Second Quarter Revenue of $622.5 Million, up
8.7% year-over-year; on a constant currency basis, up 11.2%
year-over-year
Net Cash Provided by Operating Activities of
$187.6 Million and Free Cash Flow of $184.6 Million
Dropbox, Inc. (NASDAQ: DBX), today announced financial results
for its second quarter ended June 30, 2023.
“In Q2, we delivered a solid quarter beating our guidance across
all metrics, and introduced exciting AI-powered product experiences
to our customers, including Dropbox Dash and Dropbox AI,” said
Co-Founder and Chief Executive Officer Drew Houston. “As we
navigate this period of economic uncertainty, we remain focused on
improving the product experience within core Dropbox and creating
more value across workflows and AI driven capabilities.”
Second Quarter Fiscal 2023 Results
- Total revenue was $622.5 million, an increase of 8.7% from the
same period last year. On a constant currency basis, year-over-year
growth would have been 11.2%.(1)
- Total ARR ended at $2.500 billion, an increase of 7.2% from the
same period last year. On a constant currency basis, Total ARR grew
$32.6 million quarter-over-quarter, and year-over-year growth would
have been 10.9%.(2)
- Paying users ended at 18.04 million, as compared to 17.37
million for the same period last year. Average revenue per paying
user was $138.94, as compared to $133.34 for the same period last
year.
- GAAP gross margin was 80.7%, as compared to 81.5% for the same
period last year. Non-GAAP gross margin was 82.7%, as compared to
83.0% for the same period last year.
- GAAP operating margin was 9.1%, as compared to 14.5% for the
same period last year, with such change partially due to $37.5
million in expenses related to the Company's reduction in
workforce, such as severance, benefits and other related items,
which were incurred in the second quarter of 2023. Non-GAAP
operating margin was 34.2%, as compared to 31.9% for the same
period last year.
- GAAP net income was $43.2 million, as compared to $62.0 million
for the same period last year due to expenses related to the
reduction in workforce in the second quarter of 2023, such as
severance, benefits and other related items. Non-GAAP net income
was $174.0 million, as compared to $138.1 million for the same
period last year.
- Net cash provided by operating activities was $187.6 million,
as compared to $209.9 million for the same period last year. Free
cash flow was $184.6 million, as compared to $205.9 million for the
same period last year. Cash flows in the second quarter of 2023
included $34.0 million of expenditures relating to the reduction in
workforce.
- GAAP diluted net income per share attributable to common
stockholders was $0.13, as compared to $0.17 in the same period
last year. Non-GAAP diluted net income per share attributable to
common stockholders was $0.51, as compared to $0.38 in the same
period last year.(3)
- Cash, cash equivalents and short-term investments ended at
$1.228 billion.
Share Repurchase Authorization
- On July 26, 2023, the Board of Directors authorized Dropbox to
repurchase an additional $1.2 billion of its Class A common stock.
Repurchases will be made from time-to-time, subject to general
business and market conditions, other investment opportunities and
applicable legal requirements. Repurchases may be made through open
market purchases or in privately negotiated transactions, including
through Rule 10b5-1 plans.
(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
343.8 million and 365.7 million diluted weighted-average shares of
common stock for the three months ended June 30, 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
second 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
- Drew Houston, Co-Founder and Chief Executive Officer, will be
presenting at the Goldman Sachs Communacopia + Technology
Conference on Tuesday, September 5th, 2023.
During these events, a live webcast will be accessible from the
Dropbox investor relations website at http://investors.dropbox.com.
Following the event, a replay will be made available at the same
location.
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 San
Francisco, CA, and has employees around the world. For more
information on our mission and products, visit
http://dropbox.com.
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 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 recently announced reduction of our workforce;
(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 March 31,
2023. Additional information will be made available in our
quarterly report on Form 10-Q for the quarter ended June 30, 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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenue
$
622.5
$
572.7
$
1,233.6
$
1,135.1
Cost of revenue(1)(2)
120.1
105.8
236.9
218.7
Gross profit
502.4
466.9
996.7
916.4
Operating expenses(1)(2):
Research and development
262.8
215.0
498.0
425.8
Sales and marketing
120.9
105.0
240.1
200.7
General and administrative
60.0
55.3
115.8
108.8
Impairment related to real estate
assets(3)
2.2
8.7
2.2
8.7
Total operating expenses
445.9
384.0
856.1
744.0
Income from operations
56.5
82.9
140.6
172.4
Interest income (expense), net
3.7
(0.5
)
7.6
(1.9
)
Other expense, net
(1.2
)
(3.3
)
(1.6
)
2.4
Income before income taxes
59.0
79.1
146.6
172.9
Provision for income taxes
(15.8
)
(17.1
)
(34.4
)
(31.2
)
Net income
$
43.2
$
62.0
$
112.2
$
141.7
Basic net income per share
$
0.13
$
0.17
$
0.33
$
0.39
Diluted net income per share
$
0.13
$
0.17
$
0.32
$
0.38
Weighted-average shares used in computing
net income per share attributable to common stockholders, basic
341.4
364.1
344.2
367.4
Weighted-average shares used in computing
net income per share attributable to common stockholders,
diluted
343.8
365.7
346.8
369.6
(1)
Includes stock-based compensation expense
as follows (in millions):
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Cost of revenue
$
6.4
$
6.7
$
11.8
$
12.4
Research and development(4)
67.4
58.5
120.3
109.0
Sales and marketing
6.3
5.9
11.8
10.4
General and administrative
15.2
13.9
27.4
25.5
(2)
Includes expenses related to our reduction
in workforce such as severance, benefits and other related items
during the three and six months ended June 30, 2023.
(3)
Includes impairment charges related to
real estate assets as a result of our Virtual First work model.
(4)
On March 15, 2023, the Company's 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.
Dropbox, Inc. Condensed
Consolidated Balance Sheets (In millions) (Unaudited)
As of
June 30, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
510.3
$
232.8
Short-term investments
717.2
1,110.6
Trade and other receivables, net
60.3
53.8
Prepaid expenses and other current
assets
92.7
92.6
Total current assets
1,380.5
1,489.8
Property and equipment, net
298.5
308.4
Operating lease right-of-use asset
238.9
260.6
Intangible assets, net
73.5
88.3
Goodwill
402.1
403.3
Deferred tax assets
491.2
498.7
Other assets
53.9
61.0
Total assets
$
2,938.6
$
3,110.1
Liabilities and stockholders'
deficit
Current liabilities:
Accounts payable
$
44.3
$
38.6
Accrued and other current liabilities
151.1
139.9
Accrued compensation and benefits
66.5
131.7
Operating lease liability
67.4
68.9
Finance lease obligation
113.4
114.8
Deferred revenue
734.5
702.6
Total current liabilities
1,177.2
1,196.5
Operating lease liability, non-current
553.8
585.2
Finance lease obligation, non-current
157.1
151.7
Convertible senior notes, net,
non-current
1,375.9
1,374.0
Other non-current liabilities
86.5
112.1
Total liabilities
3,350.5
3,419.5
Stockholders' deficit:
Additional paid-in-capital
2,521.9
2,511.6
Accumulated deficit
(2,895.6
)
(2,772.1
)
Accumulated other comprehensive loss
(38.2
)
(48.9
)
Total stockholders' deficit
(411.9
)
(309.4
)
Total liabilities and stockholders'
deficit
$
2,938.6
$
3,110.1
Dropbox, Inc. Condensed
Consolidated Statements of Cash Flows (In millions)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Cash flows from operating
activities
Net income
$
43.2
$
62.0
$
112.2
$
141.7
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
42.7
39.2
85.2
78.6
Stock-based compensation
95.3
85.0
171.3
157.3
Impairment related to real estate
assets
2.2
8.7
2.2
8.7
Amortization of debt issuance costs
1.1
1.1
2.1
2.1
Net gains on equity investments
—
(5.0
)
—
(5.0
)
Amortization of deferred commissions
10.1
9.7
20.8
18.7
Non-cash operating lease expense
10.8
15.7
23.5
32.9
Deferred taxes
4.1
7.7
7.5
14.1
Other
(0.2
)
1.5
0.5
3.3
Changes in operating assets and
liabilities:
Trade and other receivables, net
(2.7
)
(3.0
)
(6.5
)
1.8
Prepaid expenses and other current
assets
(10.4
)
(16.5
)
(17.6
)
(26.2
)
Other assets
2.6
2.7
3.7
5.2
Accounts payable
7.2
2.4
6.9
1.4
Accrued and other current liabilities
(33.2
)
(5.6
)
(7.6
)
9.1
Accrued compensation and benefits
26.5
29.3
(65.1
)
(65.2
)
Deferred revenue
6.6
(0.2
)
31.3
19.3
Other non-current liabilities
(2.9
)
(3.6
)
(7.6
)
(5.9
)
Operating lease liabilities
(15.4
)
(23.6
)
(35.3
)
(43.9
)
Tenant improvement allowance
reimbursement
—
2.4
—
3.3
Net cash provided by operating
activities
187.6
209.9
327.5
351.3
Cash flows from investing
activities
Capital expenditures
(3.0
)
(4.0
)
(4.9
)
(14.7
)
Purchases of short-term investments
(17.0
)
(219.9
)
(47.9
)
(301.5
)
Proceeds from sales of short-term
investments
178.9
64.8
331.6
116.6
Proceeds from maturities of short-term
investments
41.8
101.7
119.4
239.2
Other
5.4
5.5
8.7
9.5
Net cash provided by (used in)
investing activities
206.1
(51.9
)
406.9
49.1
Cash flows from financing
activities
Payments of debt issuance costs
(0.1
)
—
(0.1
)
—
Payments for taxes related to net share
settlement of restricted stock units and awards
(32.1
)
(24.7
)
(66.2
)
(61.4
)
Proceeds from issuance of common stock,
net of taxes withheld
1.0
0.1
1.2
0.3
Principal payments on finance lease
obligations
(31.9
)
(32.0
)
(63.9
)
(64.4
)
Common stock repurchases
(154.2
)
(189.8
)
(329.6
)
(449.7
)
Net cash (used in) financing
activities
(217.3
)
(246.4
)
(458.6
)
(575.2
)
Effect of exchange rate changes on cash
and cash equivalents
1.2
(5.0
)
1.7
(6.1
)
Change in cash and cash equivalents
177.6
(93.4
)
277.5
(180.9
)
Cash and cash equivalents - beginning
of period
332.7
445.5
232.8
533.0
Cash and cash equivalents - end of
period
$
510.3
$
352.1
$
510.3
$
352.1
Supplemental cash flow data:
Property and equipment acquired under
finance leases
$
33.4
$
14.4
$
67.9
$
34.1
Dropbox, Inc. Three Months
Ended June 30, 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
Impairment related to real
estate assets(1)
Workforce reduction
expense(2)
Non-GAAP
Cost of revenue
$
120.1
$
(6.4
)
$
—
$
(3.6
)
$
—
$
(2.7
)
$
107.4
Cost of revenue margin
19.3
%
(1.0
%)
—
%
(0.6
%)
—
%
(0.4
%)
17.3
%
Gross profit
502.4
6.4
—
3.6
—
2.7
515.1
Gross margin
80.7
%
1.0
%
—
%
0.6
%
—
%
0.4
%
82.7
%
Research and development
262.8
(67.4
)
(7.9
)
—
—
(27.0
)
160.5
Research and development margin
42.2
%
(10.8
%)
(1.3
%)
—
%
—
%
(4.3
%)
25.8
%
Sales and marketing
120.9
(6.3
)
(6.6
)
(3.4
)
—
(6.3
)
98.3
Sales and marketing margin
19.4
%
(1.0
%)
(1.1
%)
(0.5
%)
—
%
(1.0
%)
15.8
%
General and administrative
60.0
(15.2
)
(0.1
)
—
—
(1.5
)
43.2
General and administrative margin
9.6
%
(2.4
%)
—
%
—
%
—
%
(0.2
%)
6.9
%
Impairment related to real estate
assets
2.2
—
—
—
(2.2
)
—
—
Impairment related to real estate assets
margin
0.4
%
—
%
—
%
—
%
(0.4
%)
—
%
—
%
Income from operations
$
56.5
$
95.3
$
14.6
$
7.0
$
2.2
$
37.5
$
213.1
Operating margin
9.1
%
15.3
%
2.3
%
1.1
%
0.4
%
6.0
%
34.2
%
(1)
Includes impairment charges related to
real estate assets as a result of our Virtual First work model.
(2)
Includes expenses related to our reduction
in workforce such as severance, benefits and other related
items.
Dropbox, Inc. Three Months
Ended June 30, 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
Impairment related to real
estate assets(1)
Non-GAAP
Cost of revenue
$
105.8
$
(6.7
)
$
—
$
(1.9
)
$
—
$
97.2
Cost of revenue margin
18.5
%
(1.2
%)
—
%
(0.3
%)
—
%
17.0
%
Gross profit
466.9
6.7
—
1.9
—
475.5
Gross margin
81.5
%
1.2
%
—
%
0.3
%
—
%
83.0
%
Research and development
215.0
(58.5
)
(1.4
)
—
—
155.1
Research and development margin
37.5
%
(10.2
%)
(0.2
%)
—
%
—
%
27.1
%
Sales and marketing
105.0
(5.9
)
(1.7
)
(1.2
)
—
96.2
Sales and marketing margin
18.3
%
(1.0
%)
(0.3
%)
(0.2
%)
—
%
16.8
%
General and administrative
55.3
(13.9
)
(0.1
)
—
—
41.3
General and administrative margin
9.7
%
(2.4
%)
—
%
—
%
—
%
7.2
%
Impairment related to real estate
assets
8.7
—
—
—
(8.7
)
—
Impairment related to real estate assets
margin
1.5
%
—
%
—
%
—
%
(1.5
%)
—
%
Income from operations
$
82.9
$
85.0
$
3.2
$
3.1
$
8.7
$
182.9
Operating margin
14.5
%
14.8
%
0.6
%
0.5
%
1.5
%
31.9
%
(1)
Includes impairment charges related to
real estate assets as a result of adverse changes in the corporate
real estate market in the San Francisco Bay area, which has
impacted the Company's subleasing strategy in conjunction with its
shift to Virtual First.
Dropbox, Inc. Six Months Ended
June 30, 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
Impairment related to real
estate assets(1)
Workforce reduction
expense(2)
Non-GAAP
Cost of revenue
$
236.9
$
(11.8
)
$
—
$
(7.2
)
$
—
$
(2.7
)
$
215.2
Cost of revenue margin
19.2
%
(1.0
%)
—
%
(0.6
%)
—
%
(0.2
%)
17.4
%
Gross profit
996.7
11.8
—
7.2
—
2.7
1,018.4
Gross margin
80.8
%
1.0
%
—
%
0.6
%
—
%
0.2
%
82.6
%
Research and development
498.0
(120.3
)
(13.3
)
—
—
(27.0
)
337.4
Research and development margin
40.4
%
(9.8
%)
(1.1
%)
—
%
—
%
(2.2
%)
27.4
%
Sales and marketing
240.1
(11.8
)
(8.3
)
(6.8
)
—
(6.3
)
206.9
Sales and marketing margin
19.5
%
(1.0
%)
(0.7
%)
(0.6
%)
—
%
(0.5
%)
16.8
%
General and administrative
115.8
(27.4
)
(0.4
)
—
—
(1.5
)
86.5
General and administrative margin
9.4
%
(2.2
%)
—
%
—
%
—
%
(0.1
%)
7.0
%
Impairment related to real estate
assets
2.2
—
—
—
(2.2
)
—
—
Impairment related to real estate assets
margin
0.2
%
—
%
—
%
—
%
(0.2
%)
—
%
—
%
Income from operations
$
140.6
$
171.3
$
22.0
$
14.0
$
2.2
$
37.5
$
387.6
Operating margin
11.4
%
13.9
%
1.8
%
1.1
%
0.2
%
3.0
%
31.4
%
(1)
Includes impairment charges related to
real estate assets as a result of our Virtual First work model.
(2)
Includes expenses related to our reduction
in workforce such as severance, benefits and other related
items.
Dropbox, Inc. Six Months Ended
June 30, 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
Impairment related to real
estate assets(1)
Non-GAAP
Cost of revenue
$
218.7
$
(12.4
)
$
—
$
(3.9
)
$
—
$
202.4
Cost of revenue margin
19.3
%
(1.1
%)
—
%
(0.3
%)
—
%
17.8
%
Gross profit
916.4
12.4
—
3.9
—
932.7
Gross margin
80.7
%
1.1
%
—
%
0.3
%
—
%
82.2
%
Research and development
425.8
(109.0
)
(4.6
)
—
—
312.2
Research and development margin
37.5
%
(9.6
%)
(0.4
%)
—
%
—
%
27.5
%
Sales and marketing
200.7
(10.4
)
(3.4
)
(2.7
)
—
184.2
Sales and marketing margin
17.7
%
(0.9
%)
(0.3
%)
(0.2
%)
—
%
16.2
%
General and administrative
108.8
(25.5
)
(0.2
)
—
—
83.1
General and administrative margin
9.6
%
(2.2
%)
—
%
—
%
—
%
7.3
%
Impairment related to real estate
assets
8.7
—
—
—
(8.7
)
—
Impairment related to real estate assets
margin
0.8
%
—
%
—
%
—
%
(0.8
%)
—
%
Income from operations
$
172.4
$
157.3
$
8.2
$
6.6
$
8.7
$
353.2
Operating margin
15.2
%
13.9
%
0.7
%
0.6
%
0.8
%
31.1
%
(1)
Includes impairment charges related to
real estate assets as a result of adverse changes in the corporate
real estate market in the San Francisco Bay area, which has
impacted the Company's subleasing strategy in conjunction with its
shift to Virtual First.
Dropbox, Inc. Three and Six
Months Ended June 30, 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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
GAAP net income
$
43.2
$
62.0
$
112.2
$
141.7
Stock-based compensation
95.3
85.0
171.3
157.3
Acquisition-related and other expenses
14.6
3.2
22.0
8.2
Amortization of acquired intangible
assets
7.0
3.1
14.0
6.6
Impairment related to real estate
assets
2.2
8.7
2.2
8.7
Workforce reduction expense
37.5
—
37.5
—
Net gains on equity investments
—
(5.0
)
—
(5.0
)
Income tax effects of non-GAAP
adjustments
(25.8
)
(18.9
)
(39.1
)
(37.9
)
Non-GAAP net income
$
174.0
$
138.1
$
320.1
$
279.6
Non-GAAP diluted net income per share
$
0.51
$
0.38
$
0.92
$
0.76
Weighted-average shares used to compute
Non-GAAP diluted net income per share
343.8
365.7
346.8
369.6
Dropbox, Inc. Three and Six
Months Ended June 30, 2023 and 2022 Reconciliation of free cash
flow and supplemental cash flow disclosure (In millions, except
for percentages) (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Free cash flow reconciliation:
Net cash provided by operating
activities
$
187.6
$
209.9
$
327.5
$
351.3
Less:
Capital expenditures
(3.0
)
(4.0
)
(4.9
)
(14.7
)
Free cash flow
$
184.6
$
205.9
$
322.6
$
336.6
Free cash flow margin
29.7
%
36.0
%
26.2
%
29.7
%
Supplemental disclosures:
Key employee holdback payments related to
acquisitions(1)
$
10.6
$
—
$
21.4
$
14.3
Payments related to workforce
reduction(2)
$
34.0
$
—
$
34.0
$
—
(1)
For the second quarter ended June 30,
2023, we made payments in the amount of $10.6 million 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.
(2)
Includes payments made related to our
reduction in workforce such as severance, benefits, and other
related items.
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,
impairment charges related to 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 June 30, 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/20230803799818/en/
Investors: Kern Kapoor ir@dropbox.com or Media:
Alissa Stewart press@dropbox.com
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