highlight guidance will addition to wanted In our of investment contribute to

net locations. time believe balance de-cost out a we a through are yield population steps return statements over we We to work financial impact a positive employee as impact to company. Drew on Virtual these First, help our hiring a our generate to will moving to financial work generate as noted, and facilities. subleases a portfolio, our have in real facilities low-cost First our on by will steps will our estate and return This us take to

between may depend of million estimate agreements, over other The to assets. $XXX XX the will benefits a potential XXXX, XX we This quarter on in achieve of This cash our excess negotiations in will as impairment impairment million be I flows record the also charge generate return first charges our years. shareholders guidance. course charge recorded this that incurred expect during recover targets. of timing obligations, vast range predominantly of have and invest included amount enhances the be the half value full actual which exclude $XXX and to been million we of may strategy duration lease in related we as note our not in fourth we majority the ability margin in said, the impairment will though with in of non-GAAP do right-of-use lease-related charge capital to our a income. our and this to and of operating these $XXX these plan our And not GAAP from While would that operating subtenants, portion of range outcome of to growth to long-term in the this initiatives, the such, XXXX.

approach our highlight Next, our capital. I managing wanted to to

flow of that intention share long-term cash our offset an dilution repurchases Looking count. the significant a level least with a to potentially as ongoing our intend on we work to free achieve maintaining and portion share to forward, allocate basis goals, at we reduce spend of will annual

we we the of authorization the our we share addition, potential our work. repurchase repurchase in and ability repurchase the under shares the next our of demonstrate current We In at and to cash authorization, year. to execution to exhaust will by the which our Collectively, intend believe that near end term, steps pace with increase of capital thesis. first future our quarter way the put existing generate this that these utilizing our commitment ensure we results to our to, financial and planned efficient, strength is investment against, in

and initiatives. We deliver XXXX our margins, capital free will flow continue high-ROI in revenue cash of invest $X to billion allocate aim improve to operating in growth, to

that, I the will his thoughts. against early on recent on While targets. this it long-term and most it these path Drew for of remain delivering in is progress in turn With to good we back concluding our quarter, made the goals we journey,

Andrew Houston

and about we're suited today. Tim, help to ahead our really thrive all believe and the users during joining you, transition us to thank We're distributed all you road work. excited the Thank for uniquely

our like like moment take team, entire the on to Dropbox team. to and of management our thank With that, partners up I'd customers, Q&A. for Operator? So the behalf call a open I'd to

Operator

Instructions]. [Operator

the Our of Jaluria Rishi line first from Davidson. D.A. comes question with

Philip Rigby

wanted you with This Canvas Rigby integrations is on back deeper start in for that I with August. Rishi. announced to Philip

within have Now Or in broadly, you can the curious even any share of by Dropbox to of in insights on couple had that, you fall usage Canvas? a adoption what in schools that's settle terms education months from user just seen if of universities, you've more term?

Timothy Regan

is on This that. can Sure. Tim. start I

an integration point, your we add with did to Canvas. So

Blackboard Michigan We great also a added one recently, and other in of University quarter the EDU with traction our seen The and space, last with past. we've adding universities few

of one of keep definitely part ARR our initiatives our long-term direction. driving is So the and in I right strategy think EDU to

Philip Rigby

then how declining the just there? in about little can R&D on drivers in thinking sequentially And bit the you're talk Great. And the a more in term? about R&D you near quarter, hiring

Timothy Regan

Sure.

continue personnel you we margin, to our with efficiency all spend, think year. ending our operating year. R&D, our to of and to XX throughout increase be seeing efficiency year-over-year did and up year-over-year, XX% for and Within income XXX% continue margin we XX% expect the in to deliver see operating the the expect strong. of as where as income OpEx the rest across operating R&D And that points see quarter We we're that's [indiscernible] So far categories. I continued really strong

Operator

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

Pinjalim Bora

for in in sitting one I Drew, product question Mark. center for you. Pinjalim of majority obviously is business content mean, the processes. is This of the

While Dropbox have of venture general-purpose we seen into we around might area inside at a think that some you Dropbox have into some business that from seen some in workflow could capabilities not go HelloSign and automating that's workflow Paper, point? Do content. an processes engine

Andrew Houston

Sure. Yes.

we into we've an really expanding workflows the what moving are those them. is in user content lot focus done on and just more certainly, around and from that thinking key into So And general. way end self-serve a workflows about perspective

are great of others, So HelloSign content. for Dropbox a number There Transfer example. a is sending

these to just workflows adjacent addressing so But focused we're right. directly on are And you're initially, that content. the

out there's around customers' think ecosystem just big workflows continues of our workflows lot address into supported for the get more kinds by all expanding to -- broadly, of tools integrations. content of around horizontal the and Dropbox broadly, a that with our those revolve well of or We drive automation content to a content. us. lot partner I focus more generally key ability through tools. be We a workflow in to workflow is the content And automation

Pinjalim Bora

that's you to you. But on that goals, past, Understood. And think mentioned would you to balanced? pretty for long-term exciting. will have And reiterating of versus I coming towards applicable? one the of that kind versus like progress double-digit more are question target. a -- or you Is revenue Thanks growth? growth maintain thinking you towards the that Tim, growth growth long-term be ARPU ARPU it in for as weighted think rate the how from Do still user you user more

Timothy Regan

question. Great Sure.

flow We will front, revenue our say far investing for free confidence conservative have as horizon. February trajectory XXXX time in guidance with cash cash XX% have growth. billion And -- of XXXX, revenue long-term share our rates, on to we and margin target double-digit compounding as more are over we XX%, I of we a when profitability the perhaps long-term can that even that more call, our growth in CAGR flow growth. XX% issue on to at $X

long-term on against model. extremely are focused that we So executing

users the our is revenue the that has total between the ARPU. future. wouldn't goal don't paying guide been I contributor ARR the into for materially base our I as to users guess, optimizing users point that to largest And to we and our expectations for look for profitably. or paying guidance and As Growing formally far as reference best our split ARPU, I'd either paying growth. changing ARPU. see opposed users or paying to Historically,

Operator

from of line Our the next question Jefferies. with Brent Thill comes

Luv Sodha

Brent I Creative what you're would Are two and any kind of This was is had mentioned, around, of obviously, see Tools Or revenue for additional be helpful. questions. you there that One would provide. add-ons on especially monetize? sort product initiatives, Wanted Sodha Data Migration. new to that the Thill. opportunity these details planning couple a to add-ons this the Luv

Andrew Houston

Yes.

So customers. both of these add-ons are our really about making for the experience larger better

get on is easing creative process, segment. So focusing making to on Tools obviously, Dropbox. the Migration, Creative up running easier the And the and onboarding

the their them, opportunities among think is work a creative or they that Dropbox really creative -- that see fact we we files important a to users and audience, the of lot large suites differentiated lot of the is to you handle So lot workflows. with about simplify a really files, of and well large

-- really are a creative certainly recently. examples partnerships that we're good done yes, and making the So that in of things community we -- add-ons directly. They're focus and these monetizing Adobe with got partnership other successful, and are We our area on elsewhere. we've similar other

cross-sell we we're to lot kinds opportunities a of and opportunities. add-ons have see focused where Dropbox broadly communities these on of definitely more differentiated, So really is other and

Luv Sodha

benefit it. was like you And sales of onetime operating Got margins, historic could one be much quick forward? you much but will indication margin sustainable guess, spend going side. how I next marketing contextualize versus saw the how And Obviously, what for on is the on like maybe and any one quarter?

Timothy Regan

Sure.

operating targets extremely XXX% long-term model, year-over-year. to operating margin XX% focused our So And again, against XX% margin. as which noted, executing increased on we're to

were far and drivers third out to our prudent with our FX campaign in I fourth a what to in as necessarily revenue; headcount costs; wouldn't to gave the brand being of in relative delta As a light increasing any matter key far guidance spend, rates. quarter, of operational in with particularly the efficiency so improvement the drivers I we respect mention COVID; our onetime drove higher call did my quarter, of quarter some beat. that items. bit One that as remarks shifted last as the was our

that factored into so our but the into guidance. of And quarter, is fourth some shifting all that's

Operator

of JMP from next Our with Walravens line question Securities. comes Pat the

Mark Chen

is Mark on Pat. This for

may. So I ones, if I have two quick

to on about could quarter. So just functionalities M&A one to give us HelloSign you you thinking update And is additional two, of are take trend? add how work-from-home an the advantage this

Andrew Houston

the for question. Thanks Yes.

go-to-market first, additional QX, HelloSign Core languages in for we as our XX HelloSign, in QX Dropbox made the recently fully more broader demand. So then And above continued efforts. be see the example, on reach. to into we mean, levels. strong product pre-COVID trial as product HelloSign available integrated continue on to XX% for We've I volumes well in itself,

as We for So with one broadly, be always our a company. this really think M&A we're And important innings businesses. opportunity on so us. could HelloSign the then been early has continues a -- of big still fastest-growing the great I there. lookout more opportunities It's HelloSign. building it's to for mean for grown we've block M&A,

always user portfolio. our a free the by sheet, base looking we're we accelerate these team opportunities or cash adding so And flow, for distribution. strong product drive And innovation pursue and balance big firepower with to got to opportunities to to help our platform

be for these out investments. opportunities, look on certainly, disciplined we'll and So with

Operator

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

Heather Bellini

have answered, of mine just the bit of wanted little been seeing I in a about Drew, Most what you're terms but ask Great. funnel. to

kind lot top-of-funnel to everyone remotely. talked of guys as of pandemic a about a during result the You working enhancement switching

churn an and the So significant obviously, kind losses I are those also, show be but it's everywhere, that And -- you how little a And if is what progressing the bit? us have was coming just job been wondering could you seeing, your COVID versus down is how update given to you starting it conversions of trending are plans. gross on just of signs, -- would how levels? might gross give pre actually versus churn kind it, call then environment

Timothy Regan

to in the our and SKUs driving is constrained trial trial premium continue new our what's of do And of our were see and we norms. In with products. trends. guidance pleased those third and This largely The converted to closer part elevated consistent was demand quarter, starts we historical all has some our and raise. This COVID starts to been quarter, we're to Sure. that into historical surge have factored levels second Tim. experienced at is retained the users

to is And then, a some up relative across seeing add give retention levels. Just to on you give And updating actually is levels, XX% maybe I XX%, from actually Professional historical retention color, quarterly. from business, to pre-COVID continues a pre-COVID not that we're churn be and the conversion to bit metrics and few historical up levels. to HelloSign the guess, levels. little steady examples. and stable, churn within But front, we're is

Andrew Houston

platform, of business on And Yes. opposed operations around and -- need that content, particularly businesses workers we kind our with and knowledge workers to less generally SMBs have and the that, often knowledge collaborate discretionary they've work mean, these can from as I essential just on all their to because is building to Dropbox home disruptive. been

Operator

to call There are remarks. now the closing Drew would Houston, no questions. further to CEO, back like for turn I your

Andrew Houston

All Well, and talk we'll appreciate for right. next to thank joining safe, really to us, everyone quarter. your want and support, stay you

Operator

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

disconnect. You may now