Dropbox Announces Fourth Quarter and Fiscal 2023 Results
- Revenue growth of 6.0% year-over-year in the fourth quarter and 7.6% for fiscal 2023.
- GAAP operating margin of 42.1% in Q4 and 21.5% for fiscal 2023.
- Net cash provided by operating activities of $200.3 million in Q4 and $783.7 million for fiscal 2023.
- Free cash flow of $190.3 million in Q4 and $759.4 million for fiscal 2023.
- Total ARR of $2.523 billion in Q4, slight growth from the previous year.
- Paying users increased to 18.12 million in Q4.
- GAAP net income of $227.3 million in Q4 and $453.6 million for fiscal 2023.
- Non-GAAP net income of $170.8 million in Q4 and $685.0 million for fiscal 2023.
- None.
Insights
The reported revenue growth and operating margins for Dropbox, Inc. reflect a stable financial condition, with a modest year-over-year increase in revenue. The growth in constant currency terms suggests that the company has been able to mitigate some of the effects of currency fluctuations, which is a positive indicator for international business stability. The increase in non-GAAP operating margin from the previous year indicates an improvement in operational efficiency, potentially reflecting well on cost management strategies.
From a cash flow perspective, the free cash flow remains robust, signifying that the company is generating sufficient cash to support operations and discretionary spending. This is crucial for maintaining liquidity and funding future growth initiatives. The slight decrease in cash flow compared to the previous year, however, warrants monitoring as it may indicate a trend that could impact long-term financial health if it continues.
Dropbox's strategic focus on AI-powered product experiences like Dash, as mentioned in the statement by the CEO, highlights the company's commitment to innovation and aligning with market trends. The emphasis on enhancing the core File Synchronization and Sharing (FSS) business while expanding into new market opportunities presented by AI could resonate well with investors looking for growth in the tech sector.
Furthermore, the increase in average revenue per paying user indicates Dropbox's ability to extract more value from its user base, which is a positive sign of customer retention and upselling strategies. However, the stagnation in the total Annual Recurring Revenue (ARR) growth rate, especially when considering the constant currency perspective, suggests that market penetration or customer acquisition may be slowing down, which is a potential concern for long-term revenue growth.
The net gain on real estate assets due to the partial termination of the company's lease for its corporate headquarters is a one-time event that has significantly influenced the GAAP operating margin. It is important to distinguish these one-time gains from operational performance when evaluating the company's financial health. The prior year's impairment charges and the one-time income tax benefit also need to be considered in this context, as they can distort the true operating performance if not adjusted for.
Investors should be aware of these non-operational factors when analyzing the company's profitability. The non-GAAP measures provide a clearer picture of the company's operating performance by excluding these one-time events and other non-cash expenses, which can be beneficial for assessing the underlying business trends.
Fourth Quarter Revenue of
GAAP Operating Margin of
Net Cash Provided by Operating Activities of
Fiscal 2023 Revenue of
GAAP Operating Margin of
Net Cash Provided by Operating Activities of
“I’m encouraged by the progress we made in 2023 despite facing headwinds in Q4,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston. “We improved the overall profitability of the core business, while investing in growth initiatives with new AI-powered product experiences like Dash. Looking ahead, we’ll continue to focus on driving cash flow and improving efficiency in our core FSS business, while making strategic investments to capitalize on the new market opportunity that AI presents.”
Fourth Quarter Fiscal 2023 Results
-
Total revenue was
$635.0 million 6.0% from the same period last year. On a constant currency basis, year-over-year growth would have been6.2% .(1) Total revenue increased$2.0 million -
Total ARR was
$2.52 3 billion0.3% from the same period last year. On a constant currency basis, year-over-year growth would have been3.8% .(2) Total ARR decreased$2.2 million -
Paying users was 18.12 million, as compared to 17.77 million for the same period last year. Average revenue per paying user was
$138.83 $134.53 -
GAAP gross margin was
80.8% , as compared to80.7% for the same period last year. Non-GAAP gross margin was82.3% , as compared to82.0% for the same period last year. -
GAAP operating margin was
42.1% , as compared to (13.4% ) for the same period last year. In the fourth quarter of 2023, the Company recorded a net gain on real estate assets of$158.8 million San Francisco, California corporate headquarters. In the fourth quarter of 2022, the Company recorded impairment charges related to real estate assets of$162.5 million 32.2% , as compared to29.9% for the same period last year. -
GAAP net income was
$227.3 million $328.3 million $420.2 million $170.8 million $141.2 million -
Net cash provided by operating activities was
$200.3 million $194.6 million $190.3 million $181.7 million $28.1 million San Francisco, California corporate headquarters. For the fourth quarter of 2022, the Company paid$34.7 million -
GAAP diluted net income per share attributable to common stockholders was
$0.66 $0.93 $0.50 $0.40 -
Cash, cash equivalents and short-term investments ended at
$1.35 6 billion
Full Year Fiscal 2023 Results
-
Total revenue was
$2.50 2 billion7.6% year over year. On a constant currency basis, year-over-year growth would have been9.3% .(1) -
Average revenue per paying user was
$139.38 $134.51 -
GAAP gross margin was
80.9% , consistent with the prior year. Non-GAAP gross margin was82.5% , as compared to82.3% in the prior year. -
GAAP operating margin was
21.5% , as compared to7.8% in the prior year. Non-GAAP operating margin was32.8% , as compared to30.9% in the prior year. -
GAAP net income was
$453.6 million $553.2 million $685.0 million $573.9 million -
Net cash provided by operating activities was
$783.7 million $797.3 million $759.4 million $763.5 million -
GAAP diluted net income per share attributable to common stockholders was
$1.31 $1.52 $1.98 $1.58
(1) |
We calculate constant currency revenue growth rates by applying the prior period weighted average exchange rates to current period results. |
(2) |
We calculate total annual recurring revenue ("Total ARR") as the number of users who have active paid licenses for access to our platform as of the end of the period, multiplied by their annualized subscription price to our platform. We adjust our exchange rates used to calculate Total ARR on an annual basis, at the beginning of each fiscal year. We calculate constant currency Total ARR growth rates by applying the current period exchange rate to prior period results. |
(3) |
GAAP and Non-GAAP diluted net income per share attributable to common stockholders is calculated based upon 343.9 million and 354.0 million diluted weighted-average shares of common stock for the three months ended December 31, 2023 and 2022, respectively. |
(4) |
GAAP and Non-GAAP diluted net income per share attributable to common stockholders is calculated based upon 345.6 million and 363.3 million diluted weighted-average shares of common stock for the fiscal year ended December 31, 2023 and 2022, respectively. |
Financial Outlook
Dropbox will provide forward-looking guidance in connection with this quarterly earnings announcement on its conference call, webcast, and on its investor relations website at http://investors.dropbox.com.
Conference Call Information
Dropbox plans to host a conference call today to review its fourth quarter financial results and to discuss its financial outlook. This call is scheduled to begin at 2:00 p.m. PT / 5:00 p.m. ET and can be accessed by using the web link at http://investors.dropbox.com.
Other Upcoming Events
- Tim Regan, Chief Financial Officer, will be hosting meetings at the JMP Technology Conference on Monday, March 4th, 2024.
About Dropbox
Dropbox is the one place to keep life organized and keep work moving. With more than 700 million registered users across approximately 180 countries, we're on a mission to design a more enlightened way of working. Dropbox is headquartered in
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled "About Non-GAAP Financial Measures."
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, among other things, our expectations regarding distributed work and artificial intelligence and machine learning trends, related market opportunities and our ability to capitalize on those opportunities. Words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "plans," and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to risks, uncertainties, and assumptions including, but not limited to: (i) our ability to retain and upgrade paying users, and increase our recurring revenue; (ii) our ability to attract new users or convert registered users to paying users; (iii) our expectations regarding general economic, political, and market trends and their respective impacts on our business; (iv) impacts to our financial results and business operations as a result of pricing and packaging changes to our subscription plans; (v) our future financial performance, including trends in revenue, costs of revenue, gross profit or gross margin, operating expenses, paying users, and free cash flow; (vi) our ability to achieve or maintain profitability; (vii) our liability for any unauthorized access to our data or our users’ content, including through privacy and data security breaches; (viii) significant disruption of service on our platform or loss of content; (ix) any decline in demand for our platform or for content collaboration solutions in general; (x) changes in the interoperability of our platform across devices, operating systems, and third-party applications that we do not control; (xi) competition in our markets; (xii) our ability to respond to rapid technological changes, extend our platform, develop new features or products, or gain market acceptance for such new features or products; (xiii) our ability to improve quality and ease of adoption of our new and enhanced product experiences, features, and capabilities; (xiv) our ability to manage our growth or plan for future growth; (xv) our various acquisitions of businesses and the potential of such acquisitions to require significant management attention, disrupt our business, or dilute stockholder value; (xvi) our ability to attract, retain, integrate, and manage key and other highly qualified personnel, including as a result of our transition to a Virtual First model with an increasingly distributed workforce and in light of the reduction of our workforce announced last year; (xvii) our capital allocation plans with respect to our stock repurchase program and other investments; and (xviii) the dual class structure of our common stock and its effect of concentrating voting control with certain stockholders who held our capital stock prior to the completion of our initial public offering. Further information on risks that could affect Dropbox’s results is included in our filings with the Securities and Exchange Commission ("SEC"), including our Form 10-Q for the quarter ended September 30, 2023. Additional information will be made available in our annual report on Form 10-K for the year ended December 31, 2023 and other reports that we may file with the SEC from time to time, which could cause actual results to vary from expectations. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Dropbox assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release, except as required by applicable law.
Dropbox, Inc. Condensed Consolidated Statements of Operations (In millions, except per share data) (Unaudited) |
|||||||||||||||
|
Three Months Ended
|
|
Twelve Months Ended
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
$ |
635.0 |
|
|
$ |
598.8 |
|
|
$ |
2,501.6 |
|
|
$ |
2,324.9 |
|
Cost of revenue(1)(2) |
|
122.0 |
|
|
|
115.8 |
|
|
|
478.5 |
|
|
|
444.2 |
|
Gross profit |
|
513.0 |
|
|
|
483.0 |
|
|
|
2,023.1 |
|
|
|
1,880.7 |
|
Operating expenses(1)(2): |
|
|
|
|
|
|
|
||||||||
Research and development |
|
222.1 |
|
|
|
238.5 |
|
|
|
936.5 |
|
|
|
891.9 |
|
Sales and marketing |
|
119.6 |
|
|
|
105.1 |
|
|
|
466.0 |
|
|
|
409.4 |
|
General and administrative |
|
61.3 |
|
|
|
57.3 |
|
|
|
237.1 |
|
|
|
222.9 |
|
Net (gain) loss on real estate assets(3) |
|
(157.4 |
) |
|
|
162.5 |
|
|
|
(155.2 |
) |
|
|
175.2 |
|
Total operating expenses |
|
245.6 |
|
|
|
563.4 |
|
|
|
1,484.4 |
|
|
|
1,699.4 |
|
Income (expense) from operations |
|
267.4 |
|
|
|
(80.4 |
) |
|
|
538.7 |
|
|
|
181.3 |
|
Interest income, net |
|
6.8 |
|
|
|
3.5 |
|
|
|
19.4 |
|
|
|
3.3 |
|
Other (expense) income, net |
|
(1.9 |
) |
|
|
(1.5 |
) |
|
|
(3.7 |
) |
|
|
8.1 |
|
Income (expense) before income taxes |
|
272.3 |
|
|
|
(78.4 |
) |
|
|
554.4 |
|
|
|
192.7 |
|
(Provision for) benefit from income taxes(4) |
|
(45.0 |
) |
|
|
406.7 |
|
|
|
(100.8 |
) |
|
|
360.5 |
|
Net income |
$ |
227.3 |
|
|
$ |
328.3 |
|
|
$ |
453.6 |
|
|
$ |
553.2 |
|
Basic net income per share |
$ |
0.67 |
|
|
$ |
0.93 |
|
|
$ |
1.33 |
|
|
$ |
1.53 |
|
Diluted net income per share |
$ |
0.66 |
|
|
$ |
0.93 |
|
|
$ |
1.31 |
|
|
$ |
1.52 |
|
Weighted-average shares used in computing net income per share attributable to common stockholders, basic |
|
337.5 |
|
|
|
352.1 |
|
|
|
341.2 |
|
|
|
361.2 |
|
Weighted-average shares used in computing net income per share attributable to common stockholders, diluted |
|
343.9 |
|
|
|
354.0 |
|
|
|
345.6 |
|
|
|
363.3 |
|
(1) |
Includes stock-based compensation expense as follows (in millions): |
|
Three Months Ended
|
|
Twelve Months Ended
|
||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
||||
Cost of revenue |
$ |
5.7 |
|
$ |
5.9 |
|
$ |
23.3 |
|
$ |
24.7 |
||||
Research and development(5) |
|
58.7 |
|
|
62.7 |
|
|
237.6 |
|
|
232.3 |
||||
Sales and marketing |
|
5.0 |
|
|
6.0 |
|
|
22.0 |
|
|
22.4 |
||||
General and administrative |
|
13.5 |
|
|
12.7 |
|
|
55.1 |
|
|
51.3 |
||||
Total stock-based compensation |
$ |
82.9 |
|
$ |
87.3 |
|
$ |
338.0 |
|
$ |
330.7 |
||||
(2) |
Includes expenses related to our reduction in workforce such as severance, benefits and other related items during the year ended December 31, 2023. |
(3) |
Includes a one-time gain of |
(4) |
Results of Operations for the quarter ended and year ended December 31, 2022 include a one-time benefit from income taxes of |
(5) |
On March 15, 2023, the Company's President resigned, resulting in the reversal of |
Dropbox, Inc. Condensed Consolidated Balance Sheets (In millions) (Unaudited) |
|||||||
|
As of December 31, |
||||||
|
|
2023 |
|
|
|
2022 |
|
Assets |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
614.9 |
|
|
$ |
232.8 |
|
Short-term investments |
|
741.1 |
|
|
|
1,110.6 |
|
Trade and other receivables, net |
|
68.7 |
|
|
|
53.8 |
|
Prepaid expenses and other current assets |
|
91.9 |
|
|
|
92.6 |
|
Total current assets |
|
1,516.6 |
|
|
|
1,489.8 |
|
Property and equipment, net |
|
309.2 |
|
|
|
308.4 |
|
Operating lease right-of-use asset |
|
183.8 |
|
|
|
260.6 |
|
Intangible assets, net |
|
58.1 |
|
|
|
88.3 |
|
Goodwill |
|
402.2 |
|
|
|
403.3 |
|
Deferred tax assets |
|
460.4 |
|
|
|
498.7 |
|
Other assets |
|
53.2 |
|
|
|
61.0 |
|
Total assets |
$ |
2,983.5 |
|
|
$ |
3,110.1 |
|
Liabilities and stockholders' deficit |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
38.5 |
|
|
$ |
38.6 |
|
Accrued and other current liabilities |
|
155.2 |
|
|
|
139.9 |
|
Accrued compensation and benefits |
|
109.2 |
|
|
|
131.7 |
|
Operating lease liability |
|
57.4 |
|
|
|
68.9 |
|
Finance lease obligation |
|
116.2 |
|
|
|
114.8 |
|
Deferred revenue |
|
725.0 |
|
|
|
702.6 |
|
Total current liabilities |
|
1,201.5 |
|
|
|
1,196.5 |
|
Operating lease liability, non-current |
|
310.7 |
|
|
|
585.2 |
|
Finance lease obligation, non-current |
|
168.5 |
|
|
|
151.7 |
|
Convertible senior notes, net, non-current |
|
1,377.8 |
|
|
|
1,374.0 |
|
Other non-current liabilities |
|
90.8 |
|
|
|
112.1 |
|
Total liabilities |
|
3,149.3 |
|
|
|
3,419.5 |
|
Stockholders' deficit: |
|
|
|
||||
Additional paid-in-capital |
|
2,598.0 |
|
|
|
2,511.6 |
|
Accumulated deficit |
|
(2,742.3 |
) |
|
|
(2,772.1 |
) |
Accumulated other comprehensive loss |
|
(21.5 |
) |
|
|
(48.9 |
) |
Total stockholders' deficit |
|
(165.8 |
) |
|
|
(309.4 |
) |
Total liabilities and stockholders' deficit |
$ |
2,983.5 |
|
|
$ |
3,110.1 |
|
Dropbox, Inc. Condensed Consolidated Statements of Cash Flows (In millions) (Unaudited) |
|||||||||||||||
|
Three Months Ended
|
|
Twelve Months Ended
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
||||||||
Net income |
$ |
227.3 |
|
|
$ |
328.3 |
|
|
$ |
453.6 |
|
|
$ |
553.2 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
43.0 |
|
|
|
39.6 |
|
|
|
170.0 |
|
|
|
157.1 |
|
Stock-based compensation |
|
82.9 |
|
|
|
87.3 |
|
|
|
338.0 |
|
|
|
330.7 |
|
Net (gain) loss on real estate assets |
|
(157.4 |
) |
|
|
162.5 |
|
|
|
(155.2 |
) |
|
|
175.2 |
|
Amortization of debt issuance costs |
|
1.0 |
|
|
|
1.1 |
|
|
|
4.2 |
|
|
|
4.2 |
|
Net gains on equity investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5.0 |
) |
Amortization of deferred commissions |
|
8.4 |
|
|
|
10.6 |
|
|
|
38.6 |
|
|
|
39.5 |
|
Non-cash operating lease expense |
|
9.5 |
|
|
|
15.6 |
|
|
|
43.5 |
|
|
|
63.8 |
|
Deferred taxes |
|
26.7 |
|
|
|
(414.8 |
) |
|
|
38.4 |
|
|
|
(396.3 |
) |
Other |
|
(2.9 |
) |
|
|
(8.3 |
) |
|
|
(0.6 |
) |
|
|
(0.8 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
||||||||
Trade and other receivables, net |
|
(3.9 |
) |
|
|
(2.9 |
) |
|
|
(14.5 |
) |
|
|
(5.5 |
) |
Prepaid expenses and other current assets |
|
(17.1 |
) |
|
|
(26.4 |
) |
|
|
(41.1 |
) |
|
|
(50.0 |
) |
Other assets |
|
16.8 |
|
|
|
(13.6 |
) |
|
|
23.3 |
|
|
|
(9.7 |
) |
Accounts payable |
|
(6.2 |
) |
|
|
2.7 |
|
|
|
1.2 |
|
|
|
13.0 |
|
Accrued and other current liabilities |
|
(11.5 |
) |
|
|
2.3 |
|
|
|
(20.8 |
) |
|
|
4.7 |
|
Accrued compensation and benefits |
|
22.6 |
|
|
|
29.1 |
|
|
|
(22.6 |
) |
|
|
(6.8 |
) |
Deferred revenue |
|
(9.9 |
) |
|
|
(0.5 |
) |
|
|
21.6 |
|
|
|
25.6 |
|
Other non-current liabilities |
|
9.1 |
|
|
|
(4.7 |
) |
|
|
(1.5 |
) |
|
|
(17.9 |
) |
Operating lease liabilities |
|
(11.0 |
) |
|
|
(13.8 |
) |
|
|
(65.4 |
) |
|
|
(86.4 |
) |
Tenant improvement allowance reimbursement |
|
1.0 |
|
|
|
0.5 |
|
|
|
1.1 |
|
|
|
8.7 |
|
Cash paid for lease termination |
|
(28.1 |
) |
|
|
— |
|
|
|
(28.1 |
) |
|
|
— |
|
Net cash provided by operating activities |
|
200.3 |
|
|
|
194.6 |
|
|
|
783.7 |
|
|
|
797.3 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
||||||||
Capital expenditures |
|
(10.0 |
) |
|
|
(12.9 |
) |
|
|
(24.3 |
) |
|
|
(33.8 |
) |
Purchase of intangible assets |
|
— |
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
(1.1 |
) |
Business combinations, net of cash acquired |
|
— |
|
|
|
(75.4 |
) |
|
|
— |
|
|
|
(75.4 |
) |
Purchases of short-term investments |
|
(96.1 |
) |
|
|
(131.3 |
) |
|
|
(208.7 |
) |
|
|
(571.2 |
) |
Proceeds from sales of short-term investments |
|
16.6 |
|
|
|
59.5 |
|
|
|
352.4 |
|
|
|
213.7 |
|
Proceeds from maturities of short-term investments |
|
55.1 |
|
|
|
49.3 |
|
|
|
252.2 |
|
|
|
389.1 |
|
Proceeds from sales of equity investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10.6 |
|
Other |
|
12.4 |
|
|
|
5.7 |
|
|
|
23.9 |
|
|
|
19.6 |
|
Net cash (used in) provided by investing activities |
|
(22.0 |
) |
|
|
(105.1 |
) |
|
|
395.2 |
|
|
|
(48.5 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
|
||||||||
Payments of debt issuance costs |
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
Payments for taxes related to net share settlement of restricted stock units and awards |
|
(34.5 |
) |
|
|
(28.4 |
) |
|
|
(135.1 |
) |
|
|
(119.4 |
) |
Proceeds from issuance of common stock, net of taxes withheld |
|
0.1 |
|
|
|
0.1 |
|
|
|
2.5 |
|
|
|
0.5 |
|
Principal payments on finance lease obligations |
|
(31.4 |
) |
|
|
(31.5 |
) |
|
|
(126.6 |
) |
|
|
(127.5 |
) |
Common stock repurchases |
|
(106.2 |
) |
|
|
(174.3 |
) |
|
|
(539.9 |
) |
|
|
(795.4 |
) |
Net cash (used in) financing activities |
|
(172.0 |
) |
|
|
(234.1 |
) |
|
|
(799.2 |
) |
|
|
(1,041.8 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
4.3 |
|
|
|
5.4 |
|
|
|
2.4 |
|
|
|
(7.2 |
) |
Change in cash and cash equivalents |
|
10.6 |
|
|
|
(139.2 |
) |
|
|
382.1 |
|
|
|
(300.2 |
) |
Cash and cash equivalents - beginning of period |
|
604.3 |
|
|
|
372.0 |
|
|
|
232.8 |
|
|
|
533.0 |
|
Cash and cash equivalents - end of period |
$ |
614.9 |
|
|
$ |
232.8 |
|
|
$ |
614.9 |
|
|
$ |
232.8 |
|
|
|
|
|
|
|
|
|
||||||||
Supplemental cash flow data: |
|
|
|
|
|
|
|
||||||||
Property and equipment acquired under finance leases |
$ |
50.6 |
|
|
$ |
53.4 |
|
|
$ |
144.7 |
|
|
$ |
105.8 |
|
Dropbox, Inc. Three Months Ended December 31, 2023 Reconciliation of GAAP to Non-GAAP results (In millions, except for percentages, which may not foot due to rounding) (Unaudited) |
|||||||||||||||||||||||||||
|
GAAP |
|
Stock-based compensation |
|
Acquisition-related and other expenses |
|
Intangibles amortization |
|
Net (gain) loss on real estate assets(1) |
|
Workforce reduction expense(2) |
|
Non-GAAP |
||||||||||||||
Cost of revenue |
$ |
122.0 |
|
|
$ |
(5.7 |
) |
|
$ |
— |
|
|
$ |
(3.7 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
112.6 |
|
Cost of revenue margin |
|
19.2 |
% |
|
|
(0.9 |
%) |
|
|
— |
% |
|
|
(0.6 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
17.7 |
% |
Gross profit |
|
513.0 |
|
|
|
5.7 |
|
|
|
— |
|
|
|
3.7 |
|
|
|
— |
|
|
|
— |
|
|
|
522.4 |
|
Gross margin |
|
80.8 |
% |
|
|
0.9 |
% |
|
|
— |
% |
|
|
0.6 |
% |
|
|
— |
% |
|
|
— |
% |
|
|
82.3 |
% |
Research and development |
|
222.1 |
|
|
|
(58.7 |
) |
|
|
(4.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(0.2 |
) |
|
|
158.9 |
|
Research and development margin |
|
35.0 |
% |
|
|
(9.2 |
%) |
|
|
(0.7 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
25.0 |
% |
Sales and marketing |
|
119.6 |
|
|
|
(5.0 |
) |
|
|
— |
|
|
|
(3.4 |
) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
111.1 |
|
Sales and marketing margin |
|
18.8 |
% |
|
|
(0.8 |
%) |
|
|
— |
% |
|
|
(0.5 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
17.5 |
% |
General and administrative |
|
61.3 |
|
|
|
(13.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
47.7 |
|
General and administrative margin |
|
9.7 |
% |
|
|
(2.1 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
7.5 |
% |
Net (gain) loss on real estate assets |
|
(157.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
157.4 |
|
|
|
— |
|
|
|
— |
|
Net (gain) loss on real estate assets margin |
|
(24.8 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
24.8 |
% |
|
|
— |
% |
|
|
— |
% |
Income from operations |
$ |
267.4 |
|
|
$ |
82.9 |
|
|
$ |
4.3 |
|
|
$ |
7.1 |
|
|
$ |
(157.4 |
) |
|
$ |
0.4 |
|
|
$ |
204.7 |
|
Operating margin |
|
42.1 |
% |
|
|
13.1 |
% |
|
|
0.7 |
% |
|
|
1.1 |
% |
|
|
(24.8 |
%) |
|
|
0.1 |
% |
|
|
32.2 |
% |
(1) |
Includes a one-time gain of |
(2) |
Includes expenses related to our reduction in workforce such as severance, benefits and other related items. |
Dropbox, Inc. Three Months Ended December 31, 2022 Reconciliation of GAAP to Non-GAAP results (In millions, except for percentages, which may not foot due to rounding) (Unaudited) |
|||||||||||||||||||||||
|
GAAP |
|
Stock-based compensation |
|
Acquisition-related and other expenses |
|
Intangibles amortization |
|
Net (gain) loss on real estate assets(1) |
|
Non-GAAP |
||||||||||||
Cost of revenue |
$ |
115.8 |
|
|
$ |
(5.9 |
) |
|
$ |
— |
|
|
$ |
(2.4 |
) |
|
$ |
— |
|
|
|
107.5 |
|
Cost of revenue margin |
|
19.3 |
% |
|
|
(1.0 |
%) |
|
|
— |
% |
|
|
(0.4 |
%) |
|
|
— |
% |
|
|
18.0 |
% |
Gross profit |
|
483.0 |
|
|
|
5.9 |
|
|
|
— |
|
|
|
2.4 |
|
|
|
— |
|
|
|
491.3 |
|
Gross margin |
|
80.7 |
% |
|
|
1.0 |
% |
|
|
— |
% |
|
|
0.4 |
% |
|
|
— |
% |
|
|
82.0 |
% |
Research and development |
|
238.5 |
|
|
|
(62.7 |
) |
|
|
(2.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
173.6 |
|
Research and development margin |
|
39.8 |
% |
|
|
(10.6 |
%) |
|
|
(0.4 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
29.0 |
% |
Sales and marketing |
|
105.1 |
|
|
|
(6.0 |
) |
|
|
(1.7 |
) |
|
|
(1.6 |
) |
|
|
— |
|
|
|
95.8 |
|
Sales and marketing margin |
|
17.6 |
% |
|
|
(1.0 |
%) |
|
|
(0.3 |
%) |
|
|
(0.3 |
%) |
|
|
— |
% |
|
|
16.0 |
% |
General and administrative |
|
57.3 |
|
|
|
(12.7 |
) |
|
|
(1.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
42.8 |
|
General and administrative margin |
|
9.6 |
% |
|
|
(2.1 |
%) |
|
|
(0.3 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
7.1 |
% |
Net (gain) loss on real estate assets |
|
162.5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(162.5 |
) |
|
|
— |
|
Net (gain) loss on real estate assets margin |
|
27.1 |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
(27.1 |
%) |
|
|
— |
% |
Income from operations |
$ |
(80.4 |
) |
|
$ |
87.3 |
|
|
$ |
5.7 |
|
|
$ |
4.0 |
|
|
$ |
162.5 |
|
|
$ |
179.1 |
|
Operating margin |
|
(13.4 |
%) |
|
|
14.4 |
% |
|
|
1.0 |
% |
|
|
0.7 |
% |
|
|
27.1 |
% |
|
|
29.9 |
% |
(1) |
Includes impairment charges related to real estate assets. |
Dropbox, Inc. Twelve Months Ended December 31, 2023 Reconciliation of GAAP to Non-GAAP results (In millions, except for percentages, which may not foot due to rounding) (Unaudited) |
|||||||||||||||||||||||||||
|
GAAP |
|
Stock-based compensation |
|
Acquisition-related and other expenses |
|
Intangibles amortization |
|
Net (gain) loss on real estate assets(1) |
|
Workforce reduction expense(2) |
|
Non-GAAP |
||||||||||||||
Cost of revenue |
$ |
478.5 |
|
|
$ |
(23.3 |
) |
|
$ |
— |
|
|
$ |
(14.6 |
) |
|
$ |
— |
|
|
$ |
(2.9 |
) |
|
$ |
437.7 |
|
Cost of revenue margin |
|
19.1 |
% |
|
|
(0.9 |
%) |
|
|
— |
% |
|
|
(0.6 |
%) |
|
|
— |
% |
|
|
(0.1 |
%) |
|
|
17.5 |
% |
Gross profit |
|
2,023.1 |
|
|
|
23.3 |
|
|
|
— |
|
|
|
14.6 |
|
|
|
— |
|
|
|
2.9 |
|
|
|
2,063.9 |
|
Gross margin |
|
80.9 |
% |
|
|
0.9 |
% |
|
|
— |
% |
|
|
0.6 |
% |
|
|
— |
% |
|
|
0.1 |
% |
|
|
82.5 |
% |
Research and development |
|
936.5 |
|
|
|
(237.6 |
) |
|
|
(22.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
(27.8 |
) |
|
|
648.9 |
|
Research and development margin |
|
37.4 |
% |
|
|
(9.5 |
%) |
|
|
(0.9 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
(1.1 |
%) |
|
|
25.9 |
% |
Sales and marketing |
|
466.0 |
|
|
|
(22.0 |
) |
|
|
(8.3 |
) |
|
|
(13.6 |
) |
|
|
— |
|
|
|
(6.7 |
) |
|
|
415.4 |
|
Sales and marketing margin |
|
18.6 |
% |
|
|
(0.9 |
%) |
|
|
(0.3 |
%) |
|
|
(0.5 |
%) |
|
|
— |
% |
|
|
(0.3 |
%) |
|
|
16.6 |
% |
General and administrative |
|
237.1 |
|
|
|
(55.1 |
) |
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1.9 |
) |
|
|
179.7 |
|
General and administrative margin |
|
9.5 |
% |
|
|
(2.2 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
(0.1 |
%) |
|
|
7.2 |
% |
Net (gain) loss on real estate assets |
|
(155.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
155.2 |
|
|
|
— |
|
|
|
— |
|
Net (gain) loss on real estate assets margin |
|
(6.2 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
6.2 |
% |
|
|
— |
% |
|
|
— |
% |
Income from operations |
$ |
538.7 |
|
|
$ |
338.0 |
|
|
$ |
30.9 |
|
|
$ |
28.2 |
|
|
$ |
(155.2 |
) |
|
$ |
39.3 |
|
|
$ |
819.9 |
|
Operating margin |
|
21.5 |
% |
|
|
13.5 |
% |
|
|
1.2 |
% |
|
|
1.1 |
% |
|
|
(6.2 |
%) |
|
|
1.6 |
% |
|
|
32.8 |
% |
(1) |
Includes a one-time gain of |
(2) |
Includes expenses related to our reduction in workforce such as severance, benefits and other related items. |
Dropbox, Inc. Twelve Months Ended December 31, 2022 Reconciliation of GAAP to Non-GAAP results (In millions, except for percentages, which may not foot due to rounding) (Unaudited) |
|||||||||||||||||||||||
|
GAAP |
|
Stock-based compensation |
|
Acquisition-related and other expenses |
|
Intangibles amortization |
|
Net (gain) loss on real estate assets(1) |
|
Non-GAAP |
||||||||||||
Cost of revenue |
$ |
444.2 |
|
|
$ |
(24.7 |
) |
|
$ |
— |
|
|
$ |
(8.3 |
) |
|
$ |
— |
|
|
$ |
411.2 |
|
Cost of revenue margin |
|
19.1 |
% |
|
|
(1.1 |
%) |
|
|
— |
% |
|
|
(0.4 |
%) |
|
|
— |
% |
|
|
17.7 |
% |
Gross profit |
|
1,880.7 |
|
|
|
24.7 |
|
|
|
— |
|
|
|
8.3 |
|
|
|
— |
|
|
|
1,913.7 |
|
Gross margin |
|
80.9 |
% |
|
|
1.1 |
% |
|
|
— |
% |
|
|
0.4 |
% |
|
|
— |
% |
|
|
82.3 |
% |
Research and development |
|
891.9 |
|
|
|
(232.3 |
) |
|
|
(8.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
651.4 |
|
Research and development margin |
|
38.4 |
% |
|
|
(10.0 |
%) |
|
|
(0.4 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
28.0 |
% |
Sales and marketing |
|
409.4 |
|
|
|
(22.4 |
) |
|
|
(6.8 |
) |
|
|
(5.5 |
) |
|
|
— |
|
|
|
374.7 |
|
Sales and marketing margin |
|
17.6 |
% |
|
|
(1.0 |
%) |
|
|
(0.3 |
%) |
|
|
(0.2 |
%) |
|
|
— |
% |
|
|
16.1 |
% |
General and administrative |
|
222.9 |
|
|
|
(51.3 |
) |
|
|
(3.0 |
) |
|
|
— |
|
|
|
— |
|
|
|
168.6 |
|
General and administrative margin |
|
9.6 |
% |
|
|
(2.2 |
%) |
|
|
(0.1 |
%) |
|
|
— |
% |
|
|
— |
% |
|
|
7.3 |
% |
Net (gain) loss on real estate assets |
|
175.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(175.2 |
) |
|
|
— |
|
Net (gain) loss on real estate assets margin |
|
7.5 |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
(7.5 |
%) |
|
|
— |
% |
Income from operations |
$ |
181.3 |
|
|
$ |
330.7 |
|
|
$ |
18.0 |
|
|
$ |
13.8 |
|
|
$ |
175.2 |
|
|
$ |
719.0 |
|
Operating margin |
|
7.8 |
% |
|
|
14.2 |
% |
|
|
0.8 |
% |
|
|
0.6 |
% |
|
|
7.5 |
% |
|
|
30.9 |
% |
(1) |
Includes impairment charges related to real estate assets. |
Dropbox, Inc. Three and Twelve Months Ended December 31, 2023 and 2022 Reconciliation of GAAP net income to Non-GAAP net income and Non-GAAP diluted net income per share (In millions, except per share data) (Unaudited) |
|||||||||||||||
|
Three Months Ended
|
|
Twelve Months Ended
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
GAAP net income |
$ |
227.3 |
|
|
$ |
328.3 |
|
|
$ |
453.6 |
|
|
$ |
553.2 |
|
Stock-based compensation |
|
82.9 |
|
|
|
87.3 |
|
|
|
338.0 |
|
|
|
330.7 |
|
Acquisition-related and other expenses |
|
4.3 |
|
|
|
5.7 |
|
|
|
30.9 |
|
|
|
18.0 |
|
Amortization of acquired intangible assets |
|
7.1 |
|
|
|
4.0 |
|
|
|
28.2 |
|
|
|
13.8 |
|
Net (gain) loss on real estate assets |
|
(157.4 |
) |
|
|
162.5 |
|
|
|
(155.2 |
) |
|
|
175.2 |
|
Workforce reduction expense |
|
0.4 |
|
|
|
— |
|
|
|
39.3 |
|
|
|
— |
|
Net gains on equity investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5.0 |
) |
Income tax effects of non-GAAP adjustments |
|
6.2 |
|
|
|
(26.4 |
) |
|
|
(49.8 |
) |
|
|
(91.8 |
) |
Income tax benefit from the release of a valuation allowance on deferred tax assets |
|
— |
|
|
|
(420.2 |
) |
|
|
— |
|
|
|
(420.2 |
) |
Non-GAAP net income |
$ |
170.8 |
|
|
$ |
141.2 |
|
|
$ |
685.0 |
|
|
$ |
573.9 |
|
Non-GAAP diluted net income per share |
$ |
0.50 |
|
|
$ |
0.40 |
|
|
$ |
1.98 |
|
|
$ |
1.58 |
|
Weighted-average shares used to compute Non-GAAP diluted net income per share |
|
343.9 |
|
|
|
354.0 |
|
|
|
345.6 |
|
|
|
363.3 |
|
Dropbox, Inc. Three and Twelve Months Ended December 31, 2023 and 2022 Reconciliation of free cash flow and supplemental cash flow disclosure (In millions, except for percentages) (Unaudited) |
|||||||||||||||
|
Three Months Ended
|
|
Twelve Months Ended
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Free cash flow reconciliation: |
|
|
|
|
|
|
|
||||||||
Net cash provided by operating activities |
$ |
200.3 |
|
|
$ |
194.6 |
|
|
$ |
783.7 |
|
|
$ |
797.3 |
|
Less: |
|
|
|
|
|
|
|
||||||||
Capital expenditures |
|
(10.0 |
) |
|
|
(12.9 |
) |
|
|
(24.3 |
) |
|
|
(33.8 |
) |
Free cash flow |
$ |
190.3 |
|
|
$ |
181.7 |
|
|
$ |
759.4 |
|
|
$ |
763.5 |
|
Free cash flow margin |
|
30.0 |
% |
|
|
30.3 |
% |
|
|
30.4 |
% |
|
|
32.8 |
% |
Supplemental disclosures: |
|
|
|
|
|
|
|
||||||||
Key employee holdback payments related to acquisitions(1) |
$ |
0.5 |
|
|
$ |
34.7 |
|
|
$ |
22.4 |
|
|
$ |
49.0 |
|
Payments related to workforce reduction(2) |
$ |
0.4 |
|
|
$ |
— |
|
|
$ |
39.3 |
|
|
$ |
— |
|
Cash paid for lease termination(3) |
$ |
28.1 |
|
|
$ |
— |
|
|
$ |
28.1 |
|
|
$ |
— |
|
(1) |
Includes payments related to employee holdbacks pertaining to our acquisitions. The related expenses are recognized within research and development and sales and marketing expenses over the required service period during the quarters ended and years ended December 31, 2023, and 2022. |
(2) |
Includes payments made related to our reduction in workforce such as severance, benefits, and other related items during the quarter ended and year ended December 31, 2023. |
(3) |
Includes payment made for the partial termination of the Company's lease for its |
About Non-GAAP Financial Measures
To provide investors and others with additional information regarding Dropbox's results, we have disclosed the following non-GAAP financial measures: revenue growth and Total ARR growth excluding foreign exchange effect, which we refer to as on a constant currency basis, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP operating expenses (including research and development, sales and marketing and general and administrative), non-GAAP income from operations, non-GAAP net income, free cash flow ("FCF") and non-GAAP diluted net income per share. Dropbox has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. Non-GAAP cost of revenue, gross profit, operating expenses, income from operations, and net income differ from GAAP in that they exclude stock-based compensation expense, amortization of acquired intangible assets, other acquisition-related expenses, which include third-party diligence costs and expenses related to key employee holdback agreements, net (gain) loss on real estate assets, expenses related to our reduction in workforce, net gains on equity investments and the income tax effect of the aforementioned adjustments. FCF differs from GAAP net cash provided by operating activities in that it treats capital expenditures as a reduction to net cash provided by operating activities. Free cash flow margin is calculated as FCF divided by revenue. In order to present revenue on a constant currency basis for the quarter ended December 31, 2023, Dropbox calculates constant currency revenue growth rates by applying the prior period weighted average exchange rates to current period results. Dropbox calculates constant currency Total ARR growth rates by applying the current period rate to prior period results. Dropbox presents constant currency information to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations.
Dropbox's management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short and long-term operating plans, and to evaluate Dropbox's financial performance and the ability to generate cash from operations. Management believes these non-GAAP financial measures reflect Dropbox's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in Dropbox's business, as they exclude expenses that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful supplemental information to investors and others in understanding and evaluating Dropbox's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.
We believe that the non-GAAP financial measures, non-GAAP cost of revenue, gross profit, operating expenses, income from operations, net income, and diluted net income per share are meaningful to investors because they help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude.
We believe that FCF is an indicator of our liquidity over the long term and provides useful information regarding cash provided by operating activities and cash used for investments in property and equipment required to maintain and grow our business. FCF is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. FCF has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of FCF are that FCF does not reflect our future contractual commitments, excludes investments made to acquire assets under finance leases, includes capital expenditures, and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.
The use of non-GAAP cost of revenue, gross profit, operating expenses, income from operations, net income, free cash flow, and diluted net income per share measures has certain limitations as they do not reflect all items of income, expense, and cash expenditures, as applicable, that affect Dropbox's operations. Dropbox mitigates these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. Additionally, we have provided supplemental disclosures in our reconciliation of net cash provided by operating activities to free cash flow to include expenses related to reduction in workforce and key employee holdback payments related to our various acquisitions. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Management encourages investors and others to review Dropbox's financial information in its entirety and not rely on a single financial measure.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240215045390/en/
Investors:
Ishaan Gupta
ir@dropbox.com
or
Media:
Alissa Stewart
press@dropbox.com
Source: Dropbox, Inc.
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