Dropbox (DBX) 3 Aug 232023 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen. Thank you for joining Dropbox Second Quarter 2023 Earnings Conference Call. All participants will be in a 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 website following this call.

the for to Dropbox. turn of Kapoor, now Relations Investor will call Karan over Head I Mr. Kapoor, go please ahead.

Thank you. earnings XXXX Dropbox's second Good afternoon, and call. welcome to quarter

remind today Before that guidance our fiscal regarding for and long-term and as such macroeconomic expectations like our our started, our we trends, financial to including our and get assets, as our regarding our free include our flow, and will profitability, industry year objectives remarks margin expectations, forward-looking revenue third statements I'd technology, and you XXXX forecasts operating environment. strategies, well cash as expectations demand, employees, business, products, growth, quarter users, the and

are our subject uncertainties a as risks and assumptions are undertake actual of that today, differ in statements and forward-looking results new or could obligation of Form to as and risks Factors based materially. the them also to that XX-Q update cause we on cause release These filed earnings today's are They to actual information quarterly no statements in result could with and future to report differ results our on these from set events. SEC. materially forth

measures, Generally financial is reconciliation investors.dropbox.com. non-GAAP not discuss accordance our are earnings with in provided also We'll GAAP and in our on Accepted at website prepared A Principles. results Accounting which of non-GAAP release and

Houston. the turn to Chief to Drew Dropbox's Officer, over like call now would I Drew? and Executive Co-Founder

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

then review QX Regan, the provide product from I'll share rest and and first the today will guidance highlights is And our year. Tim and quarter, of our Joining Chief our results for Officer. Financial me financial the business Tim

FormSwift report saw solid into across the some QX. again we we as progress and that our in recovery in by led quarter, to continued late guidance once revenue our within SKUs a outperformance pleased Individuals I'm all metrics, beating had QX

Teams our to our growth difficult customers still businesses. in macroenvironment navigating impact we that DocSend a are and and However, continues Sign pressures

detail, Before, the business to I quarter. through quickly remind walk highlights objectives more of outlined primary the you that I last quarter I want in from our

objective product around their help to working organize building is The lives. first experiences our AI-powered customers

a at I'm working of Dropbox proud our is in that accelerated company way and in I'll to with roadmap Dropbox design a mission AI, more discuss we've enlightened Our minute. and our progress which Dash here

focusing and is of videos. customers' Our to address and about evolve sync conversion, core share quarter. documents here workflows second we continuing the the I'll file Much and experience share progress and retention to on around driving during been foundational, more work objective has the specifically made the

So, backdrop, we're touch with working drive with these what objective knowledge first work. on objectives, of I'll on to starting experiences improve that building to product AI-powered our

took to call, initiatives AI drive and our our on discussed actions align our investment strategy with in better we to roadmap. last product against QX we As our important some long-term growth velocity

overnight, seemingly in can Dropbox answer around And an has learning now write language. years, and and of world in innovation technology witnessing and natural in our read many been questions where all and we're live us a AI language we large machine for unprecedented and talk machines generative While AI to investing wave models.

or why, do, a content, comes it was more to there That's lot personalized. see already working these billions by these of them company, scale. product we uniquely your questions lives. content, really that ourselves our and hundreds content of when While of our their chatbots And is to lot what AI of work. stored pieces Dropbox, content there's millions at positioned and generation questions need trusted questions your their service chatbot And answer to users, of on that as can it's help answer company's introduce as that you need can't excited are of or June, find on organize hundreds insights aren't with experiences that I clear AI personalized they first their to a customers customers they help AI-powered can provide because and own personalized at AI about in of build a

with in a connects Notion, and content many their to our use smarter Dash to of workers by major bar one powered is start pain Dropbox I'll apps that allows your place. With point connects common find it more searches XXX Dash is for much single others, is spend and from universal Dash. the everything search having between search our that learning, spread tools gets Dash Workspace, tools looking Microsoft apps. machine quickly and across Google And evolves product users that you it a time and AI-powered platforms a it. work like of browser, everything. navigate because for cloud Asana, Outlook, tabs and knowledge they too all work to more to

search universal the hard last build beyond about our talked functionality. E universal search. top features of been since of on that We've of rolled-out Dash our within We couple years have working additional acquisition and Command to over teams two

machine files is first the have playlists, URLs, layer organizational you browser. have gives an folders similar links organizes your which process for save the multiple manually share And links. smart shareable seamlessly And having The of to docs learning you, at to you suggestions Stacks, for all time. can links are Stacks uses and cloud from all collections your your in Stacks a for easily how to songs smart you offer saving that and so

recent single Dash's page, search, your calendars Stacks, which there, your integrating Dash within to is view universal to from lets dashboard meetings and work. get start that shortcuts The access you other start a is feature the

users So, if users most where important back restart close page to their they start the computer, get the work. up letting browser, left off, picks their

and we're closed retention currently seeing positive beta been rolling over healthy carefully and Early out is we've activation feedback more been users rates Dash in and has it summer. the rates. to

acquire to continue self-serve identify scaling users, we're based to our Teams managed and While iterating customer our working excited We're use with early force product sales as customers feedback. also Dash to we're on and Dash customers. on SMB the test can that leveraging go-to-market

having customers to click more Over such release results as files time, dig through through receive a specific users ask answer the I'm to a advanced or where and of content or forward of coming can cases, the to lots hands specific Answers, of piece Dash of Dash looking search in we many folders. about months. plan question use any more over getting instead

product advanced with Along QX, core our roadmap Dropbox launch the Dash, Dropbox also of we with AI. in

Dropbox previews eventually answer Dropbox entire with based for over file, within content their whether folders video. the or Teams summarize file XXX-page AI time users Users single Dropbox. their AI document can ask also on even to page leverage to and Now, Dropbox on we Professional plan and Dropbox a click, long a can a it's to user's a functionality the and to content apply question this

for we're productivity. from Dropbox have for discoverability how we this encouraged Dropbox the And the excited AI increase who AI users files. their by increased as to more customers' We're engagement ultimately functionality tried users, see can early for new

also not in-house new And continue to as Meta's experiences Last We'll capabilities generation partner for we're month, doing this well were Dropbox product next Dropbox. this support evaluate on announced And as Llama AI AI-powered of the X we're we alone. a the we other launch. featured Ventures to building within performance start-ups. global as

we stay than wave, responsibly to AI protecting on privacy forefront is continuing this important the AI our As of ever. use new customers' while more

teams guide we we in come. our AI as our published the which products AI June, principles, So in and features years to develop

objective, second number workflows documents of in file and seamlessly In users. individuals evolving higher with areas which our is share user videos. we made QX, activity existing Dropbox experience to around improve a sync work our top-of-funnel drive and to Moving for address the to progress customers' churn and

deliver to driving workflow of also our a beyond solution, integrating number We businesses our continued a multiproduct company-wide FSS. effort

I'll touch improved First, with churn individuals. on

As in our become past several users, challenging, we and an as customers. uptick we more Mobile saw calls churn discussed our in macroenvironment the notably, amongst Plus individual the has

mobile recent changes, increased of some system operating was app to transparency instability. which due Some around driven also areas of and subscriptions, was this some by

our and in instrumentation churn helped issue, seen and declines latter mobile over team significant made tooling in detect sequential our the the reliability the had reverse we which enhancing address that issues, to address To prior progress quarters.

easier We Individuals to to also it made their make up-to-date, our wallet for improvements some also which processing payment customers to optimizations in modest keep some churn. drove

uploads. In led This the that and has addition in for upload we speeds file upload improvement for position one number customers, files. internal regained to to we our these performance testing behind-the-scenes upgrades success large the our the of and UX showed have improved for experience

common most camera our that improvement to of the iOS an our up upload speed to of made increase also size We uploads XX%. the on by speed

for to in drive of quickly work customers. and deliver the team's better proud performance reliability areas and experience our ultimately I'm here addressing a

our important We also Professional in it's users remain necessary as Teams trial, indicators and in to on as well of pro Teams our which ultimately admin increase concerted efforts plans a focus surface an top-of-funnel, while driving in are and resulting starting trial expansion. also in through top-of-funnel. effort conversions QX, more improvements made to we And in effort. Teams leading driving these for we engagement to made on starts, a focused And increase this targeted more team conversion

new learn for admins the our video to a for set In to Over and about homepage their document also and time, new workflows, QX, and product. Dropbox will our a capabilities, launched serve homepage easily we higher-value this team introduce activation features. point jumping-off as including AI-powered up

our to core to teams. have serve documents small efforts I've and on it challenges can our continued businesses we a experience fee videos this the around our own seen and how increased made focus about contraction investments number our for into integrating within their seamless before larger environment among customers. encouraged who Dropbox I'm businesses, we've and in During professionals Teams in the where we've talked better customers, more see of make workflows faced

FSS, integrated have about was two QX, standalone efforts but out provide had DocSend, see Pro-FSS for user Previously, In including such a first tightly and frictionless quarter integration bundle, as for we'll our a and to I'm eSign editing to as offerings, our time and customers our share our for began strategy. an sold the Sign, disjointed the next experiences to professional of users. the deeper customers excited PDF products we integrated. multi-product as rolling experience more we more bundle some weren't

long-term And FormSwift, in see while April. users our year, rates opportunity, our in which Dropbox as our GA in-house driving tool, a to also we last such businesses which just across pleased late acquired standalone Replay, editing I'm and attach momentum video into as multi-product launched some

business FormSwift's for reminder, businesses FormSwift second and driven and of a retention an We library creation straight outperformance Sign provides quarter, As the small improved account online for increased templates through individuals. in by Google and in. saw forms

and While further in see deeper from tax we to some within performance year. integration year continuing rebranding to engine earlier seasonality this make FormSwift's leverage the progress and FormSwift Dropbox marketing FormSwift we're towards of benefits around planning, opportunities

has our solid add-on And base its since a Replay of Replay start we it to premium suite greater multi-product of advance of more look our multi-product as quarter in drive beta to I shown scores subscribing we couple a see adoption already update. opportunity creative professionals. across high months satisfaction audience. forward some a our offerings, in seeing launched the part towards video and We're user customer and remain next to sharing workflows, first customers our to We as wider

some delivered AI-powered In solid we customers. product experiences introduced to quarter our exciting and closing, a

the focused AI-driven and core while our in Dropbox engineering more capabilities. experience innovating improving While our product value teams attaching workflows strengthen remain remains to product on foundation act. uncertain, our the next on focused recognize macroenvironment working with closely we within for I we're across and

been sharing upcoming in-person to to hope And you we've up to be close. in more at enhancements coming sharing York. many and in-person our more the of customer forward we customer event you We'll conference details and be first the I'm New what our building our pandemic, see October look more in It product see excited major weeks, in will since soon. of I of for

that, with I'll pass on And to it Tim.

Thank you, Drew.

an XXXX. targets provide as I'll and walk XXXX, as and our update on well for through QX financial QX some financial highlights for for an outlook

second our quarter start Let's with results.

guidance in our QX year-over-year million $XXX range $XXX increased revenue Total $XXX to beating of X.X% million. million, to

across mentioned. On by $XX year-over-year. provided a grew basis, as Foreign exchange rates to approximate The growth. our FormSwift our an well to Drew revenue upside saw currency that headwind plan outperformance guidance the revenue we from Individuals million as was constant improvement XX.X% driven

Total improvements ARR the driven grew driven price Teams $XX XX.X% a year-over-year, billion. for our basis, by FormSwift retention ARR the Individuals increase. ARR grew our On quarter constant grew within X.X% of total and primarily $X.X a sequentially, for year-over-year by million plans. currency

quarter the an users paying as driven added net some by uptick sequentially, compared with more users modest in improvement exited approximately We the a as and XXX,XXX targeted in improvement prior from to million our new as trend XX in top-of-funnel churn users well Individuals QX, from efforts. professional quarters, paying

increase, and per our Average plans. our $X year-over-year, over adoption user $XXX.XX, flat the FormSwift, premium the plan. pricing largely FX paying by offset to first to shift driven increased from of revenue QX of benefit the was continued XXXX which initiatives the pricing compared headwinds for a by quarter by was is ARPU and we as Family Teams saw

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

non-GAAP of aforementioned effects the tax Our includes the income also income net adjustments.

of we Moving model. of de-cost taking result strategy, to have steps our estate our real as portfolio virtual-first real to our a estate transition where to been a

next a market nominal This to of small charge due years. estate our we of $X to assumptions the portfolio remain real over sublease incurred Overall, a we a and outside impairment consistent, executed quarter, couple our estate real San we that million regarding Francisco. anticipate continue softer of

We to of seek our available San also the Francisco space within headquarters. and continue subleases buyouts consider remaining actively

compared quarter quarter of the for With the second with as that, to approximately the let's XXXX. was margin continue P&L. Gross roughly second XX% quarter, flat

spend as margin our points, operating roughly basis We our margin year-over-year. our XXX was in Operating guidance April, delayed XX%, force to approximately project revenue reduction XXX due marketing by outperformance. up well in following over beat basis mainly points and as

up million, $XXX were expenses year-over-year. Operating about X%

see FormSwift. While was this as QX April, well in marketing supporting talent announced of a late offset our as AI savings quarter by increases spend we continued in partial reduction force our in cost for our merit and did from annual investment efforts, in

up on outstanding, shares for $X.XX XXXX. $X.XX weighted million and XX% income second income Net second quarter based million the operating interest diluted shares EPS weighted diluted outstanding second of was million, share per the was average share XXX growth Diluted versus by driven higher $XXX per based XXX XXXX, for from quarter on average the income. of up quarter

the quarter, our XXXX, in In data of Moving ended severance also short-term resulted we on cash mostly and in quarter of force. million in $XXX from equipment. flow cash $XX finance quarterly $X investments in our quarter, to for expenditures quarter. billion. in the flow. quarter reduction balance by down million center million to million to the $X.X QX of $XXX was leases in to the free second XXXX. $XXX our cash million with the $XX $XXX payments related cash of from million Capital operations flow were This during million and compared We driven a Cash second added

approximately to our $XXX we $XXX In the share $X.X Let's against repurchase the to we turn billion under repurchasing end quarter, continued spending authorization. that X by had shares, was At approximately current activity. second execute approved remaining million QX, of in the million. authorization XXXX the million

greater an in shortly, Board $X.X detail that repurchase share announce discuss our will I billion as Additionally, program. to has pleased additional we're today authorized

guidance, some the also behind to quarter and on context this for guidance share guidance. I now provide an I'd year like update our full the provide XXXX our will thinking where to third

million expect $XXX be range of revenue we expect basis, of XXXX, million. the quarter constant million the On $XXX For in to to be to $XXX million. currency the $XXX range in revenue a third we revenue to of

to assuming the year-over-year are of headwind quarter, a We $X basis growth. a currency approximately to in point million XXX translates headwind third which

approximately basis be to margin from headwind operating a This non-GAAP roughly and FormSwift. includes FX the expect We point XX%. XXX

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

full billion by the previous revenue are On guidance $X.XXX to approximately from impact currency $X.XXX in the of currency We FormSwift $X.XXX XXXX a raising to range by $XX we points to of For or closer of range a a $X.XXX billion the XXXX, estimate to $XX.X to FX up as-reported to million now of billion prior basis, minimal raising XXX our billion our points midpoint billion. up million up from $X.XXX billion. $XX.X prior million midpoint are growth. year approximately our growth, headwind revenue expect billion billion, constant $X.XXX the we from $X.XXX approximately contribute at growth QX. to XXX headwind year basis of $X.XXX basis basis of to We forecast point of to with full XXX

to prior margin gross up from expect We guidance to XX.X% approximately XX%. of be our XX%,

expect be XX%. from XX% an FX XX%, XXX FormSwift. to from inclusive This guidance up headwind our approximately of prior operating is approximately point margin We non-GAAP to of and basis

severance Command acquisition-related guidance this million tax our a million maintaining force; This in $XXX related headwind for XXXX to outflows are $XX consistent result deal free includes reduction $XX and $XX million cash payments guidance, We approximately of in to legislation. our outflows R&D of of flow the with instalments and one-time DocSend million an of our of E; as $XXX approximately approximately initial consideration for cash cash holdbacks includes million.

revised some is these this infrastructure upgrading our we're our address year, some are videos and of guidance. uploading additions guidance. To reflected usage extra of platform. adding to as storage users and existing we levels high-density years, capacity In our files, related which we capital and have and images to recent increasing seen to our expenditures in As such our prior finance leases, increasing needs,

up our our to now We approximately range $XX of to our X.X% CapEx CapEx we're guidance in $X be expect finance cash in million leases increasing now to additions $XX to of X%. And cash million million from expect approximately revenue, XXXX. prior by

weighted to outstanding XXX Finally, to shares. our of shares, range million shares the average million XXX we XXXX previous up from to expect million diluted be of guidance in million range XXX XXX

To some this context on share guidance. additional

trends Individuals we related across our driven DocSend are for and our revenue, both outperformance on by well as These plans. to positive revenue plans QX in our macro Sign. from improved outweighing XXXX, as As headwinds and FormSwift Teams guidance trends raising are

Additionally, will Teams price and the as benefit which of half this is in a reminder, lapping of year, second we our the be our reflected guidance. in increase

As prior operating margins, to mostly are guidance, compared our our to the guidance by outperformance. operating basis approximately margin midpoint we XX raising revenue up of points XX%, as our related to driven

we skilled some of a initiatives, invest from our force savings product expect in talent towards in particular, and growth As reminder, the in to AI hiring development. early-stage long-term reduction

of expect operating year. the We spend project margins our as also the into would QX that mark marketing from high a And some the and result, have shifted represent for QX XXXX. we second half

flow, to million are guidance full our maintaining of free year we related million. As cash $XXX free range cash $XXX to flow

the and infrastructure are needed raising While of revenue CapEx cash maintaining range capacity due to our our operating free support we we needs. recent higher to our flow are guidance, levels margin

our and levels as and a marketing Additionally, of later our impact foresee investments, year of reminder, the billings we a headcount reduced stemming restructuring. a as from of result in still potential

our the share free share annual This authorized program additional to with total to remaining pleased billion we portion return to committed as capacity an end announce authorization. flow plans to existing million of brings and repurchases. count remain approximately share we of billion. significant repurchase $X.X share share QX, a has our repurchases. shareholders to $XXX We that Board approximately share our in And current cash our form to are of in buyback related our $X.X allocating strategy, billion to our of consistent on the capital had As the under $X.X repurchases,

lower accordingly. adjusted reminder, performance, share shares share buyback As at And our is points. year our price have our a result of structured full a we buy to price program as guidance count more recent

by related as and margins margins $X cash XX% gross free to delivering XXXX. targets of financial of operating our Lastly, annual to XX%, flow long-term to XX%, of billion XX% of

our see, can from are year, or you driven margin in efficiencies at operating As savings levels our we this data center by force. and these reduction infrastructure above in

expect these not we offering specific are this time, ranges of remain more the at guidance high we XXXX While at to next end year.

our with we recent what including to we our quarter, workforce expect AI. towards initiatives, of Dropbox reduction shared Consistent savings Dash last invest Dropbox from and long-term portion our a

As are their investment of we to and appropriate customer audience this products response, we users momentum. to assess a gain of our these the on therefore, range clarity the out we And support roll broader levels will at time. maintaining

billion free of annual flow related are As we target to $X our this maintaining cash by our time. at XXXX,

to we our as we exceeded and after in headwinds came second quarter, the targets. revenue such which guidance from continued While to face light significant initially margin R&D developed operating long-term legislation, tax our we exogenous factors

further keeping we investment funding to In ensure potential the for intend achieving long-term We appropriately billion $X short, are in I target. our we're also that on just growth. where mentioned, remain we that focused our mind

have still work we to do. However,

towards excited to while to AI-powered In more customers. business, we're our foundational to products new to conclusion, that we rollout improvements continue carefully drive core investing

uncertain, long-term for and customers, shareholders. our the operating remains macro-environment driving will on the we While our business focused stay value efficiently

that, now it the operator to Q&A. for over With I'll turn

Capital Thank our Rishi you. first RBC Instructions] with [Operator of line Markets. And from Jaluria coming the question

open. is line Your

solve for of and strategy guys, you wanted if into your area Answers had maybe, around a Wonderful. as could Thanks, two. so first my Dash go questions. particularly you had bit start, little I to mentioned much you taking Dash Can years, coming you yourself of center new has But I so an Drew, a positioning sounds a deeper that been about trying And think, you're brand maybe at adoption you use And like driving I've how to follow-up. then, seems lot of the it it as I especially for, the a way the just the gravity the importantly idea later. these use solving a for for kind more the to kind little customers. cases? quick Dropbox in big got us, nowhere. into given for you of the bit this of of of problem out to a maybe talk and about think of learnings least customers want some out or pain to important to search get your past? of of do point isn't case the some know solutions, I new

Great. Yeah, thanks, Rishi.

So, I Dropbox it then, have a we're files become I I devices the mean it were browser. stuff I your all about scattered cloud is and -- tabs files think content. on experienced organizing organizing your this I to really excited to one which for and you and with, -- And about stuff all I you go from in today it. but the operating across is everywhere. similar really to find problem we scattered Dash, the your was see like there, scattered a problems, And my everything, is -- as my back those problem, XXX is know I XXX all started started, origin across document the natural my back these and systems, day looking desktop different files it's your is can't evolution think when -- And a the were you ago, we do, at within or think you these all know customer company, including these

broken, doing for different cloud very plain organizing we stuff, that a search on of and organizing search challenges see of customer I this layer a with each where that with instead hidden and and kind collections all better could with this go there's have apps started, we and persistence that's there which the and their the for it is right? challenges content, opportunity XX we cloud your XX% have file in that like we no got sight ways now But that. a missing that are of layer need where organizing reminiscent -- there's really organizing in search as use. many as have and in pain is missing There's that used like box, links, concept Dropbox XX, points. is of to is we of platforms one search universal of another than So We content missing people there sync in the kind in your boxes no layer see the about way greater things they much have and share. that is a

a see as it we So, unmet greater huge -- much TAM bigger and need. much

and paradigm search to working -- this AI -- entirely. the direction then of interact to adds ability -- been which the change in layer long top time, is of a in generative it, of another Now as we've on building and then that, the for models but natural language emergence large on language, so and to

ChatGPT, amazing answer, what lot can do, used people -- what it. questions that of -- we've about but you there's pretty as these if all think generative it's as a can't So, AI it

what product can't ChatGPT things that or it presentation have not answer or like that, not ChatGPT, did on can't your it's year you or because what's where's passport last last launch like year's a like question -- So, personalized, information. if tell that, number you my because I it's things connected really to

experience thing allows chatbot addition So, launched our opportunity users even at this lot of we provide same doing important the AI -- to large AI, introduced ask because in a already of to to questions provide have of and which a in Dash most more Answers also we with personalized content. kind we're have June, us large Dash, you millions of broadly summarize -- documents videos, audience your information all who launch, their or personalized Dropbox for we in big where we we're that natural for AI language, Dropbox see with entrusted

It's excited look So, more on launch. gets having this. better in forward getting and we're about about to people's to it enclosed continuing week. beta the right now, hands. we're And very excited every We're iterate experience, and

as think that I positioning... And for

ahead. go Yes,

different center gravity. what's -- what's other I a a Yeah, we or say, I are so was think just do how like become going couple of to positioning aspects there

for I our have it's Dash. content. billion natural users at because workers are their scale, trust and customers you a many have evolution in around think Dropbox. customers solution -- our And that think we it's a to natural market none cases, We in look share existing already but when cloud to have and the distribution, file challenges adopt and X we of we most relationship files pretty their important organizing have sync them with then putting of then knowledge

this So, opportunity many is we make it what of is significant now. to a our TAM multiples think

didn't technical very large as it's collections. far build with experience, thing evolution. a sort really a is positioning, search. but it's build the focused blocks, I'd language for natural that where Dash, different the of last, can of I think product We model incorporated to say lessons do right? piece that's but missing so the And I'd past emergence one lot from a AI. have then say we've this smart then like, we time efforts, We of time, of building the do a we've long And And deal. products is again, And wanted big

years acquisition Command working also and ingredient ago. for page -- a with we've much start of is customers, few was and a we an a have a we But iterative been work which of that E, key we've more approach We where had did our Dash concept. --

So, from rest more to the we're excited iterate people's of lessons and the our and in and Dash really getting about portfolio we hands. continue experiences past on draw

a Awesome. Very guess No, thorough. thanks. follow-up. quick I just

there more upgrades? Are Is monetization give certain therefore, gross that better monetizing behind know to As monetization without understand that as understand want Is better higher-tier this to you and prices around to it's you we something (ph) to modules I around numbers discreetly? consider philosophy value, strategy. to too it. really to put I more retention? Just going around use wall] incentive to you're [gate your having about new just driving and that customers this your might get I about think generative use the drive maybe SKUs AI, But and monetization. early want these

Sure.

mean, a I pretty of be So, is think there's about similar. think and going of the I applications way portfolio -- I it to AI

machine sort machine large different applications even learning could learning of You and a there's models. lot replace before of language of

stakes some we explicit table then that case, plans, already product, of to true AI. And that's add-ons. to only higher-tier just are the are be And some some And and for features are in expect available extent. some the

which So, part an Dropbox sync -- customers. product of to available and is now. Dropbox only paid an file It's alpha add-on the is share AI, to which right is the

continuing to it. iterate on we're So,

broadly add-on companies, paid there's like at -- then, having or Dropbox look integrating from an it capabilities. of when functionality with see for lot And plans, products different like in AI AI a you other more or SKUs approaches Microsoft at Dash higher-tier you

packaging design value certainly too little a we're it's we're the making doing, amount thinking our we're for it and making value about to that that of we capture sure create. and as sure but us most we So soon the pricing right that a what for share and exactly best to both portfolio then creating users

And Tim. Rishi, this real brief, is

our bringing market driving this quality Dash year, a product and customer on adoption. is So, particularly to focus on

expect it a said, contribution will from start take Dash. So we we several before that that quarters to revenue seeing

Tim. Thanks, All That's helpful. right. Drew and really Wonderful.

next our you. line And Murphy the coming JPMorgan. Mark Thank with question of from

line is open. Your

context provide of you how or awareness platform? some please up-sell us question. terms Tim, the cross-sell Dropbox year, survey Great. Sonak some in X% driving of the you with at conference is additional for at And making Thank for capabilities a on is the about, around I our opportunities? Could this that spreading TMC that Murphy on existing be JPMorgan. you might think, full indicating taking customer for Dropbox of the customer Sign. Kolar color incremental shared This of progress awareness Mark

Sure. Good questions.

of So, we exactly survey a but our have recently for of been to where know we working e-signature, run your point, out those capabilities, roll users users towards we we're bundles less did excited where And roughly while, as soon. offer than XX% want our such half it. a to to

So, some service testing to out such we're on on to our legal rolling sync will And a we've customer these DocSend working we're share foundational where and identity. include version an then, and on professional a as solve single we addressed more have a early users problems of And for our file Sign do bundle positive. that share, conversion that terms does customers. And unified soon. are where have opportunity and items for now signals we bundles Teams these of

So, excited that dimension. we are on this making progress

fairly Great. relative the of Tim. if you macro I'm you trended just incremental Thank curious macro, terms Just kind is consistent that how the there's in you, of quick macro or can or on say to if any we And QX would say worsening? of the sequentially? color then pockets to that provide maybe is, a have improvement follow-up has

Sure.

the So, price those have DocSend Sign our headwinds. macro consistent couple today, we one are themselves. say we've as layoffs pressure as quarters. continuing observed what down hand, Teams the macro-related from trends to sell continue far sensitivity customers, roughly with I'd had And past elevated On are of then to face and over what particularly we're see that and seeing also

some the hand, other though due actions are seeing that particularly a largely sense have result in around we individual guidance rollout trends. of that trends retention, our change processes, is factors continued to improvement is as and seeing opposed as on positive our On in macro latest Tap where onboarding trends taken streamline this dynamics. our to Google we we're our up sign One in these And of also other a SKUs,

the on results. and congrats you, Thank Great.

Thank you.

question next with our And line Enders you. the of Steve from Thank coming Citi.

open. is line Your

hiring environment I of hiring push kind And, guess, to year? employee the side through the and with the we start rest base help want taking I of for and incremental into finding Thanks here. talent there's it questions on, those on should kind today seems expertise here. hires how the a of model like for how Great. are to view there? AI hire those last I guess, guess the I diversify you now the bigger quarter like layering the

to can success of a big I like talk course lot having been of environment and advantage. other outside things more and be these is pretty model about like virtual-first fertile start. finding more announced a helpful hire factors to things have it Sure. able it's hubs And flexibly another major We're of the to -- broadly. being hiring. able And, Dash tech find we our

And of also shifts then, AI folks teams from but for lot skill been we'll hiring you And of to sets. so, your that. have engineers lot or pick about generalist out mobile leadership mobile then when the cloud. building or example or a we've favorite web think great out these a before AI the engineers started the A as or blend both other to experienced industry, of best internet engineers

aware our the of company. also lot up interest of of enthusiasm, a So, -- in training our AI skilled. making turning all There's we and engineers were all and

So, good progress. both we'll and we're seeing do

year, and just and And longer-term by project model points maybe we force this our operating reduction And a half. from margin the guidance of some AI and spend we outperformance. so do XX%, setting into our also we're expect hiring talent marketing from midpoint to skilled shifted in approximately savings perspective, including for of product have initiatives, guidance still to And the this in towards revenue to XX second up XX%, development. then prior growth invest some from early-stage of that's basis the be XX% the driven and

for a QX that will we margins as operating be the expect year. result, So our do the high mark

that continued maybe guess, drive what quarter. mean, on guess, be most on the firstly, good coming like are that? updated from, And, guess that's the about is a, questions helping I the least then, secondarily, how versus what the implications your is from the two And coming expectations? see guess, for And rest here helpful. performance here. on I outperformance I that. above outperformance to is the expectations? the the in it looks I your thinking That's on that is the FormSwift, is Okay. of I business executing I top-line, at it guess, FormSwift to guide, of right way secondly,

Sure.

Teams constant So, better say midpoint up year. outperformance full as for range headwinds customers Individuals. as I'd in macro mostly know, we're trends. our the the an QX well by we trends our Sign and of not that's as assuming raising weighing on well currency the in driven as we're about $XX.X continue improvement both by some as Conversely, to million those DocSend we see guidance where

and Dropbox seems brand FormSwift seeing retention be so We're certainly did for the in and outperform with enhancements, their a side, the implemented to Now better-than-expected association also quarter the the where our on again, team UI product helping. row, pleased second expectations then some their with progress.

questions. Okay. Perfect. for Thanks taking the

America. Funk from coming Thank you. the Michael question And of of Bank next line our with

is line Your open.

more previously Yes, the in dig customer the retention sequentially implemented improvement guys. thank I question during mentioned think new some you bit churn you initiatives. for To on that quarter, it. a really the you appreciate I

increase that, So, last love around and year. much also to get the more how as churn here we some expectation from price for more then from anniversary color improve could

I Tim. to jump Drew, start. can is This in. free feel sure. Yeah,

on our our macro Teams rate quarter saw we pressure Individuals. roughly So, consistent ongoing some with with churn last customers, with remained offset improvement by

customers, themselves. churn through that see have amongst heightened to gone continue layoffs particularly Teams our We those

where improving our They also churn delays. for positive product on Now the their on and keep upload making easier to speeds, upload to to alerts help side, the see the processing stabilize we card information individual payment plans. date. reducing use, did introduced worked credit users up team

in our teens. churn rate low So, does remain overall, the

Okay. know it? ARPU the And then, we ARPU about retention impact should from quarter-over-quarter, retention? about we how from the on the should think efforts, think flat but impact how it's I on

that through Maybe walk in Sure. the quarter. the ARPU to saw dynamics we just some of

a say about ARPU was few a was up driven $X, that basis, And different on by at I'd landing year-over-year factors. $XXX. about So,

is our plan. about FX of a that's from Family the as to well partially our as by higher-priced through, offset plans, in This The contribution. acquisition pricing a continues which FormSwift, shift So, growth about to contribution. initiative, that flow benefits $X $X and a was continued

repurchase, and to really share my count on billion, the to XX% Any of Great about of $X.X new about the kind so then then, commentary program? on math, billion the And total; repurchase. about And adjustment Okay. the the $X.X see of it's signaling should of the think year-end pace we repurchase cap. share how though? quickly the incremental

Sure. Good question.

count lower of points. our our guidance our of accordingly. to buyback flow our sense reducing count future continue where that share plan, continuation the share to of adjusted that. buy portion to is to repurchase significant expect performance, best the free as at a program of do course, recent gives expectations. shares And of share share new program. repurchases allocate share our on We just reflects price XXbX-X the our as more result our of a is our a basis It continue We year commitment intention an So, structured updated guidance we've authorization price part annual full shares to cash do, our with ongoing to And of repurchase count.

Great. Thank you all for the time.

from you. the of And Brent Thill question coming with line our next Thank Jefferies.

Your line open. is

Thill. This for Brent my Eylon my is Liani for question. on Two Thanks end. Hello. things on taking

other that First, the out core assets? and what of business between rate do do you think sustainable about growth the the break how you and FSS

terms guide back Or in be full half more you year? if greater And raised can just the macro factors through of of full secondly, you given the great. the for that the the the you went the than talk year into sense that are quarter, a that optimism by guide, Thanks. of in factoring in year beat would

we're say philosophy, being consistent our guidance on approach. I'd with historical Maybe Sure.

quarter, view is and guidance. in same not assuming our largely an as macro economy it last the improvement was the Our

QX that took those Again, will from the trends improve same action are we we We in our SKUs. continue, trends saw direct assuming including positive to plans. individual

of also all somewhat our into the potential our billings guidance. levels and reduction and SKUs. sluggish of of reduced headcount investment And considerations force are do have demand factored in given mindful by we within Of could where marketing, this course, in our is impact these on this our offset Teams remain

not beyond macro time, this at 'XX your our Now, revenue as path any far earlier close as long-term providing thinking, part on guidance as keeping eye on a evolving your environment certainly of navigate the forward. our we question

growth gain of also and our customer such we we very and after contribution on Dash we we're a Bundles, better fall, ultimately have signals, are of profitability experiences this product Dropbox launching balance new focused idea a later several will as initial pursue the driving where financial as We targets. revenue healthy where

you. Thank

Sure.

Thank our the of from Sachs. you. next Staffel And Jacob Goldman line with coming question

line open. is Your

Thanks from question. Hi, for couple this A is Rangan. taking the questions me. Jacob Staffel of for Kash on

term, near in be So, you a has channel on Dropbox additionally, And to that those are product with hiring DocSend FSS AI, has the how expanded year-over-year doing how Dropbox quota XQ Dash, the relative fared touch recently. on portfolio see Can on? specifically founded offerings core that thinking the how self-service the then, might you basis? in and Replay. carrying you We touch was on Dropbox And through on maybe reps? a can sequential and offering

Sure.

So, you are we kind of on. the really as touched broadening portfolio and the pleased with We've making been progress.

the mean, customers around a Dropbox. content needs saw our bunch we FSS, had I in workflow of but we started So, with that

document so -- and and And and that's with workflows increasingly, Replay doing HelloSign, with us and into like video seen DocSend we're Capture. how expand things more with you've FormSwift why that's

could for a use initially use are together, for As targeted we've we Dropbox seen folks adopt that everything build those tape and kind found cases we then product case. -- something duct more of adopted

with and into seeing customers work organize fix your and have intelligence the all as, content experience. you're search are shifted workflows then bring the organization, to And and and to as files then cloud browser, from our a tools desktop as apps and many cloud new need problems

have motivation made. behind that's things doing, like, and Dash And as excited much -- I the I about very think we've AI. we're don't the it. as the beyond comments potential, add to far Dropbox from already kind those But the products how of probably especially for are So

a I about a new do a to a I continue lot go-to-market outbound best products. scale And reps. there's of the both and reach once And certain quota much reminder, our about the wouldn't get scaling those ready they grow we're in to from self-serve. standpoint of go-to-market how of threshold. our have we carrying get how thinking is thinking be we're motion to managed And business [indiscernible] to a a -- as say accounts hiring and those of those grow help targeted of then, we shift mean, XX% worlds

And think that trends you then mirrors sensitivity, been briefly, the self-serve, think on. I price Individuals have Teams seeing performance that about, we've improvement where we and touched it retention largely we're I talking in saw on side, I the the some asked side, about Drew on of the

you Thank Awesome. so much.

no have concludes today's this call. I we Ladies and this And see Thank questions further conference time. at you. gentlemen,

have and You wonderful day. this time, may disconnect a at