Dropbox (DBX) 10 May 182018 Q1 Earnings call transcript

Good afternoon, ladies and gentlemen. Thank you for joining Dropbox's First Quarter 2018 Earnings Conference Call.

As a reminder this conference call is being recorded and will be available for replay from the Investor Relations section of Dropbox’s website following this call. I will now hand the call over to Darren Yip from Dropbox's Investor Relations team. Please go ahead.

you. Thank welcome quarter and earnings Dropbox’s to afternoon XXXX first call. Good financial will were discuss Dropbox results the Today, quarterly that distributed earlier. Statements statements, including performance include future prospects. forward to and long-term call future expected strategy, business, of on the our overall results, growth statements this relating financial looking These subject or projected implied and this call. to unknown that and uncertainties those statements cause materially actual from are could results known risks to differ during public final described the those factors our filed prospectus on for SEC in initial in risk our and our particular, In Form will included March our XX, May XX-Q risk by XXXX. offering included XXXX, the with that in XX, filed be factors

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

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

welcome our and call. to again everyone, afternoon, Good earnings

touch Officer; and Financial and some our life be and context things QX are back and Dennis me Chief most our with review public kick and will started guidance on We ecosystem I results on this will cloud. Ajay all share Dropbox To I’ll idea about Ajay if is then of talk a our as in go-to-market Dennis off, our provide company, would our Vashee, first that highlights want better earnings our in approach business and XXXX. your call call lives Operating to financial history. Chief QX product Officer. for since year XXXX the with and the On fiscal information our Woodside, important the

spread Dropbox products globally reached the we virally hundreds businesses. Along millions into share customers Dropbox of users and people, wasn't collaboration. of brought storage, Our the our realized as and just but our valued thing that millions about way, really the what of Dropbox and

we people the challenge decided an sync one keeping most and most today, bigger we’re world. software business the at important platforms in in work. So, a tackle to years And even of ago adopted teams connecting few to widely their information

teams place use have to of our life. where and estimate we a users is people XX% paying We and place Dropbox people users, a their million come done, Of millions XX.X and for that together where work over Dropbox XXX approximately registered work. get ideas come million

with combines model us the reality consumer SaaS business. scale predictability and Our the have pioneer business a roots cash helped our of that Internet business consumer of and generation unique the

new device premium result, higher business features Advanced on business and a and estimates a price introduced we we're our Showcase, is and of to we is their tapping at last users a our plus ahead. work really customizable Professional increasing Events A in collaboration premium a Dropbox this so about users, have price to new a we we quarter long value we standard our a recovery, teams And excited a people strong functionality. a runway seeking experience billion And success webpage. relative Professional it’s ago, plans. built quarter professionally our more saw growth billion to according clients of adoption And to revenue revenue management year-over-year growth. Dropbox security them. result more in our into And as offered a individual creating the also meaningful As $XX as average growth point QX. branded product sharing for higher we file advanced plan of an and a to we're point late market, great and specifically was opportunity a IDC believe Showcase. year, increase includes that Dropbox richer This which SaaS offered plan. Today, revenue launched administrative, in run plans These plan XX% is a Collaboration through fastest increases individual one called road and we a deliver generation. are also opportunity that premium focused free drivers And $X year made cash the in us, at rate the is control to flow were and partners which for extended increase and we've the the plus plan. Content progress subscribing present company for and revenue addressing is relative business to sophisticated, QX. our sharing of

important completely more mobile teams created use of on editor including We enhancing revamped workspace go. the key great Launched start. in paper a it's to plans, is Paper languages higher for the part Dropbox In features docs editing our redesigned world. us. users XXXX of like and products mobile to our an and than discover out We to millions GA, and for XX to drives off important Paper early and paper makes platform that an engagement easier around retention. do paper addition app focus premium paper, rolled to Dropbox collaborative a recently paper subscription updates as a several is have

In dues and task to including setting addition, the creation, due app facilitates mobile assigning dates.

a twice particular, We're have with helped to usage broadly, without Updates more least at drive done. paper new in Dropbox team Dropbox Paper, user higher paper at a these one completely paper subscription those paid also monetization more like converts trials. We retention redesigned optimized our the also approximately best the constantly app for Dropbox a for iPad and functionality improvements teams to XX% add teams net In experience. have users working those and tools so to their can work rate rate. of paper get and business

So, we'll to to I'd and to Dennis, platform our deliver to approach turn and and now, users. like continue the go-to-market And value call to to ecosystem, to innovate our our improve more talk over COO. our more

Thanks Drew.

efficiently that approach. a Drew earlier, inside As has Underlying robust helps is organization. approach land an Dropbox us go-to-market unique a this self-serve mentioned engine

XX% users, person. to may revenue self-serve from In our never of comes fact, talk who a sales

proprietary to drive services, to user expansion machine and conversion. data large us We Our leverage provides in science engine motion to which targeted drive the complement what outbound determine access we with prospects devices learning and within base to of organizations. our the order actively connected self-serve and of messages deliver millions messaging to to hundreds sales

a the make to sales We on usage sharing subscribers call, signals utilizing sales based of accounts and see our a machine free to learning that reach notifies single teams organization. we within tool number which prioritize we individual a frequency. basic target may prospect rep to such Before out by deployed an a paid priori, and as and accounts, several many paid

engine. need into growth as can models predictable, Our and are easier continued and further to tap don't optimize making often sales to decision which In budgets to rip and replace our we and our QX, we cycles make science improvements departmental faster. to we short makes data

able applying to example, For segments win users by churn analytics them customized of we deploy to promotions to who back. downsell, to chose were certain or

as from efficient reseller by analyzing in expand its An the model determine this since selling space QX example by In QX within expanding recently addition, and to model, to alongside, XXXX, usage to a deployment our expanded platform multiple the has success XXXX, all users. WeWork in at rates digital account subscription can self-serve office to grown of company’s factors shared we XX-user Dropbox Since resell the new our an team able XXX starting additional and its adopted that within our new to rapidly at provider and by WeWork also targeting paper IT marketing, customers. services. were workflows. a estate growing critical has build company The we important teams. of design reseller’s optimize has digital partners. channel related predictive collaboration land XXX% to Dropbox to WeWork. design, approach groups performance, With better Teams like its real Dropbox consider brand

have and expand a Dropbox Another scaled power they with a approach is growing grown. that XU customer since account graduate they’ve a example rapidly self-serve universities short small and started been courses. when to A XU. They EdTech as Partners their and degree programs have Tier their land Top as similar team online company, using XXXX, of followed consistently

technology significant becoming our fragmentation Dropbox nearly in X,XXX clients increased its unified critical time they’ve with colleagues year, total tool We’ve QX, at integrating increased based is tool key also X,XXX licenses. and cost might and with of serving collaboration, in uses any with with around users expand in business customer surpass Dropbox collaborate world with challenge In team and Dropbox. share expanding its about application the Dropbox and paying time world’s content collaboration agencies in savings XX achieved has including that Japan. international company and of it. to this everything Dropbox far design using also XU’s find We and our seen deployment particularly securely and around achieved files productivity with and seamlessly a for grown deployments content integrates advertising success cost for the open continued and The to existing significant single for stack, our in primary customers is the of productivity has team ecosystem. one vision be tools which and of as Beginning struggle just a So QX. users in users many steadily and FSS savings together. in and home resulting and with and sales. increased deployments largest a their a part stitching the this we to XXXX,

QX, of we partnership going As over XXXX, have with platform developers momentum some And of and that key the in our API we're receiving than kept more we XXX,XXX on per billion announcements. calls month. end XX

with integration to Salesforce Dropbox First, all businesses more. connect marketing, include we one an and platform enabling partnership and of CRM number types connects commerce across partnership will collaborate more sales, strategic customers with with their announced will be The in with deeply Salesforce’s user service, Dropbox marketing commerce a both allow the can branded and or With create Dropbox internal customized cloud that a two-way relevant working by external content workflows, is folders accessed teams Salesforce. partners. and up-to-date to stay cloud and to users whether that

content directly joint also Dropbox Quip. In work home addition, an Quip that for access to Dropbox support will on documents allow will a within users Dropbox’s allowing unified effort Dropbox for with integration work. live Quip in to build files to users have furthering Quip

with partnership of a with content announced cloud to Google Cloud. our productivity we cross-platform G collaboration Google, Working series and Additionally, connect integrations that global a platform. we with tools Suite develop plan

be and administrators more Cloud will users’ that without be a easily files create, also and to streamlining Adobe. As from with Adobe collaboration Dropbox to disrupting files. from and introducing Creative share sheets open and these docs, files users organize, able XD our more announced workflows. that will we partnership to allows result, manage users business within Google easily Dropbox integration In able QX, a edit Together, were we Dropbox expanding design new we're preview

support we're all the in Dropbox. believe have validate paying Dropbox appeal their becoming X,XXX and and That Dropbox of that We universal our you in month QX a and companies construction companies XXXX. files number across than partnership customer and number files we on to of Ajay, to to results. of look forward Finally, pleased PlanGrid. and long progress industries really year keeping appeal end on I'll key our way in over preferred CFO and better With helped In architecture financial a X.XX we expanding in sizes walk the announced like advancing summary, also keep we day. then specific these paying To posted end in more over roughly making all XX verticals. we're and collaboration now of We over industries, through focused to it created turn our workflows, saved with and in to footprint. run files per Aconex, teams million all BulldozAIR, our integrations in to per translates for Fortune a teams of or billion announcements Fieldwire, and business Last with XX%. XXX XX% we're across sizes our and integrations the the users progress And engineering teams working have companies while universal wins recent platform a is industries. industry for

Dennis. you, Thank

increase Our Total revenue execution and QX results paying paying QX We per up users our demonstrate our ended delivering for users generation. in majority in total quarter XX.X cash total to top paying focus to self-serve flow an users and was average growth user. million XX% driven channels. year-over-year and paying $XXX continue million line strong - driven on with of growth primarily free through revenue with the by the and

a advanced helped $XXX.XX. healthy premium professional We plans ARPU to uptake of our and increase saw also which to

increasing be of subscriber changes from are while on to may a variety Looking negotiated mix, deliver plan some mix, FX factors rates. we’re ARPU such in plans, and as users quarterly monthly of and value focused to continuing premium our annual pricing there ahead, variation more in adoption our

have I of A RSUs I our stock-based otherwise two-tier unless the employer relations be may taxes which compensation due to IPO, XXXX. to extend our continued certain to the XX%, on Before X-K I'll to website. a note with us a and focus at margin as percentage in utilization efficiencies migrating quarter compared move for certain release SEC own of our and life life found that on costs we've related of all equipment unit investor on results increase margin quarter non-GAAP measures the allowed Since and a change years on, follow of furnished non-GAAP today number XX income useful first indicated, years. reconciliation excludes expanded are want three that Gross was hardware. earnings that statement the infrastructure, useful was release as well Gross an in four of discuss points to and the the shortly. our filed to software implemented of GAAP our with which to from of improvements Form

revenue $X of cost our million result, included a in As a QX. benefit

majority in roughly the of to gross realized expect of QX XXXX, expected benefit full-year the the with half the With of margins year. be consistent we the be first for to remainder

expenses. Moving to operating

prior expense products First as was in and as broaden as with Dropbox teams and we $XX new primarily late launched was expense creative quarter year-over-year $XX the The higher helps QX. position focus, The value in increase R&D The unleash a percentage to ago. standard our as a platform campaign million expense is and XX% XX% into year. target $XX of and revenue first consistent campaign by a XX% audience or of wider invest the revenue appeal new revenue the to a driven driven was compared ago. primarily G&A was revenue increase energy. was of XX% a that flow QX in the find million in headcount S&M million by extend to quarter continued or their QX year to in of for a experiences brand XX% XXXX platform. of to or was year that compared to continue Dropbox goal

and As grew in expenses with headcount revenue. line other

our together time split $XX This This employees. separate was payroll Taken This a reverse are $X million point quarter. of based was enable and which our and improvement XXXX. expenses IPO. outstanding margin the million method reflects a IPO non-GAAP QX excluded compensation of average stock QX. related in both which of the recognized stock our million met covering issued shares quarter a share from the therefore the non-GAAP of time major condition duration diluted XXXX IPO, liquidity result shares $X.XX per already is charge was $XXX two performance quarter million. million compensation expense use the the for to These per of granted million incurred the two-tier operating X XXXX first had of at event want $XX results. previously Between was income million across and financials the tax preferred weighting expense weighted from employer I up ago. in $X.XX We RSUs of our spend are in $XXX Diluted service-based XXXX. were quarter to in in $XX the year expense count of based share QX to performance from unrecognized included treasury in in profit excluded based first a from our stock we moment stock vesting stock $XX vesting as related In Net million calculations. our in million up and IPO QX, quarter $XXX share XXXX, the vesting items a a event on in from operating as from translates as we an total in which percentage in XX% quarter. The million condition. condition and $XXX awards $XXX upon for TRRs for our compensation we stock-based our liquidity service the RSUs based once modifying to satisfied condition per

a we addition common stock million employer million XX same best with during in underlying these the two-tier payroll shares associated tax In And the recorded at released expenses awards. RSUs result $XX quarter. as of

with revenue. it payments. of includes cash Moving of QX but in balance low from Cash free IPO flow for net April. from our expenditures yielding or cash and on annual $XX point as to bonus $XX flow seasonal includes cash our million operations the of the and a is cash QX $XX million short we completed quarter. free was from overallotment exercise Capital XX% investments cash proceeds million were cash flow, flow million was the in of underwriter our typically option proceeds the net $XXX which excludes of term ended $XXX which million

million In included the in headquarters, payment of addition two-tier the QX previously RSU mentioned improvement net I quarter. release employer allowances tax our $XX $XXX,XXX on received. the was CapEx new to related of in tenant spend

move our completed years. As entered the of new which reminder a two to XXXX, to end approximately Francisco next at lease be we a the over into San headquarters will

our $XX build received net to the to $XX lines related to improvement to allowances our we approximately center of headquarters the tenant as be to for related We lease finds to a to revenue million CapEx received had digits We new of capital capital of of buildout million in CapEx be expect data new lease total In equipment. approximately tenant allowances out expect of XXXX. improvement to $XX net additions our million of QX, generally be headquarters additions percentage this year. high-single

Turning to our guidance.

For the margin on non-GAAP shares XX% range outstanding to $XXX revenue million, million share be $XXX to diluted of our average million the $XXX of be the XX-day range expect average be in to million trailing we price. XXXX, in of quarter to of to second X% $XXX operating range in to weighted and the based

expect This the be range to million spend flow be non-GAAP the corporate XXXX, to new be million. in the in to $X.XXX range operating $X.XXX our to $XXX figure margin we includes revenue X% billion, the of one-time $XXX to full-year of of related buildout For and to to headquarters. XX% billion cash in range free the of

to turn now million the on average our range back shares of be trailing price. expect million outstanding it I'll diluted Drew to XXX based for to closing We share XX-day XXX in XXXX shares average fully remarks. weighted

closing, a thank right, had you, All we Ajay. quarter. great In

flow strategy a few financial companies platform, strength a efficient been balance software well-positioned scale Our results We're we’ve in to and to really of growth that able we in our a and unique. new business in discipline. we're demonstrate operating the go-to-market and market. We're our for growing built model achieve feel generation incredibly and we're and delivering healthy SaaS free pioneering have cash of continue something and large our

getting thank to a partners for and us customers, team, where our our of to moment to take like are the Dropbox behalf on So, today. we entire management team I'd

that, with So questions. open up for to Operator? I'd like

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

billings it that any What was the wanted the four above which growth, prior I might to I believe strength and about Ajay, accelerated ask the was it have you of quarters. or For there be billing the therefore the revenue growth, any anything contract we in deferred was should growth? aware material terms, terms, FX billings instance, impact else of? from and that driven

but may high of as growth, predictive level for think. one the say billings revenue are revenue would to us related I not as

revenue well And FX don't of or of so, business And be from in in QX, various our billings bit FX our movements more sensitive a given quarter, items revenue. benefited tailwind our consistently lower how in a prepayment from works. billings as higher given to to can billings model there as one are a resellers, drive that correlate can relative growth that partner as to an

shift For revenue and to example, given period, annual sensitive mix additions billings and changes revenue. revenue are deferred deviations balance monthly a deferred between between highly small to and subscribers in mixed in the skew our resulting in can

I’d So visibility. our say we on expect reflects growth current revenue guidance based that the

trying quick behaviors, follow-up what Can you’re of working identify exabyte scale or as trends us just maybe the we’re Science a to Dropbox data few Wondering and through this walk platforms Drew. of is leverage that of. that user cloud to you’re comment through if to aware of and have us on Dennis what applying could Data maybe leverage you the And to walk amount new it? on understand very products. Andrew could you’re that giving, try as you developing one for

our we So we focus big collaboration category. and is strength, the think, when a on about content think

workflows in our content when how it, we that use content. so ecosystem around company leverage and of so, a that. revolve that we it great is a And to comes see example many Because do

drive business. way the of workflows through the to some So us a important for most engagement it’s in

do that of we example partnerships that. of some a front a are there’s good so on our and And lot

we’re where machine and AI really Now are an learning investing another and in. areas area promising

and what whether you vision we an or an take scanner piece this that. to deep of really and product looking that as tasks PDF and can that’s things can that are lot me picture only the only find help some is finding example, to intelligence I our opportunity is or important, the or today, And where of - pivotal of of them, are searchable see like the of the for things big to like part is and this, that’s the or organize cut paper some you’re learning important of see machine information in be and clutter happen. a through a the and the people me think see the to technology important machine intelligence verbs stuff see help a going you important, cut pivotal making clutter that machine doc help going to investments More through which broadly, be

an and and search And put to our able activity going people example of content and in of feeds files so our will pieces some that, ranking the that billion efforts ranking and are to for XXX relevance of huge Dropbox early content I or us. an and go early deeper in a and fact think here on exabyte and of but is we're much other advantage

Heather Our next Goldman Sachs. Bellini question with comes from

that market do to leverage about apps then, into just questions. follow-up a do see we I you how and priorities evolving I the And I Drew, how wondering pipeline infrastructure? R&D your an core have from expand Dropbox was two One, perspective, collaboration think the had

at lot improvement. nicely, putting we for of a work, when using look technology overall So, room of experience there's our it users with the and at we maybe start

coming And arises here. still so, have a for because of we old but all tools are these that people - there's along, that example, new tools also are ton friction the

as the our fragmentation so this their to there's sync. find their turn or in cloud often that to clouds customers us we of keep and ecosystems So, experience, the

a positioned that's and that do Google thousands and platform. and with partnerships so, of are think to of we're folks our we kind part really And new an that and Microsoft like hundreds well problem of on of developers important the our uniquely

together all given of then proliferation to an see and big need things that differently. things bit tie see tools, a we do a opportunity So, to we little these

the suites So, ago really for office take that can a designed of advantage we're of we of XXXX. designed generation and fact kind a lot the were

so we from lot Dropbox - And because of could what that these more a integrated of friction that the an you having a Paper build different problem think all be experience. does example this the that fixed mean? is if Well tools arises

so - watches there our see between we that to different users these get apps work are toggle all done. And we

if PowerPoint and So different you're to to want you're constantly ticket at it working want you a a about or you respond place talk to toggling and apps. or task, a on between email, Slacker one

when conversations And so we increasingly with looked the where content at to one conventional kind boundaries manage that you outside to and the one around it Paper bring here's content to place we’re place, of have it, look the a categories and and bring Dropbox in all these one But the we thought an into integrating opportunity Paper. of all place, at and things management, like ability within separate. that been from the task coordination project things drawing

that's an but some either certainly to the of tools. in lot see I a more fronts, from opportunity on chaos proliferation rein make to could resulted cloud of there’s say So we those this

exceed be be might this measure And had you accounts? help those just existing engage, at wondering to well for with impacting, been then as churn to you’ve how data up impacting mentioned to the as on how of adoption adoption, follow this actually I've able been seen have the Showcase that potential expansion you if products and - - some you Paper points might and

getting focus So so our the do is that. products on like we experience, Paper and right, are relatively primary to want new, and Showcase

one there rate And we promising twice scale folks convert retain to and also are the retained thing a sustainable both big to that. want to but asset we distribution it our driving so want And growth. sure they signs we really Certainly products the XX% shared Dropbox among so and business, is is our up drive higher. at of trials that gently when scale new paper, comes some use team make that

people So it in sure by add we're more reduces with many and functionality increasing engaged products, as it, definition, to ways churn that engagement. because we for are retention

blended So, a we to take that. approach

Our DiFucci with John next Jefferies. question comes from

to And I quarter first my congrats on your express out blocks of here.

my think Drew. Dennis is maybe or I question for probably

X% think least growth X% mere, ARPU you looks think it’s calculated, I a we the at I of last X% saw to somewhere that in about year. good

price when even give the can Drew SKUs positive higher I the you renewing function, or in are more ARPU uplift back going over as SKUs? portion like the they're any behavior subjective prepared a did wondering standard remarks. the higher influence You this commentary specific point, price mentioned at anything I to was to that your user choosing think on if

So, some and the driving ARPU the of as our certainly growing about then uplift. biggest Dennis we see start levers adoption modernization I can higher and we drive see to tier share the of plans. more But subscriber specific can base

And couple it so a ways. a happens that - in uplift ARPU that happens was

on we're is introduction the paid use. And it it opposed mix the first both again plans properly takes price of sure something and individual business So fully the front and that for early but and is, front. the just a in higher getting plan, from individual version for on of is then higher to levers, version our people recent adopting promising in of at work business flow business people of one so moving and subscription we while the of to teams more free shift Dropbox - having as and to tier Dropbox, focus mix at up a the the set through signs

And so some too. see early uplift we there

of a our We year over QX we introduced bit professional our little last a our plan, and context of plans. a introduced advanced in ago plan just just year. So little on

things our in to seeing to business both a make before experience decision gave that tiered in where plan. with premium sign-on that those the maintenance we move plans and standard users. among deployments had year integration. or and XX% plan team as or to to the users any plan using is meaningful We're with like use to to benefits a happy plan are those plan are and And are market features are new stay not the going relatively are audit that So although advanced as plan advanced advanced our to a a remember business the had because the very our of to plans good the releasing advanced specific they we're admin of whether We're standard logs, those of teams really of sorts to most Dropbox appropriate to want for roles, tool single price advanced and conversion any plan. numbers

pretty rates, that's how happy that the ARPU reflected good seeing we're see we're So going far. you with and overall numbers take so in

start And Is if the decision a they when once I was to renewing? just had at for of Dennis, clarification, the it make that it… users beginning may, year this advanced

correct. That’s

cut …what off that was January X?

around February, It in that. was a It QX. yes. later was little And February, than beginning bit of

Our next question comes Jaffray. Zukin from with Alex Piper

taking for Thanks earlier mentioned the the echo the in call. and question, congratulations again I

partner ask influence you’re how You some new that about thinking talked the want any assess about metric and other impact to tracking I statutory Adobe. you’re or to sales of very these programs? interesting Salesforce with partnerships

Alex. And and start Dennis can it. to can thanks, I add

the Salesforce these, relationship, of pretty But large workflows when the about some so Google and so at like are you of share content you days. partnerships we look of sharing at still that’s revolve around on. of in Salesforce an example our looking and sales think customer CRM there realizing in collaterals, that and people customers both base Salesforce, examples QX, with So, were early a prospects number and

about. look when a dimensions that lot at, we’re so are there and And excited potential partnership you that different things of

We’re number ton other opportunity experience, Dropbox then, there’s are both to customer of areas, so so making and complimentary Salesforces’ joint look at integrations base, that and you Dropbox’s go-to-market. focused really good. a at they’re customer those in of on use for And sure you base great a Salesforce ways. in people first And building look product the a

the opportunity mean kind the And over of in these that’s options partnerships will we’re example so, excited happen But, - I something of time. that about. that’s one that’s of an that

into about and out more with that value that we is workflow. at renew you the higher at Dropbox embedded higher that deeply the one way integration and to we're because simply So thinking expand they're rates know rates we’re influence things of know at respect partner getting sales, teams more least now use

that so retention with be So Slack the we very applications at with teams number like to then integrations our the with those managing and kinds of more spelunker of we of starting aggressive we use so. a than applications teams salesforce. more integration now be a have surface things retention look integration one or then upsell, integrations to trying one most teams. look high - enough number to that want And when correlated partner are some have surfacing at that correlation that we're with the least to we at we’re about to integrations want We of at look the

that know given we certain for partner if about happens of be that. to segment want users our So a to driving a users, value more

not and more selling, we're that way. the monetizing value part on So focused indirectly directly to for we're base most adding focused the on user

And the with to growth then of for ARPU modeling any some trends mentioned would for from the perspective, of maybe a purposes? the just a just in that but point around all us you comment Roger, call, comments help clarification of seasonality kind anything respect

as growth think our level drive continue to period. in that there outpace ARPU I in at that growth spending revenue any given can through quarter as of high is levers deploying would really on both strategy that a well influence expansion. one user to and conversion some in ARPU think of paying And And initiatives short-term. the that the these other factors we're may are I the

deals we annual as to depending would long subscriber time. experimentation larger like are that expect mix plan like drive we're term, pricing things these on and the on the and so Alex, on more expansion things expansion the on say well initiatives over I But as FX. ARPU over and And monthly mix driving working are focused and

Our comes with Bank. next Keirstead Karl from question Deutsche

follow operating are want to a Ajay. for in upside? hardware to maybe for revenue may full year the the XQ for this change and then got so life well as be the just up. XXXX that and useful due modeling. to I've due XX% Thanks. And I is to guide clarify entirely X% to margin much very Thanks Ajay, two the higher than were we

Great question. the you to hear yes, right. for you, from thank Karl, and And you're

us on and efficiency. life by result ever margins more REITs their operating the costs giving efficient infrastructure useful in useful of is the of percentage that hardware are reduction the moment more rather a driver driven primary getting margins one margin partially of guidance utilization than was on a with the life revenue for in partially that and change operating certain I'll margin gross for as higher reiterate and expansion. a a of unit and So, just is by change gross efforts in driven by and expansion

at flow efficiency to higher growth higher overall revenue and through down just and operating level of So, then was sales cost income. the that the

And FX for a quantify one, the was then revenues terms could as maybe here earlier did out an both and Ajay billings wondering but of tailwind second was you just FX impact, just what I'm FX a well, of maybe there? bit assuming a nit tailwind. flag it you in billings what that if got

to XX through on a with on any books that the bit and but and was that as the lot because a has a marginal in given flow FX that any operating whole in period our and and in in revenue deferred the a tailwind meaningful really revenue. we revenue recognized pertains prior there was again, months really so period, billings, for of from And not we that's was modest cash millions. quarter, relatively flows enter impact deferred over over period. QX a or revenue so generated given And So FX that digits of quarter it single number, that

from Merrill next with Post Justin Lynch. comes Our question

to company of move one the know to of up team the I sales. is initiatives

how about hiring and are about around advantages Just whether why capital sales you. the And and force about those? thinking the to versus there? What choose think then, leases. how on you you the leases? accelerate flow use CapEx Thank you you're capital cash the wondering enterprise talk might the company Maybe to

part the Maybe enterprise. the take I'll on first

users e-mail XX% or already pay customers. already Customers of decide responding basic to revenue self-serve comes messaging us. prompt to product plans, and our more about in-product learn an remember part our are then, to - So, they're from most the to to pay and for a who or

others that that to made all SaaS. have involve efficiency in and sales outbound sales do So, Nearly are force not considerably a already higher many and organizations our traditional marketing those and than - paid is of of meaningful not that's sales does deployment. sales our why our peers

We have teams. a of mix

Japanese to the couple a as from of person company, call purchased have will into self-served there example XX a as were completely ago, couple sales a up the typically recall, you If or years before we XXX XXX organizations seats many seats self-serve of the that as will prospects advertising in account. as data And authority then, be have organization an well to who sales the IT my that highest that fine as saying machine people might learning might I the and science force within potential and remarks which not. on and the was really target

in deal, time. They're typically of sales organizations going XX,XXX small our the bites for bed. force, up getting within think outbound the of every right seat So not a larger they're you period over case usage of of

seats gone that months XX,XXX a have over that did XX transactions. many, from accounts many in seats but have XX they to We period

- sides. that opportunity will we teams So see the And leads to sales are on continue primarily outbound from the both expand business. but fed self-serve sales team the we

with said. - I just want the to of unique of echo of It’s elements somewhat what model. Dennis some entirely our

that. always great have of approach of our have is targeted another just been on that conventional the then unique. a Dennis not we [indiscernible] we enterprise and So huge that already is premium the sales lot and start which sales say adoption more as success that sales like is be a where would And to efficiency for which we force about XX which pretty we mile are is force with the enterprise in marathon cycle because company and sales able leveraged. there's said that, to force because this us drives hiring viral not top example scale self-serve But model on of element a or also has about and

So the all efficient and up it's more model. add it scale much

on on jump question and thank the leases I’ll question. the for you in capital

between allocation the to lease as And capital for offset a with capital favorable strategy infrastructure roughly continue on capital how we in balance million that to that our inflows about your portion down we our quarters, an investments generally versus the capital match QX a made additions. And was they in of payments why we so course, and over result, will our on lease and is QX believe ending leverage lease million our question we our financing better capital high added lease choose the capital last in equipment obligations. against may $XX and of million variances that that $XX.X outstanding evaluate at term and leverage and as from long some our buy million So level within $XXX our to $X.X repayments that's our leases lease, quarter we quarter was we, there to capital lease ongoing hardware to a level we balance cash there update And capital basis. them. capital receive while close and on funds lease expect be to the terms given our maintain high capital a we

Our next from call Mark Mahaney Capital with comes RBC Market.

Two questions please.

campaign advertising And from you the secondly, color Thank net you Any you brand about that? that scale scale up can quarter. on from? they this to they You And talk customer they the continue XXX,XXX net down? similar or adds learnings adds? to did added Did paid start from, customers it in do you. come the March new quarter, are plan it about it, customers in paying came where previous

paying relatively I'll to can was but, now. Mark, mix over the Dennis, answer your it users with question to similar. I question a yes, pass on start

with we expansion paying as in to over so, continue Dennis. growth was primary user growth driver well individual a turn the was team that team then secondary driver it quarter. and drive conversions plans. our that And both but the And to of to I’ll

value many And in know a for campaign that bring user, that to trying may launched individual do question. we brand, and an continued Dropbox the year we On so into QX last with they the be QX. thanks brand can what in people not our business of So, setting. we're familiar as

was in the energy, that we about creative particularly unleash organizations are doing So, things. can campaign all how amazing

particularly for sales trying a intent of and couple consideration that drive marketing and good uplift audiences, have are we're large that. and pretty seeing teams awareness, select organizations design We from to

our we expect is to brand our strengths. brand invest of continue in We think over one to time, our key actually

rest the brand So, see of us over the more of from work the expect to year. course

Our next question Securities. comes from Greg McDowell with JMP

the follow-up to and a high for first Drew One about term on you Dropbox theme been quick ask what I some the Certainly, global your Dropbox custom-built Drew this want one that short global infrastructure Dennis. just the ask one earnings recent want to specifically long own Dennis. And calls. for for the should infrastructure. has the I done have term for profile and business modes how infrastructure? expect in we in in helps what past, having

last place proud paid has been the to has big a operating years driven really obvious off the and the our a that's return the of And we're us So, and for over been infrastructure. we've to margin drive most in been huge by our it's financials, most able many infrastructure in been - of obvious we've that expansion couple building part the of has - investment right, due efficiency ways. the

then cost ride But sustaining infrastructure a we workload. cost down able advantage able to drive the a certainly because to that and we specific we're for directly. also are to so, curves And tune our continue

most of you're document five is from last you're looking days, that years when of at using couple some something not the Dropbox, example the an time from So ago.

that important the we So and experience, look more can opportunities and you you of timeline, can as and more storage intelligence our bigger compute a companies to being our or to Apple layer to the a that advantage example when at control machine ingredient other integration workload, a isn't comparison element the a core effect greater of being becomes as workload having we we getting big asset that's tech I a degree done is time. then And ability like by part customize a some, our have much that cold customize think of would some the lot you to workload as from something similar is flexibility it's with every know experience. XX-year that over improve a and something bigger and certainly able see vertical more to every as becomes stack the performance bigger experience if drive hot performance. is product directly they and and improvements give that to to obsess to can But and although of don't the big and see it tuning of public part we tune well. to than and over our or what I a a separately benefit that that do we flexibility cloud, do are but draw

international have market? you you. companies seeing there, propensity And business to we've talked Dennis, that I opportunity. I initiatives one but international international a think little and guys quick color, one you target expansion hoping there to give about to have too for the just don't Yeah, know buy Thanks. so very new international large was much anything a already a in any you're I

to in States and have big United outside half come are our on to already a really that is close see coming cloud. yes, starting revenue we markets us. for the strong So, from would or - expect significant growth international in the you We opportunity of

serve about the bit that and we're for through opportunity teams motion in still that's a viral Western quite Japan next in traction in from places years who well. of over hub need couple it's significant growth really we Germany, the users of and Europe, that seeing see in U.K. we're benefits to all except revenue started bringing for all of around Dropbox, to of us we parts But global Japan long particular those the every the actually a because most Nordics. that and as we will Australia in getting the the and think our familiar Nordics outbound week have strength we teams We growth an put of some ground trend, the comes with time Europe so this in do I in millions be out last those I’m us described of just see the country. think starting our don't where to of Dublin self-serve people So are in approach that all can and on they're come. of the invest markets have we source to of have into really the That's workplace we to where for hundreds world heading a a of world.

comes question Davis Canaccord. from next Our with Richard

least or one it from you So on that far content how that to wonder I questions of of little the on kind kind deliver but at deploying a demand. relevant know of deploying we touched users either proactively of are AI and away this Dropbox bit kind you is

is from thinking probably arrived extent actually could I'm what what a remember early basically organizations So to in realize Management Knowledge back that never you to Dropbox those XXXXs. the enable System promise the

like do it could you feels that. So

So that's Thanks. what question my is.

time. capability machine growing intelligence and about see really We’re and excited that growing we over

great about that's looking way team the the like helping it or stuff of struggle think I mentioned already today, tasks just do is have lot world for. and want we that. you signals into you want, where where are lot to - that that or And to of so machine different then and a antidote is a invest again to I the stuff they're that relevance inundated have And search. filing area that find an tuning the like do and time, a verbs what we the as going in people a instead go things we about over all and do the by thing have learning to find away to you things get don't be today There

to experience then have search, that the as feeds relevant. also experience, laptop to shows Dropbox of and base, we're But that a part home helping operating. then where important scale so We effectively open mentioned scale have more I in and data made and get benefit of just only the our of core tightened activity feedback I phone both the what's want But because a from our lot so, you is your Dropbox added or as that get user loop world of up. more we lot our faster more surface said. up a the to the but your we stuff to we - And

more organized lot more we more environment. a and how lot think a And work about and And using how the do effective working a much design experience do so, technology we at we calmer seamless. make of

Can you too to documents peer the hard documents yet in stuff the inside or words into that the other the just title? looking do, is tagged

a of things have search new possibility people we in and like products lot text organize search, and there Dropbox full In so auto is paper. for to

indexed and Dropbox content that in lives of as the just All are. is files

file not And look actively - are the we when for something, use as so, contents just searching we but for we can can people sure, Metadata, in the well.

Sarah next Macquarie. Our from question comes Hindlian with

into apologize a and inaugural hit follow-up have congratulations then, like as my your of any them well, we an I’ll sheet, I for outstanding this flow shape. little in first period and but balance cash Dennis free it for on these. question it's go I really looks strong you, quarter. A add in on Drew, was if Maybe you the and a detail, bit can more

how would So you your in are one in terms thinking you priorities, from areas today? what is, interested you’re really particularly hear ranking love the and to of thing about on strategic Drew I you’re platform

news the time money. to, alluded have positive long need So, is some we cash to so of for to that raise as good and didn’t public go we you been

to a thing it sheet can opportunistic. but healthy so, good was have And certainly balance a be we

our investing product against And core growth we’ll to adjacent are tuning learning all users, more the into portfolio moving product and our product the machine our I talked generally with about. and infrastructure. doing and I proceeds So use and continue think the for categories experience, dimensions in the engine, improving convergent

of healthcare, professionals finance more little that Dennis. regulated specializes are that by the more the I you we And generally yours some us number on let's industries really say that know, in I astonishing of astonished the on example, medical bit work just Dropbox. business today And do using company, a think we like competitor of for going somebody individuals, all side. on, a in know efforts it's particular to you a think you follow-up for really the around talked as

look if users as then as even when the do specific line or So stall landscape, from you that? and focus away you guess, you the feel strategy reverse vertical if team to any I ways product out I the into sort you if where or wondering if need need at and feel on of these just I'm the

so have we've today deployments business over pretty half broad about So paying users of in got have the footprint Dropbox we already. XX% XXX, And in of Fortune we them.

there's today well people force a most media, So or we have or sales construction, include workforce industry technology, SKU managing files. industries, we - any large we design in in industries foothold already where manufacturing, major do a have remote that the

the regulated provided or are being file. said, like researchers people financial that collaborating to the particular in we very, trying very use just that tools for because Now simply they're see to large Dropbox, do you what choosing don't and doctors, that said, institutions in often plenty work industries physicians of around are they're

medium and fully have research to our use record doing large referred system Gladstone integrated a Dropbox number they research. as how and we size one of institutions at we they're Industries, Dropbox very their roadshows of that So one is

auto using site We financial claims in so on taking help example who insurance accidents Dropbox of for records process by auto and forth. to services have in are organizations process

not, we coming go after industries have certainly signals, we usage, set to most usage but we just we see where have usage. those that So of self-serve rep where our will out to don't paid purposely through call, and is sales have us where it's a We engine. actually

Markets. Owens will that time and and gentlemen, KeyBanc final from Capital Rob one question have we with for do come Ladies

the roughly and rates, strength base - or know, are you some spending conversion of if function the incremental but a seeing are you’re marketing a was users campaigns given the on generating, this larger you I the the same I convert of question around it increased not, base my guess, at of in awareness paid on disclose really don’t revolves total brand and users point? conversion rates that

the We that registered continue we we understanding top an we’re want user of don’t operating. have to though on certainly the grow to even number, fixate of everybody the but our funnel scale,

workers time last thinking conversions of hundreds join about And year the but so, first we both also spent of from folks of of from a millions recently, those - get users or ourselves in a knowledge have monetizable we that meaningful joined target lot we have the audience or that on the the portion see our already having workers - because planet, knowledge reached really. we registered already or have already we are of

deployment. do we to on also bring individual maybe users so and of along take about to effectively use self-serve plan And from more focus faster to and top plan certainly business business funnel plan journey them and but more of an free we of those part the lot a we all it, of a think how as

Rob briefly, trials, I paying so within upgrades, would expansions just revenue down. that add our conversions, Also companies. reflective direct really to to growth mentioned, across as it’s you And of channels, business that

coming at and ARPU. revenue incremental users the But this more of growth from is it is paid point from

going more pivot to to that is what ARPU a is driven, forward be understand moving point commentary? there is So I'm based there of that your same more the on or

company. both be levers driver be paying continuing growth, the as of moving for but to paying ARPU us growth user would important both to primary the So view forward, growth will I revenue user growth and

right. All

your support us again speaking to thanks forward quarter. really We appreciate next today. and joining for everyone with look So again you

today's thank This program. gentlemen, for you and Ladies in conference. participating the does conclude

You all a may and disconnect day. wonderful have