Dropbox Announces Fiscal 2018 Second Quarter Results

August 9, 2018

SAN FRANCISCO--(BUSINESS WIRE)--Aug 9, 2018--Dropbox, Inc. (NASDAQ: DBX), a leading global collaboration platform, today announced financial results for its second fiscal quarter ended June 30, 2018.

“We delivered another solid quarter of revenue growth in Q2, reflecting the strength of our unique business model,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston. “We added over a dozen new product features to our user and admin experiences, and strengthened our infrastructure, all while driving a 30% free cash flow margin. With our massive scale and continued product innovation, we’re well on our way to advancing our mission of designing a more enlightened way of working.”

Second Quarter Fiscal 2018 Results

Total revenue was $339.2 million, an increase of 27% from the same period last year. Paying users totaled 11.9 million, as compared to 9.9 million for the same period last year. Average revenue per paying user was $116.66, as compared to $111.19 for the same period last year. GAAP gross margin was 73.6%, as compared to 65.4% in the same period last year. Non-GAAP gross margin was 74.5%, as compared to 66.7% in the same period last year. GAAP operating margin was (2.1%), as compared to (10.0%) in the same period last year. Non-GAAP operating margin was 14.1%, as compared to 8.0% in the same period last year. GAAP net loss was ($4.1) million, as compared to ($26.8) million in the same period last year. Non-GAAP net income was $48.0 million, as compared to $20.0 million in the same period last year. Net cash provided by operating activities was $111.9 million, as compared to $86.1 million in the same period last year. Free cash flow was $102.2 million, as compared to $82.4 million in the same period last year. GAAP basic and diluted net loss per share was ($0.01), as compared to ($0.14) in the same period last year. Non-GAAP diluted net income per share was $0.11, as compared to $0.06 in the same period last year. (1) Cash, cash equivalents and short-term investments were $981.8 million at the end of the second quarter of 2018.

(1) Non-GAAP diluted net income per share is calculated based upon 423.1 million and 346.9 million diluted weighted-average shares of common stock for the three months ended June 30, 2018 and 2017, respectively.

Financial Outlook

Dropbox will provide forward-looking guidance in connection with this quarterly earnings announcement on our conference call, webcast, and on our investor relations website at investors.dropbox.com.

COO Transition

Dropbox also announced that Dennis Woodside is stepping down as Chief Operating Officer. He’ll remain at the company until early September and serve as an advisor through the end of the year.

During his time at Dropbox, Dennis helped build a strong leadership bench, and Dropbox is proud to announce the promotion of two of these senior leaders. They’ll join the executive team, which will be restructured to take on Dennis’ responsibilities and drive even greater focus on our customers and partners. As a result, the company does not plan to hire another COO.

Yamini Rangan, currently VP of Business Strategy & Operations, will become Chief Customer Officer reporting to CEO Drew Houston. In this new role, she’ll be responsible for customer-focused business functions, including Global Sales, Marketing, Customer Experience, Business Development, and Business Strategy & Operations. Yamini joined Dropbox in 2016 and has 20 years of leadership experience across sales, marketing, and operations. Most recently, she led Global Sales Strategy and Operations at Workday, and prior to that, she held senior positions at Appirio and SAP. Lin-Hua Wu, VP of Communications, will also report to CEO Drew Houston. Lin joined Dropbox in 2016 and oversees external and internal communications, and analyst relations. Her role will help ensure the company has the right market context informing its decisions, and that its communications are fully aligned with business strategy. Lin brings more than two decades of experience to Dropbox, coming most recently from Square, where she led Corporate Communications, and Brunswick Group, where she was a partner.

“I’ve had an amazing four years at Dropbox, and am proud of what we’ve accomplished together. It’s been an honor to work with such exceptionally talented people and help grow and scale our business,” said Dennis. “I couldn’t be happier for Yamini and Lin on their promotions, and am confident that the new executive team will take the company to even greater heights.”

“We’re grateful for everything Dennis has done for us,” said Drew. “He’s helped transform Dropbox into a publicly-traded company with over $1 billion in annual revenue and 12 offices around the world. Dennis will always be part of the Dropbox family, and we wish him all the best.”

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 dialing (877) 300-7844 from the United States or (786) 815-8440 internationally with reference to the company name and conference title, and a live webcast and replay of the conference call can be accessed from the Dropbox investor relations website at investors.dropbox.com. Following the completion of the call, a telephonic replay will be available through 11:59 PM Eastern Time on August 16, 2018 at (855) 859-2056 from the United States or (404) 537-3406 internationally with recording access code 5483595.

Other Upcoming Events

Dropbox to Present at KeyBanc Capital Markets 20th Annual Technology Leadership Forum: Ajay Vashee, Chief Financial Officer, will be presenting at the KeyBanc Capital Markets 20th Annual Technology Leadership Forum in Vail, CO, on Monday, August 13, 2018 at 1:30 p.m. MT / 3:30 p.m. ET. At that time, 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. Dropbox Lock-up Expiration: In connection with our initial public offering of Class A common stock (the “IPO”), all of our executive officers, directors and holders of our capital stock and securities convertible into or exchangeable for our capital stock as of the IPO entered into market standoff agreements with the Company or entered into lock-up agreements (the “lock-up”) with the underwriters that restrict their ability to sell or transfer their shares. The lock-up period is scheduled to end on September 18, 2018, which falls within our quarterly blackout period that commences at the close of trading on September 7, 2018. Therefore, in accordance with the lock-up agreements with the underwriters, the restricted period will end at the close of market on August 23, 2018, which is ten trading days prior to the commencement of our quarterly blackout period. We will also release our market standoff agreements when the restricted period expires.

About Dropbox

Dropbox is a leading global collaboration platform that’s transforming the way people work together, from the smallest business to the largest enterprise. With more than 500 million registered users across more than 180 countries, our products are designed to help unleash the world’s creative energy and establish a more enlightened way of working. Headquartered in San Francisco, CA, Dropbox has 12 offices around the world. For more information on our mission and products, visit 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, statements regarding Dropbox’s future operational performance, the demand for our platform, the benefits from new product experiences, and expectations regarding stock-based compensation expense. Words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “plans,” and similar expressions are intended to identify forward-looking statements. Dropbox has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that the Company believes may affect its 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; (ii) our ability to attract new users or convert registered users to paying users; (iii) our revenue growth rate; (iv) our history of net losses; (v) our liability for any unauthorized access to our data or our users’ content, including through privacy and data security breaches; (vi) significant disruption of service on our platform or loss of content; (vii) any decline in demand for our platform or for content collaboration solutions in general; (viii) changes in the interoperability of our platform across devices, operating systems, and third-party applications that we do not control; (ix) competition in our markets; (x) our ability to respond to rapid technological changes, extend our platform, or develop new features; (xi) our ability to manage our growth or plan for future growth; and (xii) 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, 2018. Additional information will be made available in our quarterly report on Form 10-Q and other future 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.

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