Fourth Quarter Revenue of $446.0 Million, Up
19% Year-over-year Net Cash Provided by Operating Activities of
$186.8 Million and Free Cash Flow of $161.3 Million
Fiscal 2019 Revenue of $1.661 Billion, Up 19%
Year-over-year Net Cash Provided by Operating Activities of $528.5
Million and Free Cash Flow of $392.4 Million
The Board of Directors authorized Dropbox to
repurchase up to $600 Million of its Class A shares
Dropbox, Inc. (NASDAQ: DBX), the world's first smart workspace,
today announced financial results for its fourth quarter and fiscal
year ended December 31, 2019.
“Our strong Q4 marked the end of an exciting year for Dropbox as
we launched our vision for the smart workspace,” said Dropbox
Co-founder and Chief Executive Officer Drew Houston. “We closed the
year with more than $1.6 billion in revenue, over 450,000 Dropbox
business teams, and millions of people using our new foreground app
that keeps Dropbox at the center of our users' workflows. Moving
into 2020, I’m confident in the team we have on board and the
opportunity ahead.”
Fourth Quarter Fiscal 2019 Results
- Total revenue was $446.0 million, an increase of 19% from the
same period last year. On a constant currency basis, year-over-year
growth would have been 20%.(1)
- Annual recurring revenue ended at $1.820 billion, an increase
of 19% from the end of the prior year.(2)
- Paying users ended at 14.3 million, as compared to 12.7 million
as of the end of the prior year. Average revenue per paying user
was $125.00, as compared to $119.61 for the same period last
year.
- GAAP gross margin was 76.5%, as compared to 74.9% in the same
period last year. Non-GAAP gross margin was 77.6%, as compared to
75.7% in the same period last year.
- GAAP operating margin was (1.5%), as compared to (3.2%) in the
same period last year. Non-GAAP operating margin was 15.6%, as
compared to 11.0% in the same period last year.
- GAAP net loss was ($6.6) million, as compared to ($9.5) million
in the same period last year. Non-GAAP net income was $67.4
million, as compared to $42.3 million in the same period last
year.
- Net cash provided by operating activities was $186.8 million,
as compared to $123.7 million in the same period last year. Free
cash flow was $161.3 million, as compared to $88.3 million in the
same period last year.
- GAAP basic and diluted net loss per share was ($0.02), as
compared to ($0.02) in the same period last year. Non-GAAP diluted
net income per share was $0.16, as compared to $0.10 in the same
period last year.(3)
- Cash, cash equivalents and short-term investments were $1.159
billion at the end of the fourth quarter of 2019, as compared to
$1.089 billion at the end of the fourth quarter of last year.
Full Year Fiscal 2019 Results
- Total revenue was $1.661 billion, an increase of 19% year over
year. On a constant currency basis, year-over-year growth would
have been 21%.(1)
- Average revenue per paying user was $123.07, as compared to
$117.64 in the prior year.
- GAAP gross margin was 75.3%, as compared to 71.6% in the prior
year. Non-GAAP gross margin was 76.4%, as compared to 75.1% in the
prior year.
- GAAP operating margin was (4.8%), as compared to (35.5%) in the
prior year. Non-GAAP operating margin was 12.3%, as compared to
12.2% in the prior year.
- GAAP net loss was ($52.7) million, as compared to ($484.9)
million in the prior year. Non-GAAP net income was $207.0 million,
as compared to $166.2 million in the prior year.
- Net cash provided by operating activities was $528.5 million,
as compared to $425.4 million in the prior year. Free cash flow was
$392.4 million as compared to $362.4 million in the prior
year.
- GAAP basic and diluted net loss per share was ($0.13), as
compared to ($1.35) in the prior year. Non-GAAP diluted net income
per share was $0.50, as compared to $0.41 in the prior
year.(4)
Share Repurchase Authorization
- On February 19, 2020, the Board of Directors authorized the
company to repurchase up to $600 million of its Class A shares. 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.
(3) Non-GAAP diluted net income (loss) per share is calculated
based upon 417.9 million and 416.3 million diluted weighted-average
shares of common stock for the three months ended December 31, 2019
and 2018, respectively.
(4) Non-GAAP diluted net income (loss) per share is calculated
based upon 416.6 million and 409.8 million diluted weighted-average
shares of common stock for the fiscal year ended December 31, 2019
and 2018, respectively.
Financial Outlook
Dropbox will provide forward-looking guidance in connection with
this quarterly earnings announcement on our conference call,
webcast, and on our investor relations website at
investors.dropbox.com.
Conference Call Information
Dropbox plans to host a conference call today to review its
fourth quarter and fiscal 2019 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 investors.dropbox.com. Following the
completion of the call, a telephonic replay will be available
through 11:59 PM Eastern Time on February 27, 2020 at (855)
859-2056 from the United States or (404) 537-3406 internationally
with recording access code 3975989.
Other Upcoming Events
Drew Houston, Co-founder and Chief Executive Officer, and Ajay
Vashee, Chief Financial Officer, will be presenting at the JMP
Securities 2020 Technology Conference in San Francisco, CA, on
Tuesday, February 25, 2020 at 2:30 p.m. PT. At that time, 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 world's first smart workspace that helps people
and teams focus on the work that matters. 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 12 offices around the
world. For more information on our mission and products, visit
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, statements regarding Dropbox's
strategies and new products and features, future financial and
operational performance as well as trends in our business, the
demand for and engagement with our platform and product features,
and the benefits from new product experiences and acquisitions.
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 retain and upgrade paying users and
increase our recurring revenue; (ii) our ability to attract new
users or convert registered users to paying users; (iii) our
revenue growth rate; (iv) our history of net losses and our ability
to achieve or maintain profitability; (v) our liability for any
unauthorized access to our data or our users’ content, including
through privacy and data security breaches; (vi) significant
disruption of service on our platform or loss of content; (vii) any
decline in demand for our platform or for content collaboration
solutions in general; (viii) changes in the interoperability of our
platform across devices, operating systems, and third-party
applications that we do not control; (ix) competition in our
markets; (x) 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; (xi) our
ability to manage our growth or plan for future growth; (xii) our
acquisition of other businesses and the potential of such
acquisitions to require significant management attention, disrupt
our business, or dilute stockholder value; and (xiii) 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, 2019. Additional information will be made available in our
annual report on Form 10-K and other future 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.
Consolidated Statements of
Operations
(In millions, except per share
data)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Revenue
$
446.0
$
375.9
$
1,661.3
$
1,391.7
Cost of revenue(1)
104.9
94.4
411.0
394.7
Gross profit
341.1
281.5
1,250.3
997.0
Operating expenses(1):
Research and development
176.9
136.8
662.1
768.2
Sales and marketing
106.3
100.2
423.3
439.6
General and administrative
64.5
56.5
245.4
283.2
Total operating expenses
347.7
293.5
1,330.8
1,491.0
Loss from operations
(6.6
)
(12.0
)
(80.5
)
(494.0
)
Interest income (expense), net
2.6
3.9
12.5
7.1
Other income (expense), net
1.6
0.7
16.0
6.8
Loss before income taxes
(2.4
)
(7.4
)
(52.0
)
(480.1
)
Benefit from (provision for) income
taxes
(4.2
)
(2.1
)
(0.7
)
(4.8
)
Net loss
$
(6.6
)
$
(9.5
)
$
(52.7
)
$
(484.9
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.02
)
$
(0.02
)
$
(0.13
)
$
(1.35
)
Weighted-average shares used in computing
net loss per share attributable to common stockholders, basic and
diluted
415.4
408.0
411.6
358.6
(1) Includes stock-based compensation
expense as follows:
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Cost of revenue
$
4.0
$
3.1
$
15.8
$
47.0
Research and development
40.5
29.2
147.6
368.2
Sales and marketing
7.8
5.9
31.4
94.3
General and administrative
17.0
15.3
66.4
140.6
Dropbox, Inc.
Consolidated Balance
Sheets
(In millions)
(Unaudited)
As of
December 31, 2019
December 31, 2018
Assets
Current assets:
Cash and cash equivalents
$
551.3
$
519.3
Short-term investments
607.7
570.0
Trade and other receivables, net
36.7
28.6
Prepaid expenses and other current
assets
47.5
92.3
Total current assets
1,243.2
1,210.2
Property and equipment, net
445.3
310.6
Operating lease right-of-use asset
657.9
—
Intangible assets, net
47.4
14.7
Goodwill
234.5
96.5
Other assets
70.9
62.1
Total assets
$
2,699.2
$
1,694.1
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
40.7
$
33.3
Accrued and other current liabilities
161.9
164.5
Accrued compensation and benefits
101.4
80.9
Operating lease liability
79.9
—
Finance lease obligation
76.7
73.8
Deferred revenue
554.2
485.0
Total current liabilities
1,014.8
837.5
Operating lease liability, non-current
711.9
—
Finance lease obligation, non-current
138.2
89.9
Other non-current liabilities(1)
25.9
89.9
Total liabilities
1,890.8
1,017.3
Stockholders' equity:
Additional paid-in-capital
2,531.3
2,337.5
Accumulated deficit
(1,726.2
)
(1,659.5
)
Accumulated other comprehensive income
(loss)
3.3
(1.2
)
Total stockholders' equity
808.4
676.8
Total liabilities and stockholders'
equity
$
2,699.2
$
1,694.1
(1) As of December 31, 2018 the Company
had non-current deferred rent of $81.0 million. As of December 31,
2019, deferred rent is now included in the determination of the
Company's operating lease right-of-use asset due to the adoption of
ASC 842.
Dropbox, Inc.
Consolidated Statements of
Cash Flows
(In millions)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Cash flow from operating
activities
Net loss
$
(6.6
)
$
(9.5
)
$
(52.7
)
$
(484.9
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
41.0
45.2
173.5
166.8
Stock-based compensation
69.3
53.5
261.2
650.1
Amortization of deferred commissions
4.8
3.6
17.5
12.1
Other
(2.6
)
(1.0
)
(16.6
)
(1.9
)
Changes in operating assets and
liabilities:
Trade and other receivables, net
2.0
(0.3
)
(7.5
)
0.1
Prepaid expenses and other current
assets
7.9
(0.6
)
(18.2
)
(47.9
)
Other assets
19.4
(0.8
)
61.2
(11.2
)
Accounts payable
8.8
2.2
6.4
(1.7
)
Accrued and other current liabilities
13.5
(0.3
)
23.0
40.3
Accrued compensation and benefits
22.2
17.8
19.1
25.0
Deferred revenue
14.0
5.6
68.7
66.4
Non-current liabilities
(16.8
)
8.3
(62.4
)
12.2
Tenant improvement allowance
reimbursement
9.9
—
55.3
—
Net cash provided by operating
activities
186.8
123.7
528.5
425.4
Cash flow from investing
activities
Capital expenditures
(25.5
)
(35.4
)
(136.1
)
(63.0
)
Purchase of intangible assets
—
(0.1
)
(1.7
)
(3.0
)
Business combinations, net of cash
acquired
(2.3
)
—
(173.9
)
—
Purchases of short-term investments
(192.7
)
(186.1
)
(775.4
)
(850.4
)
Proceeds from sales of short-term
investments
115.1
9.6
456.1
71.2
Proceeds from maturities of short-term
investments
58.1
110.5
294.8
212.4
Other
6.1
(3.3
)
16.2
(1.0
)
Net cash used in investing
activities
(41.2
)
(104.8
)
(320.0
)
(633.8
)
Cash flow from financing
activities
Proceeds from initial public offering and
private placement, net of underwriters' discounts and
commissions
—
—
—
746.6
Payments of deferred offering costs
—
—
—
(4.5
)
Shares repurchased for tax withholdings on
release of restricted stock
(18.3
)
(25.2
)
(85.4
)
(351.9
)
Proceeds from issuance of common stock,
net of repurchases
0.2
16.4
2.2
26.2
Principal payments on finance lease
obligations
(21.1
)
(25.0
)
(92.9
)
(109.1
)
Other
(0.2
)
(0.4
)
(0.6
)
(6.5
)
Net cash provided by (used in)
financing activities
(39.4
)
(34.2
)
(176.7
)
300.8
Effect of exchange rate changes on cash
and cash equivalents
1.9
(1.6
)
0.2
(3.1
)
Change in cash and cash equivalents
108.1
(16.9
)
32.0
89.3
Cash and cash equivalents—beginning of
period
443.2
536.2
519.3
430.0
Cash and cash equivalents—end of
period
$
551.3
$
519.3
$
551.3
$
519.3
Supplemental cash flow data:
Property and equipment acquired under
finance leases
$
37.1
$
25.8
$
144.1
$
98.5
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.
Three months ended December
31, 2018
Reconciliation of GAAP to
Non-GAAP results
(In millions, except for
percentages, which may not foot due to rounding)
(Unaudited)
GAAP
Stock-based
compensation
Non-GAAP
Cost of revenue
$
94.4
$
(3.1
)
$
91.3
Cost of revenue margin
25.1
%
(0.8
)%
24.3
%
Gross profit
281.5
3.1
284.6
Gross margin
74.9
%
0.8
%
75.7
%
Research and development
136.8
(29.2
)
107.6
Research and development margin
36.4
%
(7.8
)%
28.6
%
Sales and marketing
100.2
(5.9
)
94.3
Sales and marketing margin
26.7
%
(1.6
)%
25.1
%
General and administrative
56.5
(15.3
)
41.2
General and administrative margin
15.0
%
(4.0
)%
11.0
%
Income (loss) from operations
$
(12.0
)
$
53.5
$
41.5
Operating margin
(3.2
)%
14.2
%
11.0
%
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.
Twelve Months Ended December
31, 2018
Reconciliation of GAAP to
Non-GAAP results
(In millions, except for
percentages, which may not foot due to rounding)
(Unaudited)
GAAP
Stock-based
compensation
Employer payroll related to
the release of two-tier RSUs
Non-GAAP
Cost of revenue
$
394.7
$
(47.0
)
$
(1.1
)
$
346.6
Cost of revenue margin
28.4
%
(3.4
)%
(0.1
)%
24.9
%
Gross profit
997.0
47.0
1.1
1,045.1
Gross margin
71.6
%
3.4
%
0.1
%
75.1
%
Research and development
768.2
(368.2
)
(8.3
)
391.7
Research and development margin
55.2
%
(26.5
)%
(0.6
)%
28.1
%
Sales and marketing
439.6
(94.3
)
(2.2
)
343.1
Sales and marketing margin
31.6
%
(6.7
)%
(0.2
)%
24.7
%
General and administrative
283.2
(140.6
)
(2.3
)
140.3
General and administrative margin
20.3
%
(10.0
)%
(0.2
)%
10.1
%
Income (loss) from operations
$
(494.0
)
$
650.1
$
13.9
$
170.0
Operating margin
(35.5
)%
46.7
%
1.0
%
12.2
%
Dropbox, Inc.
Three and twelve months ended
December 31, 2019 and 2018
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,
2019
2018
2019
2018
GAAP net loss
$
(6.6
)
$
(9.5
)
$
(52.7
)
$
(484.9
)
Stock-based compensation
69.3
53.5
261.2
650.1
Acquisition-related and other expenses
4.5
—
15.9
—
Amortization of acquired intangible
assets
2.3
—
8.4
—
Net losses (gains) on equity
investments
1.2
—
(4.5
)
—
Employer payroll taxes related to the
release of two-tier RSUs
—
—
—
13.9
Income tax effects of non-GAAP
adjustments
(3.3
)
(1.7
)
(21.3
)
(12.9
)
Non-GAAP net income
$
67.4
$
42.3
$
207.0
$
166.2
Non-GAAP diluted net income per share
$
0.16
$
0.10
$
0.50
$
0.41
Weighted-average shares used to compute
Non-GAAP diluted net income per share
417.9
416.3
416.6
409.8
Dropbox, Inc.
Three and twelve months ended
December 31, 2019 and 2018
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,
2019
2018
2019
2018
Free cash flow reconciliation:
Net cash provided by operating
activities
$
186.8
$
123.7
$
528.5
$
425.4
Less:
Capital expenditures
(25.5
)
(35.4
)
(136.1
)
(63.0
)
Free cash flow
$
161.3
$
88.3
$
392.4
$
362.4
Free cash flow margin
36.2
%
23.5
%
23.6
%
26.0
%
Supplemental disclosures:
Capital expenditures related to our new
corporate headquarters, net of tenant improvement allowances(1)
$
13.2
$
28.2
$
64.3
$
32.9
(1) Capital expenditures include cash
outflows related to the build-out of our new corporate headquarters
in San Francisco, CA. Net cash provided by operating activities
include tenant improvement allowances related to our new corporate
headquarters, and represents cash received from our landlord to
partially offset this build-out. These amounts are presented net in
the table above.
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: including revenues 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 differs from GAAP in that it excludes stock-based
compensation expense, amortization of acquired intangible assets,
other acquisition-related expenses, which include third-party
diligence costs and compensation expense for key acquired
personnel, and employer payroll tax expense relating to the release
of two-tier RSUs in connection with our initial public offering
during the six months ended June 30, 2018. 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. In order to
present revenue on a constant currency basis for the fiscal year
and quarter ended December 31, 2019, Dropbox calculates constant
currency growth rates by applying the prior period weighted average
exchange rates to current 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 new 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
new corporate headquarters, net of tenant improvement allowances.
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/20200220005823/en/
Investors: Darren Yip ir@dropbox.com or Media:
Tessa Chen press@dropbox.com
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