Fourth Quarter Revenue of $504.1 Million, Up
13% Year-over-year
Net Cash Provided by Operating Activities of
$170.7 Million and Free Cash Flow of $158.4 Million
Surpasses $2 Billion in Total Annual Recurring
Revenue
Fiscal 2020 Revenue of $1.914 Billion, Up 15%
Year-over-year
Net Cash Provided by Operating Activities of
$570.8 Million and Free Cash Flow of $490.7 Million
Dropbox, Inc. (NASDAQ: DBX), today announced financial results
for its fourth quarter and fiscal year ended December 31, 2020.
“2020 was a transformational year for Dropbox and I’m proud of
the team for their resilience and focus in addressing our
customers’ evolving needs,” said Dropbox Co-founder and Chief
Executive Officer Drew Houston. “We ended the year with strong
margin expansion, free cash flow, and more than $2B in ARR as we
continued to make progress toward our long-term financial targets.
Going into 2021, we’re focused on executing against our strategy
and building essential products for the new era of distributed
work.”
Fourth Quarter Fiscal 2020 Results
- Total revenue was $504.1 million, an increase of 13% from the
same period last year. On a constant currency basis, year-over-year
growth would have been 13%.(1)
- Total ARR ended at $2.022 billion, an increase of $41.2 million
quarter-over-quarter and an increase of 11% year-over-year. On a
constant currency basis, year-over-year growth would have been
12%.(2)
- Paying users ended at 15.48 million, as compared to 14.31
million for the same period last year. Average revenue per paying
user was $130.17, as compared to $125.00 for the same period last
year.
- GAAP gross margin was 79.0%, as compared to 76.5% in the same
period last year. Non-GAAP gross margin was 80.1%, as compared to
77.6% in the same period last year.
- GAAP operating margin was (68.8%), as compared to (1.5%) in the
same period last year due to non-recurring impairment charges in
the fourth quarter of 2020. Non-GAAP operating margin was 25.3%, as
compared to 15.6% in the same period last year.
- GAAP net loss was ($345.8) million, as compared to ($6.6)
million in the same period last year due to non-recurring
impairment charges in the fourth quarter of 2020. Non-GAAP net
income was $117.9 million, as compared to $67.4 million in the same
period last year.
- Net cash provided by operating activities was $170.7 million,
as compared to $186.8 million in the same period last year. Free
cash flow was $158.4 million, as compared to $161.3 million in the
same period last year.
- GAAP basic and diluted net loss per share attributable to
common stockholders was ($0.84), as compared to ($0.02) in the same
period last year due to non-recurring impairment charges in the
fourth quarter of 2020. Non-GAAP diluted net income per share
attributable to common stockholders was $0.28, as compared to $0.16
in the same period last year.(3)
- Cash, cash equivalents and short-term investments ended at
$1.121 billion.
Full Year Fiscal 2020 Results
- Total revenue was $1.914 billion, an increase of 15% year over
year. On a constant currency basis, year-over-year growth would
have been 16%.(1)
- Average revenue per paying user was $128.50, as compared to
$123.07 in the prior year.
- GAAP gross margin was 78.3%, as compared to 75.3% in the prior
year. Non-GAAP gross margin was 79.4%, as compared to 76.4% in the
prior year.
- GAAP operating margin was (14.5%), as compared to (4.8%) in the
prior year due to non-recurring impairment charges in the fourth
quarter of 2020. Non-GAAP operating margin was 21.4%, as compared
to 12.3% in the prior year.
- GAAP net loss was ($256.3) million, as compared to ($52.70)
million in the prior year due to non-recurring impairment charges
in the fourth quarter of 2020. Non-GAAP net income was $391.1
million, as compared to $207.0 million in the prior year.
- Net cash provided by operating activities was $570.8 million,
as compared to $528.5 million in the prior year. Free cash flow was
$490.7 million as compared to $392.4 million in the prior
year.
- GAAP basic and diluted net loss per share attributable to
common stockholders was ($0.62), as compared to ($0.13) in the
prior year due to non-recurring impairment charges in the fourth
quarter of 2020. Non-GAAP diluted net income per share attributable
to common stockholders was $0.93, as compared to $0.50 in the prior
year.(4)
Material Impairment Charges
- In the fourth quarter of 2020, we announced a new Virtual First
work model pursuant to which remote work will become the primary
experience for all of our employees. As part of the Virtual First
strategy, we will retain a portion of our office space to be used
for team collaboration and a portion will be marketed for sublease.
We reassessed our real estate asset groups and estimated the fair
value of the office space to be subleased using current market
conditions. Where the carrying value of the individual asset groups
exceeded their fair value, an impairment charge was recognized for
the difference. As a result, we recorded total impairment charges
of $398.2 million in the fourth quarter of 2020 for right-of-use
and other lease related assets. We have excluded this impairment
charge from non-GAAP operating income and non-GAAP net income. We
continue to expect to incur additional charges related to certain
European leases over the next twelve months, which could range
between $0 and $50 million depending on the then current market and
economic conditions.
Share Repurchase Authorization
- On February 12, 2021, the Board of Directors authorized Dropbox
to repurchase an additional $1 billion of its Class A common stock.
The repurchase is expected to be executed, subject to general
business and market conditions and other investment opportunities,
through open market purchases or privately negotiated transactions,
including through Rule 10b5-1 plans.
(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 diluted net income per share attributable to common
stockholders is calculated based upon 416.1 million and 417.9
million diluted weighted-average shares of common stock for the
three months ended December 31, 2020 and 2019, respectively.
(4) Non-GAAP diluted net income per share attributable to common
stockholders is calculated based upon 419.3 million and 416.6
million diluted weighted-average shares of common stock for the
fiscal year ended December 31, 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
fourth quarter and fiscal 2020 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 February 25, 2021 at (855) 859-2056 from the
United States or (404) 537-3406 internationally with recording
access code 9929317.
Other Upcoming Events
- Tim Regan, Chief Financial Officer, will be presenting at The
JMP Securities Technology Conference on Tuesday, March 2nd.
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 700 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 strategy, our ability to extend
our platform by developing and offering new products or features
and our expectations regarding future impairment charges. 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 Dropbox 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
September 30, 2020. Additional information will be made available
in our annual report on Form 10-K for the year ended December 31,
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
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
Revenue
$
504.1
$
446.0
$
1,913.9
$
1,661.3
Cost of revenue(1)
105.8
104.9
414.6
411.0
Gross profit
398.3
341.1
1,499.3
1,250.3
Operating expenses(1):
Research and development
176.6
176.9
727.5
662.1
Sales and marketing
109.9
106.3
422.8
423.3
General and administrative
60.2
64.5
227.8
245.4
Impairment related to real estate
assets(2)
398.2
—
398.2
—
Total operating expenses
744.9
347.7
1,776.3
1,330.8
Loss from operations
(346.6)
(6.6)
(277.0)
(80.5)
Interest income (expense), net
(0.9)
2.6
1.7
12.5
Other income, net
2.0
1.6
25.1
16.0
Loss before income taxes
(345.5)
(2.4)
(250.2)
(52.0)
Benefit from (provision for) income
taxes
(0.3)
(4.2)
(6.1)
(0.7)
Net loss
$
(345.8)
$
(6.6)
$
(256.3)
$
(52.7)
Net loss per share attributable to common
stockholders
$
(0.84)
$
(0.02)
$
(0.62)
$
(0.13)
Weighted-average shares used in computing
net loss per share attributable to common stockholders
411.4
415.4
414.3
411.6
(1) Includes stock-based compensation expense as follows (in
millions):
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
Cost of revenue
$
4.5
$
4.0
$
17.1
$
15.8
Research and development
43.0
40.5
174.1
147.6
Sales and marketing
8.6
7.8
33.7
31.4
General and administrative(3)
13.3
17.0
36.6
66.4
(2) Includes impairment charges related to certain right-of-use
and other lease related assets as a result of our decision to shift
to a Virtual First work model.
(3) On March 19, 2020, one of our co-founders resigned as a
member of the board and as an officer of Dropbox, 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
December 31, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
314.9
$
551.3
Short-term investments
806.4
607.7
Trade and other receivables, net
43.4
36.7
Prepaid expenses and other current
assets
62.8
47.5
Total current assets
1,227.5
1,243.2
Property and equipment, net
338.7
445.3
Operating lease right-of-use asset
470.5
657.9
Intangible assets, net
33.5
47.4
Goodwill
236.9
234.5
Other assets
80.1
70.9
Total assets
$
2,387.2
$
2,699.2
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
18.7
$
40.7
Accrued and other current liabilities
156.7
161.9
Accrued compensation and benefits
113.6
101.4
Operating lease liability
88.7
79.9
Finance lease obligation
99.6
76.7
Deferred revenue
610.5
554.2
Total current liabilities
1,087.8
1,014.8
Operating lease liability, non-current
759.6
711.9
Finance lease obligation, non-current
171.6
138.2
Other non-current liabilities
34.4
25.9
Total liabilities
2,053.4
1,890.8
Stockholders’ equity:
Additional paid-in-capital
2,564.3
2,531.3
Accumulated deficit
(2,241.4)
(1,726.2)
Accumulated other comprehensive income
10.9
3.3
Total stockholders’ equity
333.8
808.4
Total liabilities and stockholders’
equity
$
2,387.2
$
2,699.2
Dropbox, Inc.
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
Cash flows from operating
activities
Net loss
$
(345.8)
$
(6.6)
$
(256.3)
$
(52.7)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
38.8
41.0
159.3
173.5
Stock-based compensation
69.4
69.3
261.5
261.2
Impairment related to real estate
assets
398.2
—
398.2
—
Net (gains) losses on equity
investments
—
1.2
(17.5)
—
Amortization of deferred commissions
6.9
4.8
24.4
17.5
Other
(1.7)
(3.8)
(2.6)
(16.6)
Changes in operating assets and
liabilities:
Trade and other receivables, net
7.4
2.0
(5.5)
(7.5)
Prepaid expenses and other current
assets
(15.4)
7.9
(39.4)
(18.2)
Other assets
6.6
19.4
62.0
61.2
Accounts payable
(11.0)
8.8
(19.9)
6.4
Accrued and other current liabilities
12.9
13.5
(9.8)
23.0
Accrued compensation and benefits
19.8
22.2
11.7
19.1
Deferred revenue
11.7
14.0
55.1
68.7
Other non-current liabilities
(30.3)
(16.8)
(72.9)
(62.4)
Tenant improvement allowance
reimbursement
3.2
9.9
22.5
55.3
Net cash provided by operating
activities
170.7
186.8
570.8
528.5
Cash flows from investing
activities
Capital expenditures
(12.3)
(25.5)
(80.1)
(136.1)
Purchase of intangible assets
—
—
(0.2)
(1.7)
Business combinations, net of cash
acquired
—
(2.3)
—
(173.9)
Purchases of short-term investments
(215.0)
(192.7)
(756.1)
(775.4)
Proceeds from sales of short-term
investments
15.8
115.1
198.8
456.1
Proceeds from maturities of short-term
investments
164.8
58.1
386.7
294.8
Other
4.7
6.1
17.3
16.2
Net cash used in investing
activities
(42.0)
(41.2)
(233.6)
(320.0)
Cash flows from financing
activities
Shares withheld related to net share
settlement
(25.7)
(18.3)
(92.2)
(85.4)
Proceeds from issuance of common stock,
net of repurchases
0.7
0.2
2.3
2.2
Principal payments on finance lease
obligations
(24.6)
(21.1)
(89.5)
(92.9)
Common stock repurchases
(220.2)
—
(397.5)
—
Other
—
(0.2)
(0.8)
(0.6)
Net cash used in financing
activities
(269.8)
(39.4)
(577.7)
(176.7)
Effect of exchange rate changes on cash
and cash equivalents
3.3
1.9
4.1
0.2
Change in cash and cash equivalents
(137.8)
108.1
(236.4)
32.0
Cash and cash equivalents - beginning
of period
452.7
443.2
551.3
519.3
Cash and cash equivalents - end of
period
$
314.9
$
551.3
$
314.9
$
551.3
Supplemental cash flow data:
Property and equipment acquired under
finance leases
$
39.9
$
37.1
$
145.8
$
144.1
Dropbox, Inc.
Three months ended December
31, 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
Impairment related to real
estate assets(1)
Non-GAAP
Cost of revenue
$
105.8
$
(4.5)
$
—
$
(0.9)
$
—
$
100.4
Cost of revenue margin
21.0
%
(0.9
%)
—
%
(0.2
%)
—
%
19.9
%
Gross profit
398.3
4.5
—
0.9
—
403.7
Gross margin
79.0
%
0.9
%
—
%
0.2
%
—
%
80.1
%
Research and development
176.6
(43.0)
(4.2)
—
—
129.4
Research and development margin
35.0
%
(8.5
%)
(0.8
%)
—
%
—
%
25.7
%
Sales and marketing
109.9
(8.6)
—
(1.5)
—
99.8
Sales and marketing margin
21.8
%
(1.7
%)
—
%
(0.3
%)
—
%
19.8
%
General and administrative
60.2
(13.3)
—
—
—
46.9
General and administrative margin
11.9
%
(2.6
%)
—
%
—
%
—
%
9.3
%
Impairment related to real estate
assets
398.2
—
—
—
(398.2)
—
Impairment related to real estate assets
margin
79.0
%
—
%
—
%
—
%
(79.0
%)
—
%
Income (loss) from operations
$
(346.6)
$
69.4
$
4.2
$
2.4
$
398.2
$
127.6
Operating margin
(68.8
%)
13.8
%
0.8
%
0.5
%
79.0
%
25.3
%
(1) Includes impairment charges related to certain right-of-use
and other lease related assets as a result of our decision to shift
to a Virtual First work model.
Dropbox, Inc.
Three months ended December
31, 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
$
104.9
$
(4.0)
$
—
$
(0.9)
$
100.0
Cost of revenue margin
23.5
%
(0.9
%)
—
%
(0.2
%)
22.4
%
Gross profit
341.1
4.0
—
0.9
346.0
Gross margin
76.5
%
0.9
%
—
%
0.2
%
77.6
%
Research and development
176.9
(40.5)
(4.1)
—
132.3
Research and development margin
39.7
%
(9.1
%)
(0.9
%)
—
%
29.7
%
Sales and marketing
106.3
(7.8)
—
(1.4)
97.1
Sales and marketing margin
23.8
%
(1.7
%)
—
%
(0.3
%)
21.8
%
General and administrative
64.5
(17.0)
(0.4)
—
47.1
General and administrative margin
14.5
%
(3.8
%)
(0.1
%)
—
%
10.6
%
Income (loss) from operations
$
(6.6)
$
69.3
$
4.5
$
2.3
$
69.5
Operating margin
(1.5
%)
15.5
%
1.0
%
0.5
%
15.6
%
Dropbox, Inc.
Twelve months ended December
31, 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
Impairment related to real
estate assets(1)
Non-GAAP
Cost of revenue
$
414.6
$
(17.1)
$
—
$
(3.9)
$
—
$
393.6
Cost of revenue margin
21.7
%
(0.9
%)
—
%
(0.2
%)
—
%
20.6
%
Gross profit
1,499.3
17.1
—
3.9
—
1,520.3
Gross margin
78.3
%
0.9
%
—
%
0.2
%
—
%
79.4
%
Research and development
727.5
(174.1)
(16.8)
—
—
536.6
Research and development margin
38.0
%
(9.1
%)
(0.9
%)
—
%
—
%
28.0
%
Sales and marketing
422.8
(33.7)
—
(5.6)
—
383.5
Sales and marketing margin
22.1
%
(1.8
%)
—
%
(0.3
%)
—
%
20.0
%
General and administrative
227.8
(36.6)
(0.1)
—
—
191.1
General and administrative margin
11.9
%
(1.9
%)
—
%
—
%
—
%
10.0
%
Impairment related to real estate
assets
398.2
—
—
—
(398.2)
—
Impairment related to real estate assets
margin
20.8
%
—
%
—
%
—
%
(20.8
%)
—
%
Income (loss) from operations
$
(277.0)
$
261.5
$
16.9
$
9.5
$
398.2
$
409.1
Operating margin
(14.5
%)
13.7
%
0.9
%
0.5
%
20.8
%
21.4
%
(1) Includes impairment charges related to certain right-of-use
and other lease related assets as a result of our decision to shift
to a Virtual First work model.
Dropbox, Inc.
Twelve months ended December
31, 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
$
411.0
$
(15.8)
$
—
$
(3.4)
$
391.8
Cost of revenue margin
24.7
%
(1.0
%)
—
%
(0.2
%)
23.6
%
Gross profit
1,250.3
15.8
—
3.4
1,269.5
Gross margin
75.3
%
1.0
%
—
%
0.2
%
76.4
%
Research and development
662.1
(147.6)
(14.5)
—
500.0
Research and development margin
39.9
%
(8.9
%)
(0.9
%)
—
%
30.1
%
Sales and marketing
423.3
(31.4)
—
(5.0)
386.9
Sales and marketing margin
25.5
%
(1.9
%)
—
%
(0.3
%)
23.3
%
General and administrative
245.4
(66.4)
(1.4)
—
177.6
General and administrative margin
14.8
%
(4.0
%)
(0.1
%)
—
%
10.7
%
Income (loss) from operations
$
(80.5)
$
261.2
$
15.9
$
8.4
$
205.0
Operating margin
(4.8
%)
15.7
%
1.0
%
0.5
%
12.3
%
Dropbox, Inc.
Three and twelve months ended
December 31, 2020 and 2019
Reconciliation of GAAP net
loss to Non-GAAP net income and Non-GAAP diluted net income per
share
(In millions, except per share
data)
(Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
GAAP net loss
$
(345.8)
$
(6.6)
$
(256.3)
$
(52.7)
Stock-based compensation
69.4
69.3
261.5
261.2
Acquisition-related and other expenses
4.2
4.5
16.9
15.9
Amortization of acquired intangible
assets
2.4
2.3
9.5
8.4
Impairment related to real estate
assets
398.2
—
398.2
—
Net (gains) losses on equity
investments
—
1.2
(17.5)
(4.5)
Income tax effects of non-GAAP
adjustments
(10.5)
(3.3)
(21.2)
(21.3)
Non-GAAP net income
$
117.9
$
67.4
$
391.1
$
207.0
Non-GAAP diluted net income per share
$
0.28
$
0.16
$
0.93
$
0.50
Weighted-average shares used to compute
Non-GAAP diluted net income per share
416.1
417.9
419.3
416.6
Dropbox, Inc.
Three and twelve months ended
December 31, 2020 and 2019
Reconciliation of free cash
flow and supplemental cash flow disclosure
(In millions, except for
percentages)
(Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
Free cash flow reconciliation:
Net cash provided by operating
activities
$
170.7
$
186.8
$
570.8
$
528.5
Less:
Capital expenditures
(12.3)
(25.5)
(80.1)
(136.1)
Free cash flow
$
158.4
$
161.3
$
490.7
$
392.4
Free cash flow margin
31.4
%
36.2
%
25.6
%
23.6
%
Supplemental disclosures:
Capital expenditures related to our
corporate headquarters, net of tenant improvement allowances(1)
$
2.0
$
13.2
$
25.9
$
64.3
Key employee holdback payments related to
the acquisition of HelloSign(2)
$
4.1
$
—
$
28.3
$
—
(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, other
acquisition-related expenses, which include third-party diligence
costs and expenses related to key employee holdback agreements, and
impairment charges related to real estate assets. Non-GAAP net
income also excludes net gains and losses on equity investments,
and includes the income tax effect of the aforementioned
adjustments. 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
fiscal year and quarter ended December 31, 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 mitigates 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/20210218005920/en/
Investors: Rob Bradley ir@dropbox.com or Media:
Tessa Chen press@dropbox.com
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