Revenue of $487.4 Million, Up 14%
Year-over-year
Net Cash Provided by Operating Activities of
$200.9 Million and Free Cash Flow of $187.0 Million
GAAP and Non-GAAP Operating Income of $30.0
Million and $112.2 Million, Up 261% and 100% Year-over-year
Dropbox, Inc. (NASDAQ: DBX), today announced financial results
for its third fiscal quarter ended September 30, 2020.
"In Q3, we saw momentum across the business with strong
operating income, profitability, and free cash flow," said Dropbox
Co-founder and Chief Executive Officer Drew Houston. "Our margin
expansion demonstrates the strength of our business model and
execution against our long-term targets. We believe the opportunity
to redesign work has never been bigger, and now, as a Virtual First
company, we'll truly live our mission as we build better products
for distributed teams."
Third Quarter Fiscal 2020 Results
- Total revenue was $487.4 million, an increase of 14% from the
same period last year. On a constant currency basis, year-over-year
growth would have been 14%.(1)
- Total ARR ended at $1.981 billion, an increase of $49.8 million
quarter-over-quarter and an increase of 12% year-over-year. On a
constant currency basis, year-over-year growth would have been
13%.(2)
- Paying users ended at 15.25 million, as compared to 14.00
million for the same period last year. Average revenue per paying
user was $128.03, as compared to $123.15 for the same period last
year.
- GAAP gross margin was 78.8%, as compared to 75.5% in the same
period last year. Non-GAAP gross margin was 80.0%, as compared to
76.7% in the same period last year.
- GAAP operating margin was 6.2%, as compared to (4.3)% in the
same period last year. Non-GAAP operating margin was 23.0%, as
compared to 13.1% in the same period last year.
- GAAP net income (loss) was $32.7 million, as compared to
($17.0) million in the same period last year. Non-GAAP net income
was $110.2 million, as compared to $55.9 million in the same period
last year.
- Net cash provided by operating activities was $200.9 million,
as compared to $149.7 million in the same period last year. Free
cash flow was $187.0 million, as compared to $102.5 million in the
same period last year.
- GAAP net income (loss) per share attributable to common
stockholders was $0.08, as compared to ($0.04) in the same period
last year. Non-GAAP net income per share attributable to common
stockholders was $0.26, as compared to $0.13 in the same period
last year.(3)
- Cash, cash equivalents and short-term investments ended at
$1.226 billion.
(1) We calculate constant currency revenue growth rates by
applying the prior period weighted average exchange rates to
current period results.
(2) We calculate total annual recurring revenue ("Total ARR") as
the number of users who have active paid licenses for access to our
platform as of the end of the period, multiplied by their
annualized subscription price to our platform. We adjust our
exchange rates used to calculate Total ARR on an annual basis, at
the beginning of each fiscal year. We calculate constant currency
Total ARR growth rates by applying the current period rate to prior
period results.
(3) Non-GAAP net income per share attributable to common
stockholders is calculated based upon 419.9 million and 418.7
million diluted weighted-average shares of common stock for the
three months ended September 30, 2020 and 2019, respectively.
Financial Outlook
Dropbox will provide forward-looking guidance in connection with
this quarterly earnings announcement on its conference call,
webcast, and on its investor relations website at http://investors.dropbox.com.
Conference Call Information
Dropbox plans to host a conference call today to review its
third quarter financial results and to discuss its financial
outlook. This call is scheduled to begin at 2:00 p.m. PT / 5:00
p.m. ET and can be accessed by dialing (877) 300-7844 from the
United States or (786) 815-8440 internationally with reference to
the company name and conference title, and a live webcast and
replay of the conference call can be accessed from the Dropbox
investor relations website at http://investors.dropbox.com. Following the
completion of the call, a telephonic replay will be available
through 11:59 PM ET on November 12, 2020 at (855) 859-2056 from the
United States or (404) 537-3406 internationally with recording
access code 5575556.
Other Upcoming Events
- Tim Regan, Chief Financial Officer, will be presenting at the
RBC Capital Markets Technology, Internet, Media and
Telecommunications Conference on Tuesday, November 17th.
- Tim Regan, Chief Financial Officer, will be presenting at the
NASDAQ Virtual Investor Conference on Tuesday, December 1st.
During these events, a live webcast will be accessible from the
Dropbox investor relations website at
http://investors.dropbox.com.
Following the event, a replay will be made available at the same
location.
About Dropbox
Dropbox is the one place to keep life organized and keep work
moving. With more than 600 million registered users across 180
countries, we're on a mission to design a more enlightened way of
working. Dropbox is headquartered in San Francisco, CA, and has
offices around the world. For more information on our mission and
products, visit http://dropbox.com.
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to the most
directly comparable financial results as determined in accordance
with GAAP are included at the end of this press release following
the accompanying financial data. For a description of these
non-GAAP financial measures, including the reasons management uses
each measure, please see the section of the tables titled "About
Non-GAAP Financial Measures."
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
including, among other things, our expectations regarding
anticipated market opportunities and our ability to utilize
insights from our Virtual First work model to improve or develop
additional products and services. Words such as "believe," "may,"
"will," "estimate," "continue," "anticipate," "intend," "expect,"
"plans," and similar expressions are intended to identify
forward-looking statements. Dropbox has based these forward-looking
statements largely on its current expectations and projections
about future events and financial trends that the Company believes
may affect its business, financial condition, and results of
operations. These forward-looking statements speak only as of the
date of this press release and are subject to risks, uncertainties,
and assumptions including, but not limited to: (i) our ability to
realize anticipated benefits to our business from our shift to a
Virtual First work model as well as impacts to our financial
results and business operations as a result of this shift, (ii)
impacts to our financial results, business operations and the
business of our customers, suppliers, partners and the economy as a
result of the COVID-19 pandemic, and related public health
measures, as well as the potential for a more permanent global
shift to remote work, (iii) our ability to retain and upgrade
paying users, in particular paying users impacted by the COVID-19
pandemic, and increase our recurring revenue; (iv) our ability to
attract new users or convert registered users to paying users, in
particular prospective paying users financially impacted by the
COVID-19 pandemic; (v) our future financial performance, including
trends in revenue, costs of revenue, gross profit or gross margin,
operating expenses, paying users, and free cash flow; (vi) our
history of net losses and our ability to achieve or maintain
profitability; (vii) our liability for any unauthorized access to
our data or our users’ content, including through privacy and data
security breaches; (viii) significant disruption of service on our
platform or loss of content, particularly from any potential
disruptions in the supply chain for hardware necessary to offer our
services that may result from the COVID-19 pandemic; (ix) any
decline in demand for our platform or for content collaboration
solutions in general; (x) changes in the interoperability of our
platform across devices, operating systems, and third-party
applications that we do not control; (xi) competition in our
markets; (xii) our ability to respond to rapid technological
changes, extend our platform, develop new features or products, or
gain market acceptance for such new features or products,
particularly in light of potential disruptions to the productivity
of our employees that may result from our shift to a Virtual First
work model; (xiii) our ability to manage our growth or plan for
future growth; (xiv) our acquisition of other businesses and the
potential of such acquisitions to require significant management
attention, disrupt our business, or dilute stockholder value; (xv)
our ability to attract and retain key personnel and highly
qualified personnel; (xvi) our capital allocation plans with
respect to our stock repurchase program and other investments; and
(xvii) the dual class structure of our common stock and its effect
of concentrating voting control with certain stockholders who held
our capital stock prior to the completion of our initial public
offering. Further information on risks that could affect Dropbox’s
results is included in our filings with the Securities and Exchange
Commission ("SEC"), including our Form 10-Q for the quarter ended
June 30, 2020. Additional information will be made available in our
quarterly report on Form 10-Q for the quarter ended September 30,
2020 and other reports that we may file with the SEC from time to
time, which could cause actual results to vary from expectations.
If the risks materialize or assumptions prove incorrect, actual
results could differ materially from the results implied by these
forward-looking statements. Dropbox assumes no obligation to, and
does not currently intend to, update any such forward-looking
statements after the date of this release, except as required by
applicable law.
Dropbox, Inc.
Condensed Consolidated
Statements of Operations
(In millions, except per share
data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Revenue
$
487.4
$
428.2
$
1,409.8
$
1,215.3
Cost of revenue(1)
103.2
104.8
308.8
306.1
Gross profit
384.2
323.4
1,101.0
909.2
Operating expenses(1):
Research and development
183.3
172.8
550.9
485.2
Sales and marketing
105.8
108.2
312.9
317.0
General and administrative
65.1
61.0
167.6
180.9
Total operating expenses
354.2
342.0
1,031.4
983.1
Income (loss) from operations
30.0
(18.6
)
69.6
(73.9
)
Interest income, net
0.1
3.0
2.6
9.9
Other income, net
3.5
0.2
23.1
14.4
Income (loss) before income taxes
33.6
(15.4
)
95.3
(49.6
)
Benefit from (provision for) income
taxes
(0.9
)
(1.6
)
(5.8
)
3.5
Net income (loss)
$
32.7
$
(17.0
)
$
89.5
$
(46.1
)
Net income (loss) per share attributable
to common stockholders
$
0.08
$
(0.04
)
$
0.21
$
(0.11
)
Weighted-average shares used in computing
net income (loss) per share attributable to common stockholders
419.9
414.4
419.9
412.4
(1) Includes stock-based compensation expense as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Cost of revenue
$
4.6
$
4.1
$
12.6
$
11.8
Research and development
46.9
38.9
131.1
107.1
Sales and marketing
8.9
7.7
25.1
23.6
General and administrative(2)
15.3
17.5
23.3
49.4
(2) On March 19, 2020, one of the Company's co-founders resigned
as a member of the board and as an officer of the Company,
resulting in the reversal of $23.8 million in stock-based
compensation expense. Of the total amount reversed, $21.5 million
related to expense recognized prior to December 31, 2019.
Dropbox, Inc.
Condensed Consolidated Balance
Sheets
(In millions)
(Unaudited)
As of
September 30, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
452.7
$
551.3
Short-term investments
773.8
607.7
Trade and other receivables, net
49.6
36.7
Prepaid expenses and other current
assets
54.1
47.5
Total current assets
1,330.2
1,243.2
Property and equipment, net
488.4
445.3
Operating lease right-of-use asset
705.9
657.9
Intangible assets, net
37.0
47.4
Goodwill
234.3
234.5
Other assets
66.5
70.9
Total assets
$
2,862.3
$
2,699.2
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
29.5
$
40.7
Accrued and other current liabilities
129.4
161.9
Accrued compensation and benefits
93.3
101.4
Operating lease liability
89.7
79.9
Finance lease obligation
86.4
76.7
Deferred revenue
598.6
554.2
Total current liabilities
1,026.9
1,014.8
Operating lease liability, non-current
777.3
711.9
Finance lease obligation, non-current
169.4
138.2
Other non-current liabilities
37.4
25.9
Total liabilities
2,011.0
1,890.8
Stockholders’ equity:
Additional paid-in-capital
2,608.8
2,531.3
Accumulated deficit
(1,764.3
)
(1,726.2
)
Accumulated other comprehensive income
6.8
3.3
Total stockholders’ equity
851.3
808.4
Total liabilities and stockholders’
equity
$
2,862.3
$
2,699.2
Dropbox, Inc.
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Cash flow from operating
activities
Net income (loss)
$
32.7
$
(17.0
)
$
89.5
$
(46.1
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
40.9
40.6
120.5
132.5
Stock-based compensation
75.7
68.2
192.1
191.9
Net (gains) losses on equity
investments
—
1.7
(17.5
)
(5.7
)
Amortization of deferred commissions
6.7
4.6
17.5
12.7
Other
(0.8
)
(0.7
)
(0.9
)
(8.3
)
Changes in operating assets and
liabilities:
Trade and other receivables, net
(4.1
)
(1.0
)
(12.9
)
(9.5
)
Prepaid expenses and other current
assets
(1.6
)
(7.6
)
(24.0
)
(26.1
)
Other assets
22.3
15.6
55.4
41.8
Accounts payable
3.9
(0.6
)
(8.9
)
(2.4
)
Accrued and other current liabilities
2.0
(1.0
)
(22.7
)
9.5
Accrued compensation and benefits
22.2
21.7
(8.1
)
(3.1
)
Deferred revenue
14.7
26.7
43.4
54.7
Other non-current liabilities
(16.4
)
(18.4
)
(42.6
)
(45.6
)
Tenant improvement allowance
reimbursement
2.7
16.9
19.3
45.4
Net cash provided by operating
activities
200.9
149.7
400.1
341.7
Cash flow from investing
activities
Capital expenditures
(13.9
)
(47.2
)
(67.8
)
(110.6
)
Business combinations, net of cash
acquired
—
—
—
(171.6
)
Purchases of short-term investments
(111.9
)
(193.0
)
(541.1
)
(582.7
)
Proceeds from sales of short-term
investments
37.7
160.0
183.0
341.0
Proceeds from maturities of short-term
investments
83.0
75.1
221.9
236.7
Other
3.1
(3.2
)
12.4
8.4
Net cash used in investing
activities
(2.0
)
(8.3
)
(191.6
)
(278.8
)
Cash flow from financing
activities
Shares repurchased for tax withholdings on
release of restricted stock units and awards
(22.5
)
(19.0
)
(66.5
)
(67.1
)
Proceeds from issuance of common stock,
net of repurchases
0.1
—
1.6
2.0
Principal payments on finance lease
obligations
(21.5
)
(21.2
)
(64.9
)
(71.8
)
Common stock repurchases
(37.5
)
—
(177.3
)
—
Other
(0.3
)
0.3
(0.8
)
(0.4
)
Net cash used in financing
activities
(81.7
)
(39.9
)
(307.9
)
(137.3
)
Effect of exchange rate changes on cash
and cash equivalents
1.4
(1.9
)
0.8
(1.7
)
Change in cash and cash equivalents
118.6
99.6
(98.6
)
(76.1
)
Cash and cash equivalents - beginning
of period
334.1
343.6
551.3
519.3
Cash and cash equivalents - end of
period
$
452.7
$
443.2
$
452.7
$
443.2
Supplemental cash flow data:
Property and equipment acquired under
finance leases
$
41.5
$
31.6
$
105.9
$
107.0
Dropbox, Inc.
Three months ended September
30, 2020
Reconciliation of GAAP to
Non-GAAP results
(In millions, except for
percentages, which may not foot due to rounding)
(Unaudited)
GAAP
Stock-based
compensation
Acquisition-related
and other
expenses
Intangibles
amortization
Non-GAAP
Cost of revenue
$
103.2
$
(4.6
)
$
—
$
(1.0
)
$
97.6
Cost of revenue margin
21.2
%
(0.9
)
%
—
%
(0.2
)
%
20.0
%
Gross profit
384.2
4.6
—
1.0
389.8
Gross margin
78.8
%
0.9
%
—
%
0.2
%
80.0
%
Research and development
183.3
(46.9
)
(4.1
)
—
132.3
Research and development margin
37.6
%
(9.6
)
%
(0.8
)
%
—
%
27.1
%
Sales and marketing
105.8
(8.9
)
—
(1.4
)
95.5
Sales and marketing margin
21.7
%
(1.8
)
%
—
%
(0.3
)
%
19.6
%
General and administrative
65.1
(15.3
)
—
—
49.8
General and administrative margin
13.4
%
(3.1
)
%
—
%
—
%
10.2
%
Income from operations
$
30.0
$
75.7
$
4.1
$
2.4
$
112.2
Operating margin
6.2
%
15.5
%
0.8
%
0.5
%
23.0
%
Dropbox, Inc.
Three months ended September
30, 2019
Reconciliation of GAAP to
Non-GAAP results
(In millions, except for
percentages, which may not foot due to rounding)
(Unaudited)
GAAP
Stock-based
compensation
Acquisition-related
and other
expenses
Intangibles
amortization
Non-GAAP
Cost of revenue
$
104.8
$
(4.1
)
$
—
$
(1.0
)
$
99.7
Cost of revenue margin
24.5
%
(1.0
)
%
—
%
(0.2
)
%
23.3
%
Gross profit
323.4
4.1
—
1.0
328.5
Gross margin
75.5
%
1.0
%
—
%
0.2
%
76.7
%
Research and development
172.8
(38.9
)
(4.0
)
—
129.9
Research and development margin
40.4
%
(9.2
)
%
(0.9
)
%
—
%
30.3
%
Sales and marketing
108.2
(7.7
)
—
(1.4
)
99.1
Sales and marketing margin
25.3
%
(1.9
)
%
—
%
(0.3
)
%
23.1
%
General and administrative
61.0
(17.5
)
—
—
43.5
General and administrative margin
14.2
%
(4.0
)
%
—
%
—
%
10.2
%
Income (loss) from operations
$
(18.6
)
$
68.2
$
4.0
$
2.4
$
56.0
Operating margin
(4.3
)
%
16.0
%
0.9
%
0.5
%
13.1
%
Dropbox, Inc.
Nine months ended September
30, 2020
Reconciliation of GAAP to
Non-GAAP results
(In millions, except for
percentages, which may not foot due to rounding)
(Unaudited)
GAAP
Stock-based
compensation
Acquisition-related
and other expenses
Intangibles
amortization
Non-GAAP
Cost of revenue
$
308.8
$
(12.6
)
$
—
$
(3.0
)
$
293.2
Cost of revenue margin
21.9
%
(0.9
)
%
—
%
(0.2
)
%
20.8
%
Gross profit
1,101.0
12.6
—
3.0
1,116.6
Gross margin
78.1
%
0.9
%
—
%
0.2
%
79.2
%
Research and development
550.9
(131.1
)
(12.6
)
—
407.2
Research and development margin
39.1
%
(9.3
)
%
(0.9
)
%
—
%
28.9
%
Sales and marketing
312.9
(25.1
)
—
(4.1
)
283.7
Sales and marketing margin
22.2
%
(1.8
)
%
—
%
(0.3
)
%
20.1
%
General and administrative
167.6
(23.3
)
(0.1
)
—
144.2
General and administrative margin
11.9
%
(1.7
)
%
—
%
—
%
10.2
%
Income from operations
$
69.6
$
192.1
$
12.7
$
7.1
$
281.5
Operating margin
4.9
%
13.6
%
0.9
%
0.5
%
20.0
%
Dropbox, Inc.
Nine months ended September
30, 2019
Reconciliation of GAAP to
Non-GAAP results
(In millions, except for
percentages, which may not foot due to rounding)
(Unaudited)
GAAP
Stock-based
compensation
Acquisition-related
and other expenses
Intangibles
amortization
Non-GAAP
Cost of revenue
$
306.1
$
(11.8
)
$
—
$
(2.5
)
$
291.8
Cost of revenue margin
25.2
%
(1.0
)
%
—
%
(0.2
)
%
24.0
%
Gross profit
909.2
11.8
—
2.5
923.5
Gross margin
74.8
%
1.0
%
—
%
0.2
%
76.0
%
Research and development
485.2
(107.1
)
(10.4
)
—
367.7
Research and development margin
39.9
%
(8.7
)
%
(0.9
)
%
—
%
30.3
%
Sales and marketing
317.0
(23.6
)
—
(3.6
)
289.8
Sales and marketing margin
26.1
%
(2.0
)
%
—
%
(0.3
)
%
23.8
%
General and administrative
180.9
(49.4
)
(1.0
)
—
130.5
General and administrative margin
14.9
%
(4.1
)
%
(0.1
)
%
—
%
10.7
%
Income (loss) from operations
$
(73.9
)
$
191.9
$
11.4
$
6.1
$
135.5
Operating margin
(6.1
)
%
15.9
%
0.9
%
0.4
%
11.1
%
Dropbox, Inc.
Three and nine months ended
September 30, 2020 and 2019
Reconciliation of GAAP net
income (loss) to Non-GAAP net income and Non-GAAP diluted net
income per share
(In millions, except per share
data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
GAAP net income (loss)
$
32.7
$
(17.0
)
$
89.5
$
(46.1
)
Stock-based compensation
75.7
68.2
192.1
191.9
Acquisition-related and other expenses
4.1
4.0
12.7
11.4
Amortization of acquired intangible
assets
2.4
2.4
7.1
6.1
Net (gains) losses on equity
investments
—
1.7
(17.5
)
(5.7
)
Income tax effects of non-GAAP
adjustments
(4.7
)
(3.4
)
(10.7
)
(18.0
)
Non-GAAP net income
$
110.2
$
55.9
$
273.2
$
139.6
Non-GAAP diluted net income per share
$
0.26
$
0.13
$
0.65
$
0.33
Weighted-average shares used to compute
Non-GAAP diluted net income per share
419.9
418.7
419.9
418.3
Dropbox, Inc.
Three and nine months ended
September 30, 2020 and 2019
Reconciliation of free cash
flow and supplemental cash flow disclosure
(In millions, except for
percentages)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Free cash flow reconciliation:
Net cash provided by operating
activities
$
200.9
$
149.7
$
400.1
$
341.7
Less:
Capital expenditures
(13.9
)
(47.2
)
(67.8
)
(110.6
)
Free cash flow
$
187.0
$
102.5
$
332.3
$
231.1
Free cash flow margin
38.4
%
23.9
%
23.6
%
19.0
%
Supplemental disclosures:
Capital expenditures related to our
corporate headquarters, net
of tenant improvement allowances(1)
$
3.0
$
29.2
$
23.9
$
51.1
Key employee holdback payments related to
the
acquisition of HelloSign(2)
$
4.0
$
—
$
24.2
$
—
(1) Capital expenditures include cash outflows related to the
build-out of our corporate headquarters in San Francisco, CA. Net
cash provided by operating activities include tenant improvement
allowances related to our corporate headquarters, and represents
cash received from our landlord to partially offset this build-out.
These amounts are presented net in the table above.
(2) As part of our acquisition of HelloSign in 2019, we have
employee holdback agreements with key HelloSign personnel
consisting of $48.5 million in cash payments subject to on-going
employee service. The related expenses are recognized within
research and development expenses over the required service period
of three years. The payments began in the first quarter of 2020,
and will be paid evenly in quarterly installments over the
remaining required service period.
About Non-GAAP Financial Measures
To provide investors and others with additional information
regarding Dropbox's results, we have disclosed the following
non-GAAP financial measures: revenue growth and Total ARR growth
excluding foreign exchange effect, which we refer to as on a
constant currency basis, non-GAAP cost of revenue, non-GAAP gross
profit, non-GAAP operating expenses (including research and
development, sales and marketing and general and administrative),
non-GAAP income from operations, non-GAAP net income, free cash
flow ("FCF") and non-GAAP diluted net income per share. Dropbox has
provided a reconciliation of each non-GAAP financial measure used
in this earnings release to the most directly comparable GAAP
financial measure. Non-GAAP cost of revenue, gross profit,
operating expenses, income from operations, and net income differ
from GAAP in that they exclude stock-based compensation expense,
amortization of acquired intangible assets, and other
acquisition-related expenses, which include third-party diligence
costs and expenses related to key employee holdback agreements.
Non-GAAP net income also excludes net gains and losses on equity
investments, and includes the income tax effect of the
aforementioned adjustments, including the tax effects of acquired
intangible assets. FCF differs from GAAP net cash provided by
operating activities in that it treats capital expenditures as a
reduction to net cash provided by operating activities. Free cash
flow margin is calculated as FCF divided by revenue. Non-GAAP
diluted net income per share differs from GAAP diluted net loss per
share in that the numerator utilizes the non-GAAP net income as
described above, and the weighted average shares used in the
computation include certain shares that are excluded from the GAAP
diluted net loss per share calculation because their effect would
have been anti-dilutive. For periods that we are in a GAAP net
income position, the weighted average shares used in the
computation are the same as the shares used in our non-GAAP diluted
net income per share computation. In order to present revenue on a
constant currency basis for the quarter ended September 30, 2020,
Dropbox calculates constant currency revenue growth rates by
applying the prior period weighted average exchange rates to
current period results. Dropbox calculates constant currency Total
ARR growth rates by applying the current period rate to prior
period results. Dropbox presents constant currency information to
provide a framework for assessing how our underlying business
performed excluding the effect of foreign currency rate
fluctuations.
Dropbox's management uses these non-GAAP financial measures to
understand and compare operating results across accounting periods,
for internal budgeting and forecasting purposes, for short and
long-term operating plans, and to evaluate Dropbox's financial
performance and the ability to generate cash from operations.
Management believes these non-GAAP financial measures reflect
Dropbox's ongoing business in a manner that allows for meaningful
period-to-period comparisons and analysis of trends in Dropbox's
business, as they exclude expenses that are not reflective of
ongoing operating results. Management also believes that these
non-GAAP financial measures provide useful supplemental information
to investors and others in understanding and evaluating Dropbox's
operating results and future prospects in the same manner as
management and in comparing financial results across accounting
periods and to those of peer companies.
We believe that the non-GAAP financial measures, non-GAAP cost
of revenue, gross profit, operating expenses, income from
operations, net income, and diluted net income per share are
meaningful to investors because they help identify underlying
trends in our business that could otherwise be masked by the effect
of the expenses that we exclude.
We believe that FCF is an indicator of our liquidity over the
long term, and provides useful information regarding cash provided
by operating activities and cash used for investments in property
and equipment required to maintain and grow our business. FCF is
presented for supplemental informational purposes only and should
not be considered a substitute for financial information presented
in accordance with GAAP. FCF has limitations as an analytical tool,
and it should not be considered in isolation or as a substitute for
analysis of other GAAP financial measures, such as net cash
provided by operating activities. Some of the limitations of FCF
are that FCF does not reflect our future contractual commitments,
excludes investments made to acquire assets under finance leases,
includes capital expenditures related to our corporate
headquarters, and may be calculated differently by other companies
in our industry, limiting its usefulness as a comparative
measure.
The use of non-GAAP cost of revenue, gross profit, operating
expenses, income from operations, net income, free cash flow, and
diluted net income per share measures has certain limitations as
they do not reflect all items of income, expense, and cash
expenditures, as applicable, that affect Dropbox's operations.
Dropbox compensates for these limitations by reconciling the
non-GAAP financial measures to the most comparable GAAP financial
measures. Additionally, we have provided supplemental disclosures
in our reconciliation of net cash provided by operating activities
to free cash flow to include capital expenditures related to our
corporate headquarters, net of tenant improvement allowances and
key employee holdback payments related to the acquisition of
HelloSign. These non-GAAP financial measures should be considered
in addition to, not as a substitute for or in isolation from,
measures prepared in accordance with GAAP. Further, these non-GAAP
measures may differ from the non-GAAP information used by other
companies, including peer companies, and therefore comparability
may be limited. Management encourages investors and others to
review Dropbox's financial information in its entirety and not rely
on a single financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105005993/en/
Investors: Rob Bradley ir@dropbox.com or Media:
Tessa Chen press@dropbox.com
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