Dropbox (DBX) 4 Nov 222022 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen. Thank you for joining Dropbox's Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] 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. it Dropbox. Karan turn Investor Head now for Relations will over Kapoor, to of I Mr. go please Kapoor, ahead.

Good Dropbox's Earnings Third you. Quarter Thank afternoon, XXXX Call. and welcome to

call well at cash remind which expectations today demand website Before XXXX that A guidance investors.dropbox.com. measures, accepted and I in we and to products, markets. provided fiscal our for Drew prepared now and Co-Founder over and update with to non-GAAP Houston. is Factors long-term new to these them that Dropbox's regarding Executive such our like We'll forward-looking of our from our as quarterly SEC. accounting Officer, differ accordance would started, strategies, our are today's as set our a based statements we technology, could materially non-GAAP XX-Q reconciliation to These financial subject could materially. discuss assets, earnings flow revenue generally result not are in to principles. our our future business, to including financial also are operating results and information get GAAP that as Form and our expectations in our with on forth as filed and regarding release results differ the Drew? turn of include margin, report our are and our cause will actual on also no the growth, in uncertainties employees, Chief year risks actual and objectives like to risks and release remarks events. expectations, on or forward-looking assumptions undertake earnings obligation fourth results They today, statements I'd cause and as free users, you and profitability, forecasts quarter statements of

to everyone. earnings our and QX call. Karan, Welcome good XXXX afternoon, Thanks,

of June. from product driven delivered offset some the We Tim packaging And with remainder will first by was our the on an our in in last results which partially Joining along discuss year. in out touched our some We by increasingly teams workflow particularly strength Financial some moderation our with rolled continued which Officer. recent strong I quarter, Regan, plans financial impacts and macroeconomic backdrop. another document softness individual SKU, quarter, for we're Plus the economic our a mobile. me own today our we then Chief Like business, the amidst speak many to in quarter business moment. guidance the pricing on a I'll and saw QX to our highlights eye of share is Tim close which the Tim and changes, provide keeping and peers, strength will from potential evolving climate businesses and challenging

we critical, especially on again it's how once for focused value strategy demonstrated outlined to times, workflows uncertain while as Tim disciplined we earlier And pay these to During close users top simplifying need to security best customers mind when higher we or continue serve of our they driving users business to keeping attention remaining by and year. also our profitability, will And XXXX, by discuss. strategic this, approach more doing this remain ourselves spend. their we're thing be the to we stronger-than-expected committed as which we

for First, to future experience FSS continue a the core set we evolve user to improving by offering our growth. foundation stronger

our on our continue excellence the saw users our we maintaining better several particularly to to our quarter how past for been Plus incremental start needs while experience videos we're teams. in or And we business user. to also business, core documents on the content workflows with about balance we're suggestions. growth at has individual particularly as Dropbox small year-over-year. profitability. to freelancers on some as web serve page uploading for machine who in the with key our operational most, enhancements and learning into rates. And an pricing by Consistent focused in and access innovating and the QX, building rolling retention. A churn files suggestions the we're part the retain in did engaged continue we friction more mobile, business users updated of among beyond we our observe decrease Second, saw as teams. that I'll reducing browse excited we retention storage, user important users improving driving improved in Content packaging by around leverage sharing. finally, such file to how core plans, growing enhanced experience. we folder to quarters, churn evolve In and need lead even to particularly we resulting retention user among increase ultimately in surface rate some and actions functionality higher out These navigation to per enhance ML actions I'm users

saw standard customers. new for as renaming I'm our file in also and value and who those updated our and added in have quarter, Among advanced highlighted the we've like learning-assisted increase with We to have with features seen features packaging. around security protection prioritization plans file names workflows identify last increased machine naming see we and our files. And to organizational logins significant who and resonating lots and actions where feature, patterns data models of conventions, engagement pricing machine users suggest teams of learning around adopted pleased a our Dropbox. or this we saving

focus admins in to use centralized sensitive when from very needed larger shared revoke complete it solutions our access controls, on organization and addressing another mind of content And important evaluate can security a spend secure. had on to top is storage include in firm to consolidating By like This time security sales strong driven they utility including we're drive which metrics, information. also has and these on multiple received For who of We've external externally security and governance and with feedback provides needs. the get space capabilities which managed one add-ons reporting health passwords Dropbox. improve handle for example, who proprietary users, beyond customers, data financial to we customers more renewal where content keep capabilities, their This these data by their launched easier focused features customers protection dashboard backup retention team makes and do a selling has backup. incremental links helped as our adoption team's by view new for from that positive quarter. needs, users

view incremental which start of pockets I beyond business. with premium base. powered Moving users. experimenting market, analytics learning experience core we're workflows some user to to share files adoption in want file Dropbox to verticals of customers to professional DocSend, to saw driving given in price with around be we our in about the specifically to a We top quarter, analytics, and insights who DocSend's content fastest-growing last continues that important functionality driving and And setting moderation started FSS completion. be week's the about their experience which users for sharing, stage core launch of softness advanced feature. additional we is capital venture of DocSend, who FSS, in sensitive started choosing slower second overlap mentioned with analytics service individual documents Dropbox Last introducing objective core market a video. viewership while backdrop, cater more which to our DocSend the for I'll investing DocSend's fundraising. DocSend with to send customers DocSend built the want was QX, across And awareness requested and We as video time also as seeing within such we're video

a platform towards an audience. Dropbox easily Sign. video into content user excited analytics can working videos customers time for in integration to know, is share awareness. Dropbox we've developing towards Dropbox's And with potential DocSend announce HelloSign, With you seamless leveraging cases last our driving as its see and week, expand users been to playback rich rate, analytics our excited its is high Now demand, agreement HelloSign And further rebranding now completion and watched workflows. This strategy the streamline experiences. in and use insights for to tighter in individual as like brand I'm target step of important I'm that while with

launched within we providing platform, the agreement their Dropbox workflows manage signature to our the without ability customers Additionally, our Dropbox. hub leaving ever

our leveraging developer saw no-code an that during challenging While business Dropbox eSignature growth this we for moderate that mobile-friendly. like QX Sign and makes API, activity eSign builder Dropbox for a the solutions. complex our broader we're market, PDFs Sign from in differentiate still we value-add offerings uptick seeing Forms, period it's important in traditional We're

platforms. and of paid will Sign digital acquisition and the storage channel videos differentiated we've with Sign Basic, the Capture to two to of we premium of network, teams, saving, streamline and beta shift any to excited plans, up to in recognize plan's beta their our e-mails. evolving at get how-to plans, Dropbox to their XXXXp see their that our Dropbox the on for HR customers, is we and pandemic limit. retention or like Capture syncing products continuous during workflows. features of Dropbox of record both and well a the users we're teams For to own and across from ability to time all in recording they're Capture and last Capture tool can feedback onboarding with training its our number editing differentiated providing that since Forms excited a XXXX. for customers higher-tiered presenting including expanded with And build I'm cloud last now all Capture to as cloud-native gig week, experience users among available organizing content users five plans as to and video reminder, communicate videos Teams And for Family announce like screenshots as in add to the under as video And minutes. as as plans up whether workflows. and with XK simplicity for users. of Plus value video browser that excited to length to as plans suite With all-in-one and the is share Professional We're communications value awareness time Dropbox hours Dropbox videos. the I'm from and of in-house tools, utility files viral Capture for work, and We driver sharing of then, editing an Capture workforces. we in hours and your And and customers process released all moving developed in saving year. our I'm more across launched rely recipients working Dropbox quickly economy more the adding Forms, see brand long meetings included as new lastly, heading platforms existing more users your growth customer their to the

plays Our coming road sharing acquisition the doing to role I of in and this forward in map, look E work an Command the we're more important about quarters.

our also our the published what in I our It uncertainty. on Before goals, up, work last amidst that going far. In our wrap inaugural years a in the was highlight we and broader towards we're for we of closing, would sharing initiatives build ESG inside it for a as like in And achieving has our being we've sustainability report. I growing come. to and progress efforts both our we're investing social period communities. This company week committed years, and accomplished been to to so impact solid force progress good, on quarter of our proud outlines

on through we're customers workflows operationally, hand with in believe macro While around healthy And solutions. financial to with to we profile Tim we to grow walk we not well it We challenges, backdrop we're to remain as ourselves positioning focus immune will streamlining on staying our their know importance a economic weather our financial and and are customers, our sheet. disciplined over only balance that, existing challenging I'll innovating more that believe increasingly we're focused results.

you, Thank Drew.

reminder of I'd Before our financial results, start strategy. quarterly a our turning to like with to

sustained while committed our remaining growth and in pursue objectives. manner long-term to disciplined thoughtful continuing and are We a profitability to

We and in to also significant initiatives form to remain we while growth free returning focused shareholders acquisitions repurchases. a believe cash capital organically will of that also our on revenue, portion both the of drive through flow share allocating future

continue dollar. detail keeping a strengthening exchange we environment, from the on where in I and discuss highlighted, more we particular, are Drew intensifying macro will close headwinds shortly. foreign As see eye this rates, to in the

Total year. of Beginning for to for of Let's beating revenue our $XXX third quarter X.X% start provide year-over-year to $XXX performance, million remainder guidance I'll range with the third $XXX our with million. updated million, results. quarter our increased the and guidance the quarter

on growth, and Teams revenue partially announced sequentially a with ARR sequential grew quarter users Total $XX approximately we adoption on as year-over-year driven with paying our billion. a therefore, an per reminder, a We constant earlier. headwind XXX,XXX $XX a provided pricing by a On increased the $X.XXX constant previous that currency quarter. user in the to growth lower headwinds by approximate $XXX.XX on rates expectations. with net offset the X.X% and seats grew our touched revenue our currency which, XX.XX new users X.X% of million exchange acceleration total driven for paying changes pricing year-over-year. of of year-over-year was plan, Foreign quarter On basis, for paying was June, and and constant Family basis, our and primarily six packaging up in line XX.X% carries which exited and in in Drew largely year-over-year. third million Average step-up FX QX, ARR is in grew basis This QX, million Teams from is currency the plans ARPU profile. $X a our by by nearly plans, ARR comprised added

and equity we estate income note intangibles, non-GAAP, impairments on indicated, to statement our further unless discussion all like investments. gains that I purchased compensation, real are and amortization acquisition-related otherwise our Before P&L, stock-based mentioned of continue certain excludes figures with expenses, of assets would net of

a includes our also of transition a now real effect our estate income update provide strategy, aforementioned tax been de-cost non-GAAP portfolio have our real to where the income as on net virtual-first we a result I'll to the adjustments. Our steps brief of model. taking estate

the While impairment San million. up additional related fees continue Area, $X Francisco increase million the the evolving, be available our we have particularly to an to total real QX, support at with for nearly space primarily efficiencies this $XXX greater margin where $XXX impairment Bay will sublease. San in needs. around driven area primarily This time, XX% of to cumulative our improvement estimate With in Francisco impairment in by we a let's that our an that, on for quarter, infrastructure as P&L. margin percentage was two optimization year-over-year million. the Gross headquarters estate market brings our charges common In we ongoing customer our data in was representing an in to basis. continue our The as recorded is points gross for increase our center charges, well

R&D we we $XXX Third was and The levels XX% in attrition in year initiatives. third growth primarily in an the backfill to of in or XX% of to compared increase of quarter was elevated R&D other to revenue increase by invest and of XXXX. increased expense million revenue, saw the key quarter last as hiring which driven continue

a openings as of we percentage by filled that in our of forward, as critical R&D most Going will pace do revenue end the expect be of expect see this the not year. growth to of we continue

marketing Third the QX. revenue and which or quarter of XX% our campaign third majority in as a last expense of XX% decreased revenue, was XXXX compared million $XX sales of of quarter to brand in spend year incurred was

of of quarter the quarter earned the which or of million compared third up of quarter, points expense of X% $XXX third roughly and operating an revenue, million margin X% Third an quarter of the XXXX. XXXX. decreased third to compared revenue we total, X XX% G&A representing in $XX to operating was in In profit

margin, the that lower stronger-than-expected spend. shares and quarter third expense for lower-than-expected average project in T&E is $XXX which tax $X.XX Diluted two from Consistent fully was new weighted efficiencies of by the based income million outstanding quarters, increased past diluted about legislation share Our XXXX. XXX purposes. XXXX. for a million, NOLs up Net increase points, on shares was now lower-cost hiring the tax third our given quarter we for non-GAAP from third year-over-year outstanding, based weighted XXX utilized and of average per diluted R&D million QX driven guidance operating costs the to per by versus impact significantly our $X.XX income share gross have quarter X% locations, X margin exceeded EPS with tax of on the

cash This and our of $X were resulted the leases flow. capital center free million and short-term to the billion. We to third equipment. quarterly finance $XX million operations for cash flow the cash Cash on balance compared QX with quarter, million ended to in quarter. of Moving during In and our flow million cash quarter, the of from we $X.X third $XXX $XXX in $XXX quarter expenditures XXXX. in investments data was added million

to million executing activity. Let's was billion by $XXX $X.X our we approved that shares, earlier a million. authorization approximately against this continued QX, turn share year repurchase In X.X repurchasing spending

approximately As the QX to third the of guidance. I the remains authorization. this turn behind guidance million year. let's some the the under that, for provide end full context With thinking also current will and of for on $XXX quarter,

For of we revenue XXXX, $XXX be the quarter expect million million. in fourth $XXX range to to the of

in in translates of million assuming $XX headwind greater fourth growth headwind quarter, our $X We what to which to than are a more XXX and a year a million guidance. currency point basis approximately than previous was the full implied

expected approximately project capacity investments non-GAAP planned increase future be expect planned to meet the our operating sequential XX.X%. from for We hiring decline our year. by is driven finalizing to margin expected infrastructure The an spend and QX needs, XX% operating margin primarily to in

trailing XXX to million we range shares average shares $XXX be outstanding based average diluted weighted to the price. million our on share expect XX-day of Finally, in

up from $X.XXX previous On raising range to guidance headwind guidance from currency $X.XXX we of reported billion at of $X.XXX revenue year million, our up revenue to $XX approximately $X.XXX from billion, range $XX the to We a constant estimate to $X.XXX billion to raising full a of year our the by forecast full million of billion. $X.XXX For up billion $X.X are billion prior basis, now billion, currency prior midpoint XXXX we are our XXXX, the to $X.XXX $X.XXX billion. million.

margin infrastructure gross XX.X% of the of our XX%, up seen approximately raising prior from are year. approximately We forecast to due some to this we've our efficiencies guidance

to approximately be operating an guidance our XX.X% guidance are inclusive from X guidance margin up This operating XX%. We also of range of range is our raising in the to prior from headwind margin point approximately XX%, of FX.

are We cash flow of our million $XXX million. $XX million, million $X forecast free in $XXX the compared million raising $XXX midpoint outflows deal by the affected includes range of $XXX newly now legislation million guidance reminder, be And inclusive from as to our prior also in installments for This consideration to is our of to $XX cash headwind million an XXXX acquisition-related to of XXXX. tax flow in cash impact R&D of the of holdbacks. estimated resulting guidance a the free

for to range continue $XX million. million to of to be expenditures We capital the $XX in expect XXXX

build-out center, continue of a expect to significant additions planned be implies QX in due in live up to X% We to lines go a XXXX. to our approximately of early This new finance leases XXXX. data lease expected in revenue step to

reduction XXX of XXX program. of our Finally, million reflects and on share additional to guidance million down shares. XXXX repurchase our previous count range this share commitment million to context of our shares guidance. in share shares, we diluted to impact from million in To outstanding XXX expect some the This our anticipated to range be XXX

up we of range, million. high For are the constant raising end guidance revenue by our $X XXXX, currency

pricing being moderation with to Dropbox mobile. earlier, the on our mentioned changes results plans, early some Sign, is workload recent our softness continued SKU, pleased Plus by we of document packaging our partially in DocSend As which businesses, our particularly and offset in we and Teams and are

and we July. plans, teams packaging and reminder, in changes our to As into standard a effect advanced from benefits QX, pricing which in went largely saw

price total user of introduction increase their subset The the of for of value respective customers is we well comprises to XXXX roughly the XX%. raised the some Given of as our as with accounts. The ultimately increase of managed plans, our subject year majority base X/X these by ARR. to that see the additional will lending our XXXX these pricing this remainder in prices

guide customers, in see beyond. that And similar in not mind change. do we will flow includes expect we to QX immediate impact XXXX monthly model, the revenue important ratable and given absolute subject ARR, to do to the keep While to ARR step-up our is remember, accordingly from not contribution in it an a as to recognition QX pricing our

related pandemic ability traditional have operating our infrastructure our as FX driving incremental As reopening with hire margin, efficiencies, are raising restrictions success to San and Francisco, and tech we as as office top operating such are as talent continue while New York to well as margin we hubs expenses T&E we experiencing soften, high-cost higher to headwinds, XXXX to of Seattle outside margin. due guidance gross

of As to the raising midpoint XXXX cash guidance. flow we our free are cash year full flow, free related

I'd revenue, when FX As to cash benefits margins, delivering of has guidance as free our flow of impact billings $XX compared will and cash XX% flow the which also larger be headwind on of the long-term offsetting free XX% revenue XXXX. increased recognition to this financial a brings resulted of operating operating targets free to a flow a Thus, of absorbed a billion at ratable more flow annual in given model. by enhance year, of our free to our our and the introduced our me beginning cash compared $X guidance. initial year, margins has significant million note more strengthening dollar cash U.S. the impact that reminder, than immediate to the cash we

you are exit of a software intensify as the recognizes subscription over revenue the on QX how year our time from headwinds our we guidance, see of booking. from we can business FX period based As time seeing

cash increased currency and current these in free constant, Assuming experience will revenue flow remain headwinds to rates XXXX. we FX

we will we us are enable a backdrop, more that challenging the a lot believe of managing to a in weather is recognize business uncertainty. way we there While

uncertainty. too we any focused initiatives, team a proud make demonstrating efficiently as it respond financial against I'll our for And targets unfold. stability customers business solid this believe for and events and outperformance and on a drives drive of business is running we generation, I'm how we to With during cash continue continue keeping our that macro that, remaining early especially at on our our well the to free flow conclusion, turn the which are a time, and we to healthy so execution the to to while In long-term our margin close now Q&A. the environment of to in while value way eye to time best it execute long-term operator shareholders. changes to over increasing allocate

first Our RBC with Instructions] [Operator Markets. from Jaluria Capital question Rishi comes

You proceed. may

to explore like? Nice seeing bit in environment. a of drive What some you in spite start cases you're those to I VC Drew, for spite you of And a what's pleasantly -- softer about wanted strength DocSend? one remarks, how driving funding or DocSend, DocSend. kind hear for continued wanting talk prepared use you headwind. talked kind Tim. in see the in look in for to surprised of Can I'm continued your I've little one newer macro talked of Drew, that strength about about of would to which question got

question. the for Thanks Sure.

which be seen exposure has clear, mean, to DocSend's have to so I -- businesses. -- of down. we given headwinds one we and fastest-growing be to have the come our activity fundraising just continues fundraising DocSend So market,

analytics a sending kind verticals and around needing clear, we some revolve So provides. things of it there. different seen of have the and just That to there be content lot headwinds have that to DocSend are said, that around

of and seeing management. customer and lot we're like sales professional verticals So success, a opportunity new account in services

out other adding So in segments value. of kinds new into customer and branching short, we're

added so week in things And analytics. video for advanced we last on our with launches example,

be mix there customer we continued the believe a as but So likely moderates. there will will shift -- funding a DocSend, other we for activity see to be segments opportunity

we about if to currency. under the Got accelerated maybe X about a right, we it. numbers, points wanted slightly growth And we Tim, That's helpful. if ARR really look, accelerate then, constant sense, get overall revenue currency, look by at constant X% -- saw

And that can, Now was was the some packaging To from changes. without you about the can quarter did actual not year, pricing of and what this over in mention kind understand does impact and from you the guidance for it obviously so of the flow extrapolating help when next just from you uplift the from through thinking extent those? we're us this quarter?

Sure.

give pricing out So the break bunch contribution pieces a don't the we I'll separately. you of here.

did we So plans. raise Standard Team and XX% Advanced prices our on by

user the renewing higher-price some And increase large is a the ARR 'XX will course, how became these the portion landing the as quarter, about new remainder for in comprises XXXX the those cycles the to of change. so June. customers, began ultimately X/X then given that customers step-up price of monthly total just at subject did managed revenue recognize in flowing the come the point subject will of and our this July. this And that higher of beyond. accounts. they see for began with our starting And of purchasing base to they majority XXXX as well to plans revenue, Existing from we year as increase price billing starting in of within and customers customers pricing And subset the our our

Brent from comes Jefferies. Thill with question next Our

may proceed. You

Thill. solid a for Congrats on here. Brent Sodha trend Luv is on This

maybe Drew. ask to one wanted for Just first

little being are given in the in price the that unpack today, SMB bit One the some guess companies made down Teams other you we increase. the side. are I environment churn higher churn facing of a the the for comments prepared remarks within despite was rates could you just plans because of around

the and that unpack what customer there? base strength just So drove

Sure.

a of couple say parts. I'd So

of the our So improving I'd one increase say a seeing plans, retention expectations. is price overall I'd been been or or say continue. we've that's the core has churn ahead new churn on trend the customer is in business, and

so And gone expected the And going the and changes or a new customer part we part we gone see is -- we what's value. this of than have basically, better anticipated. we flywheel is better where than we of -- believe packaging it's first, as -- or create of changes part it's driving packaging why pricing

wasn't in increase. just so this a case, And it price

We a customer that of had also in features to for security been introduced Teams response lot demand.

example, have victims the something in between up don't of the ransomware are dedicated for up way last and like attacks SMBs, So resources. are XX% IT XXX% year, XX% security

that see been And we've we it growth macroeconomic area. security kind will be so that in you in because a direction environment. of building And any need

see -- we stability we far. monitor how cautious don't that evolving pleased overall, so That want macro when all an -- a these positive us, at to environment so changes. been know and affecting signals to the the is closely we by for really look said, -- we it's we we've we're So be see situation, it's going

then any given similar Tim. we level this Got obviously. you you guide? the it. previously? you're of to Tim. embedded raising But into environment of this conservatism year, one how Are the what for Is And should embedded we're color conservatism know there, in? embedding Just more guide it I the think for have

say that just I'll from material are our changes approach. guidance historical no there Sure.

we have course of their over those And changing data these we when what to we of trends with degree revise sufficient we seeing guide growth as to conditions, continue do macroeconomic see and we our into year, into initiatives performance. the have needed. signal the as incorporate as we high on guidance in We additional are and a visibility factor

with JPMorgan. Our next from question comes Murphy Mark

may You proceed.

Murphy. This is I'll reiterate And the [indiscernible] on Mark congrats the quarter. for on

business saw a of during pandemic, some softness? of here pressures the softness of say you expect prior did any the would with in And a of of they the in some the you the that that a the some elevated consistent you demand mentioned segments plateau quarter? On of see sense incrementally bit bit worsen? to Or when were

Sure.

business. incremental macro in some headwinds seeing are we So Sign Dropbox our

our Plus As users, macro-related COVID amount just seeing we some a on around that bit, and DocSend that business fair of down tailwind also do particularly of are then mobile. softness given we of slow a lap

beyond year. going So, I'm of we into all components these to factored our the guidance those baseline I of this the updated certainly, trends And trends guidance. point. mentioned give in into as our to guidance for these at not Luv, been have QX -- rest forward-looking factored

it. recent Got the And very of Is increase. customers done, particularly prior the as of to on change relative given any elasticity a among inflationary helpful. you've then the topic that in follow-up the quick That's environment? of price level increases the some price XX% there

And can I project that. price expected. don't out say certainly impact better that price to break has you'd as think in than can say when stats what -- we that gone can we I cycles. increases, have imagine, taken is gone I specific account, prior the those increase we've on I how of Teams

question with next from Citi. Our Enders comes Steve

You may proceed.

on about prices past I raising quarter. I shifting broadly more just mean of pricing to of want kind guess, drive in way? an of you, some the pricing there's about thinking to some on Teams you thinking seems the with increase plans packaging it really or been potentially ask increase are good guess I that the other and I in the like packaging success how dynamics.

I demand. I before, consistent. Well, think mentioned as in so starts creating philosophy, And new our which value, pretty been adding response features to we has it by start with customer

paired lot and protection ransomware product is we a around products, asking So the a features available that of passwords, new for new the increase, Capture, right? So been price with and for. And have then Dropbox add Teams' subscribers. paid all security customers example, backup Capture, to was

value. another change it's So of or we change packaging. then prices And example creating

workflows portfolio, our a economics look customers share have And the them. we companies, a and of like other Company. you And obviously a for files, lot address sync around of their also SaaS of only and to and as DocSend, that store customers, opportunity lot not these big And a economics lot favorable bundling, workflows need Dropbox there's see success have broader right? at there. products but obviously is our Sign, bundling there of a when for great we As are are portfolio that been

in challenged we're to and say do think -- We here, terms how having how consolidate early how more resonate of spend will be we'll tools, or they effectively. are through also thinking they a doing customers I'd especially type about environment. as consolidate, suites solutions in all-in-one more So their thinking more manage innings bundling and

levers there's historically you. the do guess, on I Okay. in app of some more know the that I how like you Plus or focus think retention help trying of Plus Got of that drive from guess improve of That's the about side the trying the improve on and terms of conversion some helpful. kind rates trends. plan, been just in rates conversion? kind to drive of you kind further retention of I to those

the Yes, I and mean, basics. seen I just some core experiences improving streamlining we've can the to just start. good first, of returns

by that increase, speeds, by by nuts the we onboarding bolts, see removing see from experiences, retention we like just So there friction things improving that, photo improve. making more found seamless, sharing backup and engagement we our like

I levers. to there SKU. continue we with mean any of puts individual those So to and invest And be in then going kinds takes are

out about, think we also one customers think and let offering and do any them from We of little me for compelling SKUs most direct the the zoom a our with how about them. match bit

have higher think been so Plus shift from effect also or towards plans plans and And a driven like value driving things we've that like Professional mix our Teams more retention like network I that.

offering, the optimized far -- SKU of globally monetize it we're a then sure other I'd at there things from as versus and specific a pricing, making ensure But how making like number So we any we're within also say look individual decisions. we as making level are portfolio that. and levers churn

Joey comes with question Marincek next Securities. from Our JMP

You may proceed.

what security? more what additionally, here. happened what the the And customer it And that touch nice on security? you you about on Congrats relates steps can customers are have talk needs can taken? What phishing it GitHub -- results is ways to you help? maybe and What incident? then our as can Drew, Dropbox some

Sure. Great question.

standpoint, year, half XXX% so customer demand. new security them of small from almost businesses, evolve, landscape last up before, to attacks IT security the victims like don't those half on in And the I front, of demand have to see shared businesses, continues something have we are small the a dedicated ransomware X/X So right? the been as And resources. so

Dropbox So to more help to passwords fully we a being world up number from see revenue protection a for -- for a in options where to team. ransomware featured a big people back is backup your able where needs, in that endpoints opportunity something are all managing now working everywhere,

instrumental the features price of functionality launching a where We and big a demands, the been we've new areas see that's launched there's has changes, lot success security been features increase been the so part. that in security been that. those and And that resonating with new been customers we've to different response has and of of the packaging adoption to new have and

our accessible. things background, look targeted and accounts how but business be incident responded of you think production our we lot -- specifically a No material impact. quickly. sort was at be mentioned on of we've evidence We GitHub detail impact there of are be service customer and that posted content material were incidents will like employees. GitHub a we our that No Definitely of we We environments we payment the the these -- and phishing just the indication or resolved were in don't apps, was is minimal, overall will again, October. more handle code, there's the to Second, believe there fishing about compromised. we've customer compromised. not kinds campaign impact. issue We one information core transparent or or passwords believe kinds quickly blog, the

then give E. us And on And is your That's very update performing what's there? you expectations? to also helpful. an How Command can it relative ultimate vision

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Thank questions. you. for One moment

Matt from America. of comes Bank Bullock question next Our with

You proceed. may

Funk. I'm on for Mike

Just pricing tap wanted to triple increases. on the here

past digested So, weakness frame XXX, of adds from net in we that so, did monthly increases? And forward? see a the terms that see users by resell going can the adds now around driven have couple we this the plus versus that that trying that, decel in assume -- a of Was if pricing deceleration that the mobile. most net pricing we in in impact could I'm of to of average quarters. the XXX of decel

is Tim. take I'll Sure. This that.

our see drop from We new packaging expected So the about. in users users in Teams we the and the of paying net third changes paying wake added in pricing about an XXX,XXX we've been did quarter. that plans talking

softness see around particularly challenging also on We users, our did some environment. of the due some macro to Plus mobile

that I as does far would As the the that pricing from of out, change. larger stem portion breaking say the drop

on new paying don't As to to far change as pricing users. looking do We and an impact forward, have formally guide net packaging paying Teams users. our we expect

pricing positive change confident seeing the run. and However, we're we're encouraged this are that to long is by net the early ARR in a signals

Staffel question comes next Sachs. with Our Goldman Jacob from

may You proceed.

But has we'll future Family Jacob obviously, range. that given the you the it, of and plan of five that are is included $XXX innovations six a ARPU? acceleration due quick. It's in the ask are in have seats recently that portion the to released, And been all that. how thinking product about of seems $XXX, ARPU It around that around kind floating call like last, been here. I ARPU to six quarters, like or real

Tim. is This

did pricing about was end $X.XX which quarter mix our benefits continued third to driven ARPU this our and we shift premium initiative about a the was with $XXX, And up by year-over-year. at So SKUs. from

from nearly there that, was offsetting Now $X a headwind FX.

as the perspective, ARPU. will to headwind continue forward, plan. plan, a trends and to you year that hold. Family impact And current Family into There from a expect be that Again, tailwind looking then, to intensify, apart as to we factors of as plays -- don't formally the our XXXX, mentioned, some continue ARPU does, course, the to FX FX. assuming exiting FX may be So guide headwinds And mentioned. we rates you pricing

here, are our our is puts profitably ARR takes for is a why which optimizing total priority. base specific versus ARPU and growing there so And

you. the That Thank That concludes session. concludes Thank you our Q&A conference. participating. for

You may now disconnect.