DROPBOX INC

Previous wording

By solving these universal problems, we’ve become invaluable to our users. The popularity of our platform allows us to scale efficiently. We’ve built a thriving global business with 18.16 million paying users.

Current wording

By solving these universal problems, we’ve become invaluable to our users. The popularity of our platform allows us to scale efficiently. We’ve built a thriving global business with 18.22 million paying users.

Previous wording

During the three months ended March 31, 2024 and 2023, we did not recognize any impairment charge related to right-of-use assets and other lease related property and equipment assets. See Note 8, "Leases" for additional information. We may incur additional impairment charges depending on the state of the corporate real estate market or shifts in our Virtual First strategy. In addition to generating sublease income, we expect that as a result of our Virtual First model, we will continue to see savings in certain areas, including reductions in facilities related costs and depreciation expense.

Current wording

During the three and six months ended June 30, 2024, we did not recognize any impairment charges. During the three and six months ended June 30, 2023, we recognized $2.2 million of impairment charges for right-of-use assets and other lease related property and equipment assets. See Note 8, "Leases" for additional information. We may incur additional impairment charges depending on the state of the corporate real estate market or shifts in our Virtual First strategy.

Previous wording

During the three months ended March 31, 2024, we saw seasonal strength within our FormSwift business, and better than anticipated performance within DocSend and Dropbox Sign. Additionally, we continued to see pressure across Individual and Teams plans as businesses are facing a challenging operating environment.

Current wording

During the three months ended June 30, 2024, we saw growth in Individual plans offset by continued pressure within our Teams plans, as businesses continued to face a challenging operating environment. We also continued to see better than anticipated performance within DocSend, while our FormSwift business faced seasonal pressure.

Previous wording

In April 2024, we became aware of unauthorized access to the Dropbox Sign production environment, as previously disclosed in our Form 8-K filed with the Securities and Exchange Commission on May 1, 2024. Our investigation of this incident is ongoing and we may discover other impacts or new events related to this incident may occur that could affect our business operations, financial condition or results of operation.

Current wording

In April 2024, we became aware of unauthorized access to the Dropbox Sign production environment, as previously disclosed in our Form 8-K filed with the Securities and Exchange Commission on May 1, 2024. While we remain subject to various risks due to the incident, including ongoing litigation and regulatory scrutiny, as of the date of this filing, it has not had, and we do not believe it is likely to have, a material impact on Dropbox’s overall financial condition or results of operations.

Previous wording

Our ARR fluctuates and may decline in some periods as compared to prior periods. For example, ARR increased in the first quarter of 2024 as compared to the fourth quarter of 2023 as a result of seasonality within our business. We expect to drive ARR growth, however the pace of our future growth may be lower relative to prior periods.

Current wording

Our ARR fluctuates and may decline in some periods as compared to prior periods. ARR increased in the second quarter of 2024 as compared to the first quarter of 2024 as a result of growth in our Individual plans. We expect to drive ARR growth, however the pace of our future growth may be lower relative to prior periods.

Previous wording

Total ARR increased for the period ended March 31, 2024, compared to the period ended March 31, 2023 primarily driven by an increase in paying users through our outbound channels, as well as FormSwift seasonality.

Current wording

Total ARR increased for the period ended June 30, 2024, compared to the periods ended December 31, 2023 and June 30, 2023, primarily driven by an increase in paying users in our Individual plans.

Previous wording

The number of paying users as of March 31, 2024 grew as compared to December 31, 2023 and March 31, 2023, largely from outbound channels as well as from FormSwift seasonality. However, our overall paying user growth rate has declined and may decline in the future.

Current wording

The number of paying users as of June 30, 2024 grew as compared to December 31, 2023 and June 30, 2023, largely from an increase in paying users in Individual plans. However, our overall paying user growth rate has declined and may decline in the future.

Previous wording

The total number of paying users fluctuates and may increase in some periods as compared to prior periods. For example, paying users increased in the first quarter of 2024 as compared to the fourth quarter of 2023 primarily as a result of outbound sales channels as well as expected seasonality within our business. We expect to drive paying user growth, however the pace of our future growth may be lower relative to prior periods.

Current wording

The total number of paying users fluctuates and may increase in some periods as compared to prior periods. For example, paying users increased in the second quarter of 2024 as compared to the first quarter of 2024 primarily as a result of our individual plans performance. We expect to drive paying user growth, however the pace of our future growth may be lower relative to prior periods.

Previous wording

As a result of an increased mix of sales towards our higher-priced subscription plans, and FormSwift seasonality we experienced an increase in our average revenue per paying user for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Current wording

As a result of an increased mix of sales towards our higher priced plans, as well as a shift to monthly subscription plans, which have a higher price point than our annual plans, we experienced an increase in our average revenue per paying user for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023.

Previous wording

The below table sets forth our ARPU for the three months ended March 31, 2024 and 2023.

Current wording

The below table sets forth our ARPU for the three and six months ended June 30, 2024 and 2023.

Previous wording

Our FCF increased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to an increase in cash provided by operating activities for the reasons discussed below, including an increase in net income due to operating efficiencies following our reduction in workforce in 2023, partially offset by an increase in capital expenditures.

Current wording

Our FCF increased for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to an increase in cash provided by operating activities for the reasons discussed below, including payments related to our reduction in workforce in 2023, partially offset by an increase in capital expenditures.

Previous wording

We expect our FCF to generally increase in future periods as we increase subscription sales and drive operating efficiencies. We expect to continue to purchase infrastructure equipment to support our user base and anticipate that our capital expenditures will generally remain consistent in future periods as we continue to invest in our internal infrastructure, network and security. The timing of our operating expenses as described below, may result in FCF to vary from period to period as a percentage of revenue.

Current wording

We expect our FCF to generally increase in future periods as we increase subscription sales and drive operating efficiencies. We expect to continue to purchase infrastructure equipment to support our user base and anticipate that our capital expenditures will generally remain consistent in future periods as we continue to invest in our internal infrastructure, network and security. The timing of our operating expenses as described below, may cause FCF to vary from period to period as a percentage of revenue.

Previous wording

We expect that sales and marketing expenses will fluctuate in absolute dollars and as a percentage of revenue in both the near term and long term. We plan to continue to invest in sales and marketing, long term, to grow our user base and increase our brand awareness. The trend and timing of sales and marketing expenses will depend in part on the timing of marketing campaigns.

Current wording

We expect that sales and marketing expenses will fluctuate in absolute dollars and as a percentage of revenue in both the near term and long term. We plan to continue investing in sales and marketing in the long term, in order to grow our user base and increase our brand awareness. The trend and timing of sales and marketing expenses will depend in part on the timing of marketing campaigns.

Previous wording

(2)On March 15, 2023, our President resigned, resulting in the reversal of $6.7 million in stock-based compensation expense. Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023.

Current wording

(4)On March 15, 2023, our President resigned, resulting in the reversal of $6.7 million in stock-based compensation expense. Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023.

Previous wording

(2)On March 15, 2023, our President resigned, resulting in the reversal of $6.7 million in stock-based compensation expense. Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023.

Current wording

(4)On March 15, 2023, our President resigned, resulting in the reversal of $6.7 million in stock-based compensation expense. Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023.

Previous wording

Revenue increased $20.2 million or 3.3% during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023 primarily due to an increase in paying usersand an increased mix of sales towards our higher-priced subscription plans, which together contributed to an increase of $19.5 million in revenue. In addition, revenue was positively impacted by $0.7 million from changes in foreign exchange rates across multiple currencies.

Current wording

Revenue increased $12.0 million or 1.9% during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023 primarily due to an increase in paying usersand an increased mix of sales towards our higher priced plans, as well as a shift to monthly subscription plans, which have a higher price point than our annual plans, which together contributed to an increase of $11.1 million in revenue. In addition, revenue was positively impacted by $0.9 million from changes in foreign exchange rates across multiple currencies.

Previous wording

Cost of revenue decreased $11.0 million or 9.4% during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to decreases of $9.1 million in infrastructure costs primarily as a result of the change in useful lives from 4 to 5 years for certain infrastructure and component assets and $1.2 million in employee-related costs.

Current wording

Cost of revenue decreased $13.1 million or 10.9% during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to decreases of $8.2 million in infrastructure costs, primarily as a result of the change in useful lives from 4 to 5 years for certain infrastructure and component assets, and $3.4 million in employee-related costs.

Previous wording

Our gross margin increased during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to a 3.3% increase in revenue during the period and a decrease in our cost of revenue as described above.

Current wording

Our gross margin increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to a 1.9% increase in revenue during the period and a 10.9% decrease in our cost of revenue as described above.

Previous wording

Research and development expenses decreased $16.1 million or 6.8% during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to decreases of $10.3 million in employee-related costs and $5.1 million in allocated overhead.

Current wording

Research and development expenses decreased $35.7 million or 13.6% during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to decreases of $36.3 million in employee-related costs and $1.7 million in allocated overhead.

Previous wording

$4.4 million related to advertising and other marketing related expenses.

Current wording

Sales and marketing expenses decreased $8.4 million or 6.9% during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to a decrease of $16.4 million in employee-related costs. This decrease was partially offset by an increase of $6.1 million related to advertising and other marketing related expenses.

Previous wording

Interest income, net increased by $3.4 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to higher interest income as a result of interest rate increases.

Current wording

Interest income, net increased by $1.0 million during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to higher interest income as a result of interest rate increases.

Previous wording

Other income (loss), net increased by $0.7 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to a $1.6 million reduction in losses on investments, offset by a $0.8 million decrease in foreign currency transaction gains.

Current wording

Other income (loss), net increased by $3.1 million during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to a $1.5 million gain from sales of retired infrastructure assets, a $1.1 million increase in foreign currency transaction gains, and a $0.7 million reduction in losses on investments.

Previous wording

Provision for income taxes increased $0.2 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to an increase in income before income taxes, offset by an increase in availability of tax credits in the current year.

Current wording

Provision for income taxes increased $7.3 million during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to the impact of our reduction in workforce on fiscal year 2023 income before income taxes, offset by an increase in availability of tax credits in fiscal year 2024.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $548.9 million and short-term investments of $627.0 million, which were held for working capital purposes. Our cash, cash equivalents, and short-term investments consist primarily of cash, money market funds, corporate notes and obligations, U.S. Treasury securities, certificates of deposit, asset-backed securities, commercial paper, foreign government securities, U.S. agency obligations, supranational securities, and municipal securities. As of March 31, 2024, $428.3 million of our cash and cash equivalents was held by our foreign subsidiaries. We do not expect to incur material taxes in the event we repatriate any of these amounts. Our cash is held at several large financial institutions and our investments are focused on the preservation of capital, fulfillment of our liquidity needs, and maximization of investment performance within the parameters set forth in our investment policy and subject to market conditions. The investment policy sets forth credit rating minimums, permissible allocations, and limits our exposure to specific investment types. We believe these policies mitigate our exposure to risk concentrations.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $515.1 million and short-term investments of $547.4 million, which were held for working capital purposes. Our cash, cash equivalents, and short-term investments consist primarily of cash, money market funds, corporate notes and obligations, U.S. Treasury securities, certificates of deposit, asset-backed securities, commercial paper, foreign government securities, U.S. agency obligations, supranational securities, and municipal securities. As of June 30, 2024, $319.2 million of our cash and cash equivalents was held by our foreign subsidiaries. We do not expect to incur material taxes in the event we repatriate any of these amounts. Our cash is held at several large financial institutions and our investments are focused on the preservation of capital, fulfillment of our liquidity needs, and maximization of investment performance within the parameters set forth in our investment policy and subject to market conditions. The investment policy sets forth credit rating minimums, permissible allocations, and limits our exposure to specific investment types. We believe these policies mitigate our exposure to risk concentrations.

Previous wording

Our principal uses of cash in recent periods have been funding our operations, repurchases of our Class A common stock, purchases of short-term investments, the satisfaction of tax withholding obligations in connection with the settlement of restricted stock units and awards, making principal payments on our finance lease obligations, and capital expenditures. In February 2022, our Board of Directors authorized the repurchase of up to $1.2 billion of the outstanding shares of our Class A common stock. In July 2023, our Board of Directors authorized the repurchase of up to an additional $1.2 billion of the outstanding shares of our Class A common stock. We completed the February 2022 authorization of $1.2 billion during the three months ended March 31, 2024 and continued stock repurchases under the July 2023 authorization. Share repurchases will be made from time-to-time in private transactions or open market purchases as permitted by securities laws and other legal requirements and will be subject to a review of the circumstances in place at that time, including prevailing market prices. The program does not obligate us to repurchase any specific number of shares and has no specified time limit; it may be discontinued at any time. During the three months ended March 31, 2024, we repurchased and subsequently retired 11.1 million shares of our Class A common stock for an aggregate amount of $281.6 million. Included in the cost of treasury stock acquired pursuant to common share repurchases is the 1% excise tax imposed as part of the Inflation Reduction Act. The pace of our share repurchases may fluctuate due to various circumstances, including market conditions and our stock price.

Current wording

Our principal uses of cash in recent periods have been funding our operations, repurchases of our Class A common stock, purchases of short-term investments, the satisfaction of tax withholding obligations in connection with the settlement of restricted stock units and awards, making principal payments on our finance lease obligations, and capital expenditures. In February 2022, our Board of Directors authorized the repurchase of up to $1.2 billion of the outstanding shares of our Class A common stock. In July 2023, our Board of Directors authorized the repurchase of up to an additional $1.2 billion of the outstanding shares of our Class A common stock. We completed the February 2022 authorization of $1.2 billion during the three months ended March 31, 2024 and continued stock repurchases under the July 2023 authorization. Share repurchases will be made from time-to-time in private transactions or open market purchases as permitted by securities laws and other legal requirements and will be subject to a review of the circumstances in place at that time, including prevailing market prices. The program does not obligate us to repurchase any specific number of shares and has no specified time limit; it may be discontinued at any time. During the three and six months ended June 30, 2024, we repurchased and subsequently retired 11.3 million and 22.4 million shares, respectively, of our Class A common stock for an aggregate amount of $262.2 million and $543.8 million, respectively. Included in the cost of treasury stock acquired pursuant to common share repurchases is the 1% excise tax imposed as part of the Inflation Reduction Act. The pace of our share repurchases may fluctuate due to various circumstances, including market conditions and our stock price.

Previous wording

In April 2017, we entered into a $600.0 million credit facility with a syndicate of financial institutions, which we subsequently amended in February 2018, February 2021, and March 2023. Pursuant to the terms of the revolving credit facility, we may issue letters of credit under the revolving credit facility, which reduce the total amount available for borrowing under such facility. In February 2018, we amended our revolving credit facility to, among other things, permit us to make certain investments, enter into an unsecured standby letter of credit facility, and increase our standby letter of credit sublimit to $187.5 million. We also increased our borrowing capacity under the revolving credit facility from $600.0 million to $725.0 million. In February 2021, we amended our revolving credit facility to decrease our borrowing capacity from $725.0 million to $500.0 million and the letter of credit sublimit from $187.5 million to $65.0 million. We may from time-to-time request increases in the borrowing capacity under the revolving credit facility of up to $250.0 million, provided no event of default has occurred or is continuing or would result from such increase. In March 2023, we amended the revolving credit facility to update our borrowing benchmark from LIBOR to SOFR. The revolving credit facility terminates on February 23, 2026.

Current wording

In April 2017, we entered into a $600.0 million credit facility with a syndicate of financial institutions, which we subsequently amended in February 2018, February 2021, and March 2023. Pursuant to the terms of the revolving credit facility, as amended, we may issue letters of credit under the revolving credit facility, which reduce the total amount available for borrowing under such facility. The amended revolving credit facility, among other things, permits us to make certain investments, and enter into an unsecured standby letter of credit facility. Our borrowing capacity under the amended revolving credit facility is $500.0 million and the letter of credit sublimit is $65.0 million.. We may from time-to-time request increases in the borrowing capacity under the revolving credit facility of up to $250.0 million, provided no event of default has occurred or is continuing or would result from such increase. In March 2023, we amended the revolving credit facility to update our borrowing benchmark from LIBOR to SOFR. The revolving credit facility terminates on February 23, 2026.

Previous wording

As of March 31, 2024, we had no amounts outstanding under the revolving credit facility and an aggregate of $31.2 million in letters of credit issued under the revolving credit facility. Our total available borrowing capacity under the revolving credit facility was $468.8 million as of March 31, 2024.

Current wording

As of June 30, 2024, we had no amounts outstanding under the revolving credit facility and an aggregate of $30.4 million in letters of credit issued under the revolving credit facility. Our total available borrowing capacity under the revolving credit facility was $469.6 million as of June 30, 2024.

Previous wording

For the three months ended March 31, 2024, net cash provided by operating activities was $175.5 million, which primarily consisted of our net income of $132.3 million, adjusted for stock-based compensation expense of $78.0 million, depreciation and amortization expenses of $31.4 million, and net cash outflow of $84.8 million from operating assets and liabilities. The outflow from operating assets and liabilities was primarily due to the payment of our corporate bonus, offset by an increase in deferred revenue from increased subscription sales, as a majority of our paying users are invoiced in advance.

Current wording

For the six months ended June 30, 2024, net cash provided by operating activities was $406.1 million, which primarily consisted of our net income of $242.8 million, adjusted for stock-based compensation expense of $168.5 million, depreciation and amortization expenses of $63.8 million, and net cash outflow of $104.7 million from operating assets and liabilities. The outflow from operating assets and liabilities was primarily due to the payment of our corporate bonus and the payment for the second tranche termination fee for the partial termination of our lease for our San Francisco, California corporate headquarters, offset by an increase in deferred revenue from increased subscription sales, as a majority of our paying users are invoiced in advance.

Previous wording

The increase of $35.6 million in net cash provided by operating activities during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to an increase of $44.3 million in net income, as adjusted for stock-based compensation and depreciation and amortization expenses. This was partially offset by an increase of $8.7 million in cash outflows from changes in operating assets and liabilities.

Current wording

The increase of $78.6 million in net cash provided by operating activities during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to an increase of $85.5 million in net income, as adjusted for stock-based compensation and depreciation and amortization expenses. This was partially offset by an increase of $6.9 million in cash outflows from changes in operating assets and liabilities.

Previous wording

For the three months ended March 31, 2024, net cash provided by investing activities was $113.7 million, which primarily related to $117.2 million in net investment activity inflows, driven by the sales and maturities of short-term investments, net of purchases. The increase was partially offset by cash paid for capital expenditures of $9.2 million related to purchases of infrastructure assets at our datacenters.

Current wording

For the six months ended June 30, 2024, net cash provided by investing activities was $176.9 million, which primarily related to $202.8 million in net investment activity inflows, driven by the sales and maturities of short-term investments, net of purchases. The increase was partially offset by cash paid for an acquisition of $21.1 million and cash paid for capital expenditures of $15.1 million related to purchases of infrastructure assets at our datacenters.

Previous wording

The decrease of $87.1 million in net cash provided by investing activities during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to a decrease of $82.2 million in net investment activity inflows and an increase of $7.3 million in cash paid for capital expenditures related to purchases of infrastructure assets at our datacenters.

Current wording

The decrease of $230.0 million in net cash provided by investing activities during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to a decrease of $200.3 million in net investment activity inflows, an increase of $21.1 million in cash paid for an acquisition, and an increase of $10.2 million in cash paid for capital expenditures related to purchases of infrastructure assets at our datacenters.

Previous wording

For the three months ended March 31, 2024, net cash used in financing activities was $352.7 million, which primarily consisted of $279.4 million for the repurchase of our common stock, $41.3 million for the satisfaction of tax withholding obligations for the release of restricted stock units and awards, and $32.1 million in principal payments on finance lease obligations.

Current wording

For the six months ended June 30, 2024, net cash used in financing activities was $679.4 million, which primarily consisted of $539.6 million for the repurchase of our common stock, $76.0 million for the satisfaction of tax withholding obligations for the release of restricted stock units and awards, and $63.9 million in principal payments on finance lease obligations.

Previous wording

The increase of $111.4 million in net cash used in financing activities during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to an increase of $104.0 million in repurchases of our common stock and an increase of $7.2 million in cash paid for the satisfaction of tax withholding obligations for the release of restricted stock units and awards.

Current wording

The increase of $220.8 million in net cash used in financing activities during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to an increase of $210.0 million in repurchases of our common stock and an increase of $9.8 million in cash paid for the satisfaction of tax withholding obligations for the release of restricted stock units and awards.

Previous wording

See Note 1 “Description of the Business and Summary of Significant Accounting Policies” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements as of the date of this Quarterly Report on Form 10-Q.

Current wording

See Note 1 “Description of the Business and Summary of Significant Accounting Policies” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report on Form 10-Q.