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Dropbox (DBX)

Participants
Kern Kapoor Head of Investor Relations
Drew Houston Co-Founder and Chief Executive Officer
Tim Regan Chief Financial Officer
Mark Murphy JPMorgan
Brent Thill Jefferies
Steve Enders KeyBanc
Kash Rangan Goldman Sachs
Rishi Jaluria RBC
Joey Marincek JMP Securities
Call transcript
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Operator

Good afternoon, ladies and gentlemen. Thank you for joining Dropbox's Fourth Quarter 2021 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 it over to Kern Kapoor, Head of Investor Relations for Dropbox. Mr. Kapoor. ahead. go Please

Kern Kapoor

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

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

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

Drew Houston

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

QX strategy Joining update year start our of an results long-term I'll for XXXX, Then XXXX Officer. will recap our financial XXXX for year over me Tim for a our of full and an Chief and QX for is give today and with targets. overview provide fiscal guidance Regan, provide on Tim our Financial go XXXX. and

XXX,XXX to organize we we've year, stayed as workflows work value objectives flow year cloud long-term to and and your was our for XXXX So and strategic three paid ended reached XX% delivered by grew a the over even teams. billion all strong started. our To Dropbox. recap, more vision $X.X content approximately customers with focused profitability, throughout And We increased around cash in ARR, our get let's significantly towards the free on over it. our

remove over which actions biggest also performance like acquisition objective drive flows. in investments we made drive also in of each quality, XXXX was the rebuild pleased began these and user satisfaction sharing churn long-term Our and the XXXX and made crucial first high-value and from and one I'm retention pay-off. retention to are experience previews come from of half core we to content improving And sharing and mobile to for see in coming team sign-ups and because from our continued nearly our friction down to customer was at the investments XX% these users offering. in improvements and with and come improvements. of evolve gains mobile of experience, year, the content. seen sign-ups shared basic mobile investments mobile drivers to the receiving retention We've level. mobile simplify to quarter Dropbox Last while We onboarding of improve XXXX. basic XXXX And churn

We team within for XX% encouraging signing users a to flow. to collaborators increase with the for also a their And users in it a team team saw sharing which we the drove up, the invite the rate. nearly existing XX% request-to-join a in in center reduced invite the experience basic increase and We by domain teams the corporate self-serve onboarding made easier after also team users. friction find mobile to

sharing expectations beyond core acquired objective XXXX early has DocSend's and integrate it pleased to invest our we to about In HelloSign. further pipeline plans I'm company. workflow our suite strength the into with added to of along Dropbox XXXX, was secured excited second it With experience. a DocSend, for we document our Our capabilities, document analytics We're say to each DocSend, product quarter. and outperformed in our and

and Shop, into company, find closed newest believe that our work And to content. we cloud our share in capability to which road into launched Command offer this lastly, to Capture, and which plans will easier of a support E, are and help I'll universal vision search a to distributed our users, to our it also We on search your and workflows all we universal really organize QX, more designed later. to life better map Replay products creative build I'm bit for beta, our teams. we acquisition excited our make as bring

last as of points margins objective with proud X XXXX And And we which non-GAAP free share to was Tim Our our significant flow I'm by repurchases, operating financial million over form while driving detail. improvements in and discuss back expanded cash XXXX. excellence our of operational in long-term in will the here capital delivering $XXX against our consistent nearly increased shareholders our year-over-year, more and already we targets. progress executing some of First talent. that finally, positive our model in in of and report And also build though year. value we're benefits. Employees attracting excited operating productive, hiring year offers, flexibility this we're the diverse in great a distributed full completed early transition, seeing trends the on XXXX that our are we're to all the still the they I'm more Virtual and work realizing model. from we

history modern to strategy, as the working. software the we of see uniquely our ways be never to As want is key macro building continue our and they in frame been environment. I've of customers this work, shared some before, a better support of positioned to Dropbox To help experience to trends to improve I time transition to there's new in reiterate

continued last year, adapt to hybrid First, to to models. over companies accelerate cloud the more the or see as shift we've their flexible they working

create, ways the and We to offer us working digital new growth as primarily publish of to broadly, and And primarily to from more that one. the shift screens tools also see more in platforms it's ongoing offices the permanent working a seamless physical content. economy monetize creator in is clear

experience help our opportunity customers. organize the a to improve see to digital of and continue that We huge lives

which of So focused three much year, began themes is the these strategy, in we work with we this in mind, XXXX. consistent with pieces on our important of remain

First, we'll to our FSS business drive evolve retention continue improve monetization. to and core

in serve workflows while also and to expanding media with HelloSign workflows DocSend, we're Second, around FSS rich beyond investing documents, creators. better

and order focused we'll improving deeper strengthening and packaging. excellence strategy pricing balance profitability. drive our and focused evolving each business. we're of on the piece to operational I'll continue on funnel as starting we Finally, retention, go leveraging core into of growth stay top In our monetization, to with that

with start retention. Let's

mobile for we're can rate it in simplified our work While which enables professionals speed the much usability of capabilities, across and past retain at reduce we're content. actions teams to small mobile will of users capabilities. has users they've sharing when the key to faster there's faster. retention web over all content Virality content it's organizing we taken are year, be and architecture, easily shared our who their churn making web still and and our to shared and loading, higher find our updating who share Investments improvement content able for another recipients. to in mobile our share videos and to steadily experience, the also We've by easier access effects so see any rates. sharing enhancing users include or And network for access more so driver making surfaces. quickly and receive easier room as whether here improving tend search browsing users Teams

to experiences, efforts we product particularly easily camera existing experimenting we're add-ons e-signature. up-sell our or more And on users. immediately Finally, building of improvements features We've shared such These the it, surface at for monetization, process self-serve on we're beyond our of content our begin of more to deliver new making increased mobile, our surface use add marketing we're shared high-value making improving and mobile investments the we convert more promotions to with enhancing efficient of conversions, and the plan to scanning on Building teams, can support value value and mobile also investments product web reducing opportunities to time. users focused while to related a the right to where a to content, personalized churn that our uploads top engage onboarding workflow And one CRM also surfaces for a overall. funnel more drive we're more them as recipient provide and conversion. folder through component our some FSS. also like experience with it awareness on right seamless relevant with and re-share to and basic is prompts from along to drive more users,

For our example, extend them continue version adjacent the from past, on coming always growth. we capabilities have from drive In history deleted in extended this to on areas pipeline, to quarters. to in users focused we in packaging a to this and recovery products see pricing days history to version are rolled demand with had we've the flow share high-value XX more file in security our on And effective Plus add-on year We'll In the tied leveraging and I'll customers. QX, also that to year. it's success and approach allow been two to especially out iterating we're that automation.

As more our we of to robust decision-makers be our and offerings capabilities as to every more like to from password accounts and to our shift well updated and more this monitoring easy threats. and workloads priority iterate as for provide phishing. include product teams continue plan existing experience. we'll into expand freelancers. and And passwords like identity spending solo protection continue the against like cloud, to IT recently, we to year, shared critical companies this on and We'll to ransomware a sharing, lightweight passwords building most to professionals. insights today's and as access enabled manage top on And and functionality down advanced browser-first most controls security rank alerts, for kind CIOs see their we both also

them they most cloud live find In content easily. addition, automation format time help they're and from machine organize and investing that since than we're learned to and committed their passionate to to content. which folders world don't search customers potentially to discover to And collect looking need users We've waste for, content more media. they and organize our tends intelligence creative their content, to and and in rich in our and traditional media most a targeted be of what hybrid to browsing, want large they're of search used more

to controls search and surfacing plan users that we and view their automated and performance. year, ways content through suggestions this can the manage better in assisted So and improve

We new always, security automation increase we products. our add improve customers. and value our we functionality As and the like for

also value. we'll that, and packaging do that pricing that we As iterate reflects on best

and on the workflows of Dropbox onto through our businesses bringing these Dropbox teams. by customer umbrella, XX%, we're HelloSign In grow about we to into of and reach. is and DocSend videos as part documents important and consistent shared second Now shared were pillar the An to updated in the nearly technology number strategy videos of which and with and expanding month, with this HelloSign around our brand. and live is opportunity marketing kind our fastest-growing driving saw this beyond website experience. user Dropbox expand like adjacent why around files went excited we FSS. rich serve PDF better products grew creatives and the XXXX, DocSend XXXX, to we're by DocSend both back-end an of In the with product over a more Dropbox of under demand media DocSend is This workflows number XX%. committed relaunched their and

adoption. we where bundle, increasing we applied learnings In Dropbox with our which to DocSend and has Pro key from bundle, first seen addition, market went also e-signature our and

We important side-by-side further are their to and Capture, Shop creative an savings Shop that makes plans easier for and and We've also who our to content build DocSend professionals web QX, market so true late professionals customers continue and experiences, creative teams to FSS part ways with Supporting collaborators and is to and and HelloSign engagement seen can share took for time these passionate in checkout experience we more growth strong expanding them our from solution. Replay across looking newest in workflows for ease use and it QX example, integrate And are with integrate as of to of who base both for best users product the we enable of the a opportunity our seamless Capture to their these their see strategy support the around and see users our that Dropbox beta core functionality customers. e-signature Replay. analytics, more And and media. appreciate and into rich mobile. one multiproduct to digital for adoption

team experience Dropbox was XXXX collect, and ability Film example, attendees. video all and excellence. in festival throughout Sundance accessible needed finally, dynamic and new create virtual more integral the assets Dropbox for request they the a Festival's to used to to the on filmmakers then operational to Sundance's seamlessly XXXX. the organize we'll share For And go the focus share to and that continue content, and and

the our our private financial employees opportunity that our our is progress really keep our strategy Tim First. talent we grateful XXXX Dropbox we excited to in cultural share our to and of footprint making to chain many List on Best Equality the really reduce This the progress which row, We'll the we will for a been have to for infrastructure has also work of life. to the equity seventh Virtual And our and job our for pool across of as Corporate technology Our a efficiency perfect expand alongside diversity, a proud to great done in this outline. efficiency To included year year stay team great and we once I'm a close, and increasing cloud. to about XXXX. I'm stand who to And continue received ahead while infrastructure I'm public inclusion maintain support has improve Kubernetes And ahead. constraints. important roll of Dropbox geographic this expect score lay towards our a supply strengthening out long-term between also flexible any Employers our us allowing business and example footprint pleased all the We'll again, our diversify bring groundwork our costs and to relationships running made to which We're year. I'm industries. Index. and on more really utilization, drive proud peers goals, Forbes all

organize in As hybrid in helping I problem lives what a that customers most I'm the motivated working new and think the our world. is about for to future, remote by solving we're universal their

of today. chaotic web-based juggling are productivity improvement as our between browsers. for the world, in earlier, offices physical room one. I tabs experience we to those on from the see file As workers a screens in a shared a of see digital XXX lot we And the overwhelming to shift desktops The and and permanent are caught see of Most apps. XXX files we knowledge browser-based our now used screens sea

So in today's in back same many XXXX. problem ways, version we're solving saw of we the

building looking I'm that, it an Tim financial our vision With was your place XXXX around in long-term results. over work for through walk of tear to and it, towards organized our cloud the hand ahead. forward foundational and Our step content I'll all to one to workflows important

Tim Regan

you, today's walk guidance, results, some on XXXX call, underlying and our the XXXX our long-term XXXX year million, $XXX with Thank then I I'll revenue full with targets. this and through full will and million. update to Starting Drew. quarter to context along close guidance year $XXX On of million guidance with fourth fourth our beating our increased range XX.X% our fourth year-over-year quarter $XXX results, quarter total an for

revenue by DocSend. strength teams’ Our and was our in SKU, our higher such our plans driven ASP outperformance professional offerings, as

$XX for a Foreign constant exchange approximately basis currency XX.X% $X.XXX total million a Total ARR of to grew tailwind basis, rates growth. year-over-year billion. provided the XX.X% On year-over-year. ARR a for quarter point sequentially grew XXX and by

continued our attract ARR in and was a with approximately paying quarter improving new quarter highlighted, family retention on revenue per in plan. with in XXX,XXX users the and Drew added driven paying of the our paying teams fourth our user million exited user plans premium new net efforts to As users in QX. strength experience better and users adoption drive We growth $XXX.XX Average SKUs work XX.XX and by to by the emphasis teams users. our specific reflects our continued to the mobile,

indicated, Before non-GAAP income estate expenses reduction real mentioned purchased of lease assets, exclude we to I in are and note our continue that expenses, termination. intangibles, further statement with our would impairments P&L, amortization our otherwise and to compensation, on of like unless figures of net discussion related our certain all acquisition-related stock-based force gains

Our deferred real investments, income on tax valuation are also transition from our a excludes the the includes our of on release we a I'll update gains aforementioned First provide of of income allowance and income where and effect the equity net real losses tax steps tax strategy, model. assets non-GAAP now as benefit to adjustments. estate our to the portfolio part on brief a estate Virtual de-cost taking net

continue to the our We progress quarter. goals, against make Seattle in subleases fourth executing and in Ireland

earnings QX. a As in from million we our in successfully portion existing out is Francisco payment previous quarter, in call, of This termination, reflected we and the subtenant had within on where flow San which with reflected also is results. our an operations resulted million, an to a we lease landlord agreement lease anticipated $XX a buy our within cash during fourth our which onetime $XX our gain reached of GAAP

slower-than-expected our impairment As buyouts make though significant drive us, footprint will should deals our as savings to may cumulative rent during on subleasing. sublease. brings are economics similar million impairment our charges time. of as payments incurred $XX future, sense quarter, otherwise pandemic to for other generated the the from with restrictions we remaining facilities million. translated at would agreement incurred This the our fourth previous amount the no continued landlords, this into a there $XXX to-date amounts pending the of termination Separately, have reminder, enter In this lease we we exceeds avoided

our $XXX charges estimate up to to total be million. continue impairment We that will

share the XX% fourth represents operating quarter of improvement as $XX or fourth the and decreased EPS to of margin XX% was G&A quarter earned fourth which X outstanding, which to for which compared $XXX expense no XXXX. a categories we which million driven XXXX. of a Gross revenue for quarter, conclude in in compared P&L. the the impact is by from the compared also was from $XXX million valuation aforementioned was assets. per average estate on as million impacted our improved revenue $X.XX income to real costs to income our XX% assets quarter in of the benefit of XX% is that all for tax pandemic release onetime expense I stemming over this cash of tax from reduction let's lower revenue, or of net XXXX. million, onetime $XX income the facilities-related quarter, valuation by our to diluted diluted that XXXX. XXXX. tax would slightly million and from profitability, continue benefit. percentage us the $XXX fourth revenue, a impairment. a up which result point with the assets depreciation write-down on restrictions a event in share percentage percent was there margin these outstanding on and quarter favorably XXX to weighted In a the the on weighted increased quarter million XX% X% or is X gross $XX of benefit continued million the of internally our total, representing fourth decreased hardware is a Additionally, year-over-year an based Sales quarter an increase data necessary. of of is of with expense operating efficiencies in a fourth the associated in allowance record that of of or shares million across $X.XX allowance This deferred XX% in revenue, improvement of was on of storage improvement XXXX. an result leading result per quarter continue note managed of longer a QX, quarter based was a XXX of Irish I'd R&D fourth that, Net With is Diluted fourth deferred rollout profit a shares GAAP basis. marketing The compared our of note was point revenue of expense margin infrastructure. the primarily Fourth X% our no average

cash and was of flow fourth our we Cash and Moving our balance includes lease of buyout the investments to cash of expenditures compared million of our the $XXX quarter. San $X equipment. in $XXX the million on leases in headquarters $XX of in billion. quarter quarterly Francisco. we ended were to the Capital million the QX impact the million with XXXX. This flow and for resulted short-term during center $X.XXX $XXX flow, finance million cash quarter cash in from fourth quarter, added to free aforementioned data operations In

Let's repurchased turn from activity. QX, $XXX to shares, repurchase the doubling spending shares our share of In nearly we million, approximately XX.X QX. million number purchased

program our price At end reminder, buy the a approximately our we authorization. As million had $XXX remaining of buyback shares repurchase $X share to billion is QX, lower structured on more at points.

greater later this this call, an that earlier additional pleased month, Additionally, $X.X on in will Board to as our discuss share detail we authorized repurchase we're announce billion program.

Net XXXX, currency Reflecting a relative representing turn let's growth, $X.XXX was billion, guidance for continued which our the was demonstrates XX.X% the growth over was This was full significant flow $X.XX against total a percentage Gross last XXXX. long-term across a targets. our X% for EPS full $X.XX Free weighted year improvement free up year-over-year share initial of have revenue million million. XXX basis, per throughout also we was revenue million. updated outstanding, over pillars from per XXXX million, of or Capital by up finance year our margin cash year-over-year equipment. by for lease share repayments, shares year. which to over the for XX% XX% million X was for commitment to XXXX, Cash range. this we XXXX flow XXXX. XXXX, constant diluted currency year X the which XXXX. $XX finance to XX% XX.X%. year XXX Diluted off our margin execute $XXX was from year-over-year increased beat improvement In flow revenue $XXX guidance for been our million $XXX XX% strategic financial from expenditures our from and point for resulted balance beating XXXX ability to $XXX on added constant data XXXX basis operations executed points of Total rates was the revenue. and percentage as $XX to cash grew our results. our points on income for approximately for outperformed year-over-year. by against full up Now year. year, moment, Operating would lease On average Net based average million XX% the totaled center lines in our

we shares, this in share to first year spending like $X I'd context million on and provide XXXX. billion now approximately where the Finally, XXXX also quarter repurchased XX some will over full behind our guidance, I guidance. thinking

the first expect be in range quarter, million $XXX to of we the to For $XXX revenue million.

the first We minimal are assuming in quarter. million a currency tailwind $X of approximately

the of in reminder, each as a there quarter are subscription year. fewer first Additionally, days and

operating to XX.X% range be the non-GAAP expect margin We to of XX%. in

with reset there of reminder, is quarter each seasonality some as a payroll margins year. at the taxes first start As operating

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

For headwind. billion in the range is the to revenue be range inclusive of $X.XXX an to full we $XX approximate of $X.XXX expect This year, million billion. currency

We gross expect to margin be XX%. approximately

We approximately expect margin non-GAAP XX%. operating to be

$XX expect $XXX million acquisition-related This in million be for cash outflows of deal holdbacks. to installments cash million. XXXX in the We range consideration free includes flow $XXX to of the

legislation, I as will result elaborate free is tax our R&D estimated pending cash on which an inclusive a of headwind $XX million of flow Additionally, shortly. guidance

As million million $XX expenditures, to cash to expect revenue, to of and related addition we capital XXXX. of $XX CapEx be we X% our in finance to expect the leases to approximately be range in

diluted in range the average XXXX XXX of million be We to XXX shares. million expect to shares weighted outstanding

formal context XXXX. I some In share behind to addition for to this wanted our expectations guidance, further

as as shared, we grow business investing and product our revenue, we've to portfolio. the across Drew related As been

product Specifically, trends, our growth our investment efforts innovation launching key we both increased and towards foundational way and new marketing have in such aimed synergies at areas us features including a that the capabilities recent opportunities, aimed and in to inherent and capture feeling R&D HelloSign these quarters targeted help through initiatives and as DocSend deals improving conversion. in improving address retention in improvements

to most version a customer and in seamless to building updates also invest experience in operating we're customers capabilities adapt out and also continue our We complex desktop a our of Mac an OS. environment. recently automation to And increasingly ensuring new client to as address for changes, our in demand security system related we

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to cumulative efforts the of growth into of of momentum, Any guidance. on pricing the culminating we year. packaging monetization year expect this accelerating factored revenue back the in half second been the We have and translate are and in to changes half impact considering these the

guidance. As currently related exogenous in roughly from to point few we year expecting that role operating headwinds facing XXXX, headwind. we whereas a a are are tailwind, margins, are XXXX, FX XX our this In playing in basis we a approximate benefited two-point an

resume. restrictions T&E, event in also gatherings soften and travel and expenses XXXX company We expect incur overhead to and incremental employee as pandemic

that carry to ROI. and continue will R&D invest we marketing and a Additionally, sales initiatives compelling in

result be for the cash free million now repealed. defer possibility a a recently includes a R&D current capitalized as legislation that would amended legislation tax cash that of to There guidance require tax purposes. flow, be or costs tax related laws headwind As pending our may is $XX effective to that

XXXX. an impact such our update are on we which plan I'll Furthermore, achieve share in guidance. this to time, including targets, we our long-term until However, by now

and infrastructure we efficiency team innovation drive footprint. storage Our as our continues manage to

previous end long-term continue incremental result, of to gross top above As drive efficiencies. the now our range, room margin are and we we to target see a

our are we XX% from range gross such, up of to to to target previous XX% long-term raising As XX%. of margin XX%, a range our

related the ability despite exogenous we As operating headwinds in leverage our drive in our are to margins to business. mentioned and earlier, confident

maintained key It margin margin XX% increasing our top invest growth As up operating for target a flexibility important of previous to to XX%, are that to of raising we've us. operating XX%. long-term range result, our we high even a remains to priority with as in our XX% from line is note initiatives to targets, range ROI a

Additionally, despite annual of tax cash free our reiterating goal XXXX. the by headwinds, aforementioned billion are we flow cash $X of

of authorized want Board repurchases. in annual form exhaust reducing billion authorized Furthermore, previously share shareholders the I plan allocate portion to return as with previously share of year. billion $X our significant mentioned, share our We additional to to capital our remain to plan a share in to consistent update of objectives with has half this flow program, Lastly, an the of our count. the our conclusion, cash financial strategy free first program repurchases share an intact. our to goal on share repurchase In $X.X our repurchase

see to biggest initiatives to that product sustainable This balancing We in opportunities disciplined to long-term strong our focus to to on we rule profitability growth continue shareholder to line drive in shareholders value may create way. enables of that of And continue us enhance growth and a we the the while allocate XX of top a invest and thoughtful, returning share to capital offerings compelling return form repurchases. in value. to the carry cash also profile financial

We as operator our have With challenges the our facing. solve to assess from monetize excited these strategies to adjacencies about short, to the win, aim continue opportunities inorganic range to it additional very customers into to which opportunities over will free we for now product In or organic we the enter turn to road Q&A. are opportunities, could I'll we many base, user continue and ahead. to that, are initiatives that

Operator

first Murphy with Instructions] Thank [Operator comes question Mark JPMorgan. from you. Our

may with your question. You proceed

Mark Murphy

it Yes, making. regarding a I and had thank that Replay question and that Dropbox congrats underpinning creatives. to seem video progress you're What products. move much on Drew, the capture all very creation you is that's into you have and targeting this

files? map. Just more on come as larger well, margin video just And the you wondering if video-type some can this storing for on maybe of to touch there's road those profile

Drew Houston

can I Sure. start.

around of files, casual so Dropbox more and demand, with – this and we've been large these the of the creators. and support customers economy, Dropbox audience is workflows. resonates revolve customer broader with then both these to with of last years. the and creator explosion dovetails platform And with seeing creative rise this creatives having kind on following rich we're more over their professionals their an a on in the video of engagement couple demand of better video And audiences from lot or gotten workflows because new media, a we've So

where So way. is communicate content. Shop we're another Capture and of Dropbox distributed digital that you customers one and help – is helping their produce where a over where Replay video video are our can an monetize example in you

solutions these So suites. need They we customers. bundled what they that with are get with really their these that – the see resonates than more Dropbox customers in office

we opportunity be exciting think it's expansion for So an us. going to

Tim Regan

add this And Tim. Maybe is then, just I'll that. to Mark,

our Capture, Shop, as These accordingly. contributors can where where and these As our And material as in a these adoption XXXX teams related expected material raise are targets impact longer-term to for are long-term they're were in you margins. our not certainly Replay near indicated to be internal bets not to materially XX% on results in by contribute term. adjusting lean far see monitoring the not resourcing our and margins gross to we XX% and the as will having margins, to

Mark Murphy

Yes.

question, see. you in thank for clarifying Obviously, to It that. is of on my And nice increase kind right the margin other long-term so bridges the into framework. which Tim, it's

increase it's maybe the or acquisition creating think For or the user instance, I there? down help that's storage else. uplift us maybe coming bridge the to is what it's that just there? costs costs, just estate you it's wondering maybe I'm real footprint something Can delta

Tim Regan

Sure.

raising and storage do and as we they with to have the room margin top we XX%, remain as within from T&E we growth as more And said, with other see Then we locations. as infrastructure we to shift sustainable see post-pandemic to business, do costs opportunity ways continue targets. We the our XX% additional focused operating as in opportunity find a you invest XX%. this costs. target efficiencies be some XX% these we to our So up drive starting headwinds But really the as leverage know, FX such long-term this, to team year such and are despite to costs. our to to have such opportunities, additionally, see on still But that result, efficient driving the raise to other longer-term lower-cost drive ways line growth. to do

Mark Murphy

Thank you Excellent. much. very

Operator

Thank you.

Thill comes question with Jefferies. Brent next from Our

with You may proceed your question.

Brent Thill

lot way? there about on your just curious a your and that forward to forward do talk feel digestion same you're of pace been Curious you signals I'm there's demand And move a about of the get the great the you thoughts seeing? what over are in pandemic. the clients couple thoughts – during Drew, your from overall Or is phase of the pull continuing what years. saw on the you're shape to at the last seeing

Drew Houston

Sure.

– and habits example. and where workflows maybe were adopting as the we businesses. mean, businesses like different like the stable. like pandemic. needed for I shapes pretty lot the paper-based these the And needed it's I there after mean pandemic, to Dropbox from HelloSign on different think, across of say DocSend pen I you our found during pandemic, have mean are the new I before needed core shifting a e-signature, then business, customers I'd been our

the room that's see find the places. than demand So talk customers another tabs There's content They're when of is that working thing for of during a different of place. people apps, different offices but browser. then improvement their there's their surge a lot going using pandemic, scattered forward. that lot we out in in in that open are somewhat. that as a over tons experience. of is we It's to moderated And more in all we And XXX screens

cloud organize we help way your files. organize big same the opportunity a see we so that you And content help for Dropbox your to

expansion more for acute fragmentation pandemic. opportunity being scattered where is the this an different content more using and challenge tools and these of there's being all this my after So acute

a So becoming and certainly of there's complexity forward bigger that fragmentation this pull in problem. a terms

tools. some the to And are demand see. we that So those overall, our more will distributed of only work create shift for the we dynamics think

Brent Thill

M&A? the innovation to more enough into forward? but conviction and that to for some room allocation, that buyback, just decision? see plow not great And ask going driving capital walk that? will keep leaving What's on you just you Are through the M&A Can driving why

Drew Houston

growth working able we profitability. growth a fund and and can and I to efficient. on. feel Unfortunately, about business our there. Tim, we're mean, of invest We're business a I core areas, free we're of to add fully our in Sure. of can is always some really both start. to transformation the lot on thinking having afford balance

and growth we newer longer of our DocSend HelloSign that with think have products then funded, big have a fully and We businesses long-term tail that are are stage we opportunities.

capital. the expand about ability and we continuing So the organically good to M&A extent feel I'm to we're unconstrained also also pretty that our efficient. to excited more invest while can corrects become in of margins, terms market

of up but lookout we'll time, at opening disciplined. those we're be so on same the And more, opportunities still kinds the for

lot a the over really few and years, more we've our last gotten So disciplined allocation. intentional capital about

Tim Regan

Drew our sheet that to as does related to similar investments, as we product to that. HelloSign gives in To point, vision organic Timothy we'll M&A, have significant basis revenue of an strong best quickly generate a business the to repurchases, assess organic believe portfolio investments. lot best a and of ongoing returns. to growth. a cash the our model we an generate We and share drive And and Drew, we And continue And according allocate M&A repurchases, free Drew's where continue invest will cultivate product maybe that very add alluded to and share our our map portion to annual balance diverse to as great related DocSend. that do, share I just And we'll flexibility as can on to and a And us cash. to and to, to efficient reducing of look flow related share certainly, to with complement businesses intention to intend pursue do of count. for road the capital R&D use to repurchases ultimately,

Brent Thill

Thank you.

Operator

you. Thank

Enders Our with next question comes from Steve KeyBanc.

your with proceed may You question.

Steve Enders

pricing guess I little the how guide. you appreciate potentially question. the could Thanks I to levers sense the but some about packaging – about income we taking optimize things I invest are and conversion extra get revenue some you want It think the you're all what drive Okay. side, of on other there's as or both to for better the either Great. opportunity the on context rates? for experiences of thinking like the year. better seems are coming kind for there pull a that the areas

Drew Houston

start. can I Yes,

optimizations include growth the of continued business. the growth focused mean, our on we're ones a So there's FSS – to lot I levers. core

tail stage bit still pretty our earlier of transformation earlier early I to talked for so them. continue and some stage broader then DocSend, experience, we in improving funnel. M&A. reducing a headroom your of had top opportunity to with innings lot growth deposit and a of the the files beyond, which and evolving fastest-growing organizing churn, are core and for we've So little Capture see just which we there, Replay of businesses then our content, an And products have of engagement about simplifying like on HelloSign improving syncing a lot cloud momentum opportunities future still the our businesses There's business, the and longer all and

levers So where all different we the good is about and are now. these portfolio degrees, feel investing right into were

Steve Enders

year, at of of but I and mean kind I the kind what there that would a areas if – sounds looking I packaging of you're there. kind thinking guess of how augment it be – the changes later are early this some any about guess, like of for there's the new coming of the pricing preview some least to you're is kind is what

Tim Regan

provide And products, quarters. And customer pricing pricing Sure. our our the iterate delivering our our I'll we this about of best new more updates reflects out building features as more have year, and Tim. ensure security capabilities And and in always We'll future right guidance value later in we'll packaging This also value even the customers. we're and We're approach. approach complex XXXX our improve detail for for deliver one. we're approach. packaging and address is our to it that packaging that such inclusive to as new customers thoughtful pricing increasingly to and to is environment. demand share automation capabilities on an take

Steve Enders

the questions. Thanks great. taking Okay, for

Operator

you. Thank

Our Kash with next Sachs. question comes from Goldman Rangan

may You with question. your proceed

Kash Rangan

technology wanted thank we new And power the and of so different changing for building Drew, very proposition does the How get of IPO. result thoughts almost is on days is from enhanced and very I the very Thank certainly a pricing much. much. the the in product? go-to-market mean your to Hi, workflows product all that into as value more you inflationary you're accommodate to the what what marketing to you company the the also and the be this environment? know and a

Drew Houston

strength Hey or whether we've These – gig IPO freelancers, segments that to, that's where creators, Sure. among of of the lot solopreneurs, natural and some strength you've had creative of Kash. a I'd where say changes adjacencies. SMBs, there's Well, just we're a are economy. lot the since alluded professionals we've had

e-signature. work digital creators or the monetizing production and of on content, video different things richer it, having things a the sharing on like or with on more side, document do need or whether side that's content to variety as video they capabilities on So

demand seen on demand new kinds elevated certainly those or So we've of fronts.

adopt think, we're new something you our Dropbox you self-serve to user focus they send these high if certainly share you HelloSign I a pretty signature, motions with go-to-market, or end become level, is cases, great many share at to user We focus become for And products. on and our where if a exposed as far or sharing, As organically building marketing a you our we viral experience. or similar I new in customers where I use philosophy I – and on tools.

So efficient motion, incredibly can see fundamentals. you an the just as it's from

source base. – of And our option or all customer a is And that as potential investing really and huge sure thing buy huge company in adoption one is I'd embraced source our efficient. when products. we lot is value quickly of DocSend, that that. multi-business or so that we the We've truly multi-product make our drive motion a a a changing existing helping base a HelloSign self-survival that's say for through is become we can we're customers

customers in So branding, bundling then had lot having to the SKUs. with different foundation packaging exposing having success the we've we're multiproduct thoughtfully our And early investing products. a on new some all and our consistent more pricing front,

with for have So our we professional e-signature example, bundle HelloSign.

DocSend, added we I leveraging on And virtuous have a create always of we're it. tuning the we're similar then – significant to to pricing enough on, always monitoring we we've or pricing our then new and as as with and adding We to iterating value pricing obviously, think, we've a inflation. thing and packaging. And like value cycle feel as last, and justify products try our touched

cycle So this will we that year. expect continue

Kash Rangan

you Thank so much. Wonderful.

Operator

you. Thank

with from Our Rishi Jaluria RBC. next question comes

You may proceed with your question.

Rishi Jaluria

Thanks Wonderful. much taking Two for here. question so my guys.

to follow-up. negative product-led target, the in right? talking you're back QX. a You're a X.X% us context to R&D You're at I've a have margin given for the thinking high expense push you're growth I And got I operating a and appreciate raising rates? go to model. at the about company back talking right of to when just Maybe your you're R&D wanted software around guess sequential your where XX% spending is to company about just and your the about I how remind still about very for growth I all is XX% growth that's XXXX? Look, that spending going this I then there talking that target. revenue, you're for level long-term want point, little your self-service. growth bit First, wonder, growth which level that of But great a on that

Tim Regan

Sure.

for see I desktop related and and into our introducing and and investing for our customers and to particularly far we've And SKUs translate HelloSign a first, high-level been for facing, intuitive to products, seamless that strategy finally, features, our ensuring regionally mobile these take our And teams where to as to updates where easily customers, of all adding new can broadly customers a continue growth. challenges our are operating buckets. that investing as and adapt multiproduct accessible as our them content these initiatives investments keeping And see OS, break seamless, as workflows, does contributing automation to impact, our room have our related and been our long-term to return would are improvement, is rates. a add-ons retention, few investments we way, we're Mac we security we've and key to are safe versions to client are what we for through to as changes net flow in as highest growth head R&D investing such And adjacencies DocSend. we we ARR new enabling time where some system it revenue. example, lately, So to count where see customers revenue a in in experience longer-term for foundational these

Rishi Jaluria

Dropbox your to a to helpful. view, like that And then how do preserve Got keeping at about And First one to approach? you as big were great which same take first soon shaking that, From employee and of to thinking retention, as Virtual How strategy, First would office you on of and on alongside to drive time, terms impact the pandemic figure, seeing employee the that potential experience, especially That's culture, end this companies about we're is see. in really companies month love high-level one some you the to tech beyond to we this of hear as while this are companies – the and Virtual more return maybe start definitely there you it. of out? hear, down probably go out and that, maybe that? the see talk plan during adopt more retention Thanks. how

Drew Houston

and Virtual candidates double op leave – that's Boomerang I what of candidates accepts within we saw company XXX% then really number double nearly enroll and like for call offer the Sure. the that come Well, even nearly on might a increase in the uptick mean, been has in balance, then year. First folks back for a number we an and last year, positive us. also

new it's talent. perspective, companies more think ours and they the you're I is or seeing unlocking broadly, that hiring offer pools employees And of it. this when like a what – from have once flexibility that then really flexibility, finding resonating we're demand employees they So

we we figuring mean, out So first I'm this do we the us we in publicly. really happy distributed company in, when it and is culture maintain still think really every XXXX positions back that decisions started I I That rolled you with how said, think I making October well, think environment. think, out a

Virtual really don't to trying critical. that. not experience the importantly, remote always a – true, see in-person we meaning We're are substitute we're That's is First, only. We for that and been get

So have of convening our return also through months. to both of false those – excited a months – done people in-person or to looks experience, office to the And get starts do hopefully, to the then we worlds, of opportunities, reintroduce be work able really to really just great able team of how flexibility but the the after give we'll get retreats experience. excited do best about from being thinking has we're job it next day. the like home day there we're great as some best to to we're several in able few last But the in-person in

Rishi Jaluria

Awesome. it. much. Got right. All Thank you so

Operator

question JMP Our [Operator with Instructions] Securities. you. Walravens comes Thank Pat from next

You with your may question. proceed

Joey Marincek

Great. on Thank you Marincek Pat. Joey much. It's for so

our On How going so is? are you head-to-head? market from much. you give one there? an us can Thank how do often the you then on opportunity think And update HelloSign, competitive end. you set penetrated Just that

Drew Houston

customers mean our bundle, slight are at allows fastest-growing which pro with adoption Sure. be start. heavily businesses. e-signature we've continues to going our And of increasing and both I a our And we're things HelloSign and well investing I Dropbox seen one – here. buy can HelloSign, to of discount. professional

we support, added SharePoint quarter. natively can new a – SharePoint. app sign send launched so mobile our – how there's We last customers So have documents you appreciate within and

we So on that product-led we're environment. focused motion Dropbox is of that experience. the And been. is see a kind growth advantage mean the pretty I think broadly, our competitive always same stable I improving more HelloSign has

similar a think – less just model. dynamics reliance efficient really scalable on we're there and I it's are where or

So big mean the pandemic, somewhat it's a be early moderated still but it I innings. big surge after it's we opportunity. the think to in continues

Joey Marincek

so you Thank much.

Operator

further like questions at the for now further remarks. would I any call Houston not time. Thank to Drew you. to And over back turn I'm showing this any

Drew Houston

Well, and with All again you today. again thanks quarter. for us right, everyone. joining continued appreciate to We next your forward look speaking support

Operator

Thank participating. for call. concludes today's you Thank you. conference This

disconnect. now may You