Second Quarter Revenue of $572.7 Million, Up
7.9% Year-over-year; on a constant currency basis, Up 8.8%
Year-over-year
GAAP Operating Margin of 14.5% and Non-GAAP
Operating Margin of 31.9%
Net Cash Provided by Operating Activities of
$209.9 Million and Free Cash Flow of $205.9 Million
Dropbox, Inc. (NASDAQ: DBX) today announced financial results
for its second quarter ended June 30, 2022.
"Our Q2 results are a testament to the strength of our business
and the value our product delivers to our customers, despite the
unpredictable macro environment," said Dropbox Co-Founder and Chief
Executive Officer Drew Houston. "We made great progress this
quarter, enhancing performance and functionality in our core FSS
product, releasing additional security and data protection
capabilities, and expanding workflows, like Capture and Replay. We
believe we're operating from a position of strength to deliver
value to shareholders, thanks to strong profitability and improved
customer retention. I'm proud of the team's discipline and
execution, and excited for what's ahead as we build one organized
place for your cloud content and all the workflows around it."
Second Quarter Fiscal 2022 Results
- Total revenue was $572.7 million, an increase of 7.9% from the
same period last year. On a constant currency basis, year-over-year
growth would have been 8.8%.(1)
- Total ARR ended at $2.333 billion, an increase of $43.7 million
quarter-over-quarter and an increase of 7.7% year-over-year. On a
constant currency basis, year-over-year growth would have been
8.3%.(2)
- Paying users ended at 17.37 million, as compared to 16.14
million for the same period last year. Average revenue per paying
user was $133.34, as compared to $133.15 for the same period last
year.
- GAAP gross margin was 81.5%, as compared to 79.8% for the same
period last year. Non-GAAP gross margin was 83.0%, as compared to
81.2% for the same period last year.
- GAAP operating margin was 14.5%, as compared to 15.9% for the
same period last year. Non-GAAP operating margin was 31.9%, as
compared to 31.9% for the same period last year.
- GAAP net income was $62.0 million, as compared to $88.0 million
for the same period last year. Non-GAAP net income was $138.1
million, as compared to $160.5 million for the same period last
year. The company's GAAP and non-GAAP net income declined
year-over-year as a result of a significant increase in income tax
expense due to the impact of new R&D tax legislation.
- Net cash provided by operating activities was $209.9 million,
as compared to $219.9 million for the same period last year. Free
cash flow was $205.9 million, as compared to $216.0 million for the
same period last year.
- GAAP diluted net income per share attributable to common
stockholders was $0.17, as compared to $0.22 for the same period
last year. Non-GAAP diluted net income per share attributable to
common stockholders was $0.38, as compared to $0.40 in the same
period last year.(3)
- Cash, cash equivalents and short-term investments ended at
$1.446 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 exchange rate to prior period results.
(3) Non-GAAP diluted net income per share
attributable to common stockholders is calculated based upon 365.7
million and 397.0 million diluted weighted-average shares of common
stock for the three months ended June 30, 2022 and 2021,
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
second 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 using the web link at
http://investors.dropbox.com.
Other Upcoming Events
- Tim Regan, Chief Financial Officer, will be presenting at the
KeyBanc Technology Leadership Forum on Monday, August 8th.
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
approximately 180 countries, we're on a mission to design a more
enlightened way of working. Dropbox is headquartered in San
Francisco, CA, and has employees 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
distributed work trends, related market opportunities and our
ability to capitalize on those opportunities. 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 macro economic uncertainty, 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, and increase our
recurring revenue; (iv) our ability to attract new users or convert
registered users to paying users; (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; (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
March 31, 2022. Additional information will be made available in
our quarterly report on Form 10-Q for the quarter ended June 30,
2022 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
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Revenue
$
572.7
$
530.6
$
1,135.1
$
1,042.2
Cost of revenue(1)
105.8
107.1
218.7
216.4
Gross profit
466.9
423.5
916.4
825.8
Operating expenses(1):
Research and development
215.0
185.5
425.8
366.7
Sales and marketing
105.0
100.8
200.7
203.5
General and administrative
55.3
52.8
108.8
111.4
Impairment related to real estate
assets(2)
8.7
—
8.7
17.3
Total operating expenses
384.0
339.1
744.0
698.9
Income from operations
82.9
84.4
172.4
126.9
Interest expense, net
(0.5
)
(0.9
)
(1.9
)
(2.1
)
Other income (expense), net
(3.3
)
7.5
2.4
12.6
Income before income taxes
79.1
91.0
172.9
137.4
Provision for income taxes
(17.1
)
(3.0
)
(31.2
)
(1.8
)
Net income
$
62.0
$
88.0
$
141.7
$
135.6
Basic net income per share
$
0.17
$
0.23
$
0.39
$
0.34
Diluted net income per share
$
0.17
$
0.22
$
0.38
$
0.34
Weighted-average shares used in computing
net income per share attributable to common stockholders, basic
364.1
388.4
367.4
393.3
Weighted-average shares used in computing
net income per share attributable to common stockholders,
diluted
365.7
397.0
369.6
401.2
(1) Includes stock-based compensation
expense as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Cost of revenue
$
6.7
$
5.9
$
12.4
$
11.3
Research and development
58.5
49.5
109.0
93.0
Sales and marketing
5.9
6.2
10.4
13.1
General and administrative
13.9
12.3
25.5
24.4
(2) Includes impairment charges related to
real estate assets as a result of our decision to shift to a
Virtual First work model.
Dropbox, Inc.
Condensed Consolidated Balance
Sheets
(In millions)
(Unaudited)
As of
June 30, 2022
December 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
352.1
$
533.0
Short-term investments
1,094.2
1,185.1
Trade and other receivables, net
46.7
49.6
Prepaid expenses and other current
assets
100.1
82.1
Total current assets
1,593.1
1,849.8
Property and equipment, net
296.3
322.0
Operating lease right-of-use asset
396.8
413.9
Intangible assets, net
46.5
53.6
Goodwill
353.9
356.6
Other assets
72.2
95.4
Total assets
$
2,758.8
$
3,091.3
Liabilities and stockholders'
deficit
Current liabilities:
Accounts payable
$
30.3
$
25.7
Accrued and other current liabilities
147.7
140.8
Accrued compensation and benefits
73.5
139.1
Operating lease liability
77.3
78.3
Finance lease obligation
115.0
120.4
Deferred revenue
691.9
671.5
Total current liabilities
1,135.7
1,175.8
Operating lease liability, non-current
608.7
632.0
Finance lease obligation, non-current
142.9
167.7
Convertible senior notes, net,
non-current
1,372.2
1,370.3
Other non-current liabilities
42.2
39.4
Total liabilities
3,301.7
3,385.2
Stockholders' deficit:
Additional paid-in-capital
2,424.1
2,448.1
Accumulated deficit
(2,926.1
)
(2,739.4
)
Accumulated other comprehensive loss
(40.9
)
(2.6
)
Total stockholders' deficit
(542.9
)
(293.9
)
Total liabilities and stockholders'
deficit
$
2,758.8
$
3,091.3
Dropbox, Inc.
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Cash flows from operating
activities
Net income
$
62.0
$
88.0
$
141.7
$
135.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
39.2
36.8
78.6
71.5
Stock-based compensation
85.0
73.9
157.3
141.8
Impairment related to real estate
assets
8.7
—
8.7
17.3
Amortization of debt issuance costs
1.1
1.0
2.1
1.7
Net gains on equity investments
(5.0
)
—
(5.0
)
—
Amortization of deferred commissions
9.7
7.7
18.7
15.4
Other
1.5
(5.3
)
3.3
(6.2
)
Changes in operating assets and
liabilities:
Trade and other receivables, net
(3.0
)
(1.5
)
1.8
(8.6
)
Prepaid expenses and other current
assets
(16.5
)
(11.5
)
(26.2
)
(23.8
)
Other assets
26.1
21.2
52.2
39.1
Accounts payable
2.4
2.1
1.4
12.2
Accrued and other current liabilities
(3.3
)
(14.6
)
15.8
(8.3
)
Accrued compensation and benefits
29.3
33.0
(65.2
)
(37.6
)
Deferred revenue
(0.2
)
15.5
19.3
44.4
Other non-current liabilities
(29.5
)
(26.4
)
(56.5
)
(60.5
)
Tenant improvement allowance
reimbursement
2.4
—
3.3
1.6
Net cash provided by operating
activities
209.9
219.9
351.3
335.6
Cash flows from investing
activities
Capital expenditures
(4.0
)
(3.9
)
(14.7
)
(10.8
)
Business combinations, net of cash
acquired
—
—
—
(125.4
)
Purchases of short-term investments
(219.9
)
(179.8
)
(301.5
)
(693.7
)
Proceeds from sales of short-term
investments
64.8
57.0
116.6
171.2
Proceeds from maturities of short-term
investments
101.7
134.1
239.2
264.0
Other
5.5
14.2
9.5
17.5
Net cash provided by (used in)
investing activities
(51.9
)
21.6
49.1
(377.2
)
Cash flows from financing
activities
Proceeds from issuance of convertible
senior notes
—
—
—
1,389.1
Purchase of convertible note hedge in
connection with issuance of convertible senior notes
—
—
—
(265.3
)
Proceeds from sale of warrants in
connection with issuance of convertible senior notes
—
—
—
202.9
Payments of debt issuance costs
—
(1.0
)
—
(23.7
)
Payments for taxes related to net share
settlement of restricted stock units and awards
(24.7
)
(26.9
)
(61.4
)
(62.7
)
Proceeds from issuance of common stock,
net of taxes withheld
0.1
2.6
0.3
5.5
Principal payments on finance lease
obligations
(32.0
)
(26.1
)
(64.4
)
(50.7
)
Common stock repurchases
(189.8
)
(150.8
)
(449.7
)
(582.7
)
Net cash (used in) provided by
financing activities
(246.4
)
(202.2
)
(575.2
)
612.4
Effect of exchange rate changes on cash
and cash equivalents
(5.0
)
0.5
(6.1
)
(0.4
)
Change in cash and cash equivalents
(93.4
)
39.8
(180.9
)
570.4
Cash and cash equivalents - beginning
of period
445.5
845.5
533.0
314.9
Cash and cash equivalents - end of
period
$
352.1
$
885.3
$
352.1
$
885.3
Supplemental cash flow data:
Property and equipment acquired under
finance leases
$
14.4
$
43.3
$
34.1
$
67.3
Dropbox, Inc.
Three Months Ended June 30,
2022
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
$
(6.7
)
$
—
$
(1.9
)
$
—
$
97.2
Cost of revenue margin
18.5
%
(1.2
%)
—
%
(0.3
%)
—
%
17.0
%
Gross profit
466.9
6.7
—
1.9
—
475.5
Gross margin
81.5
%
1.2
%
—
%
0.3
%
—
%
83.0
%
Research and development
215.0
(58.5
)
(1.4
)
—
—
155.1
Research and development margin
37.5
%
(10.2
%)
(0.2
%)
—
%
—
%
27.1
%
Sales and marketing
105.0
(5.9
)
(1.7
)
(1.2
)
—
96.2
Sales and marketing margin
18.3
%
(1.0
%)
(0.3
%)
(0.2
%)
—
%
16.8
%
General and administrative
55.3
(13.9
)
(0.1
)
—
—
41.3
General and administrative margin
9.7
%
(2.4
%)
—
%
—
%
—
%
7.2
%
Impairment related to real estate
assets
8.7
—
—
—
(8.7
)
—
Impairment related to real estate assets
margin
1.5
%
—
%
—
%
—
%
(1.5
%)
—
%
Income from operations
$
82.9
$
85.0
$
3.2
$
3.1
$
8.7
$
182.9
Operating margin
14.5
%
14.8
%
0.6
%
0.5
%
1.5
%
31.9
%
(1) Includes impairment charges related to
real estate assets as a result of our decision to shift to a
Virtual First work model.
Dropbox, Inc.
Three Months Ended June 30,
2021
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
Workforce
reduction
expense(1)
Non-GAAP
Cost of revenue
$
107.1
$
(5.9
)
$
—
$
(1.6
)
$
(0.1
)
$
99.5
Cost of revenue margin
20.2
%
(1.1
%)
—
%
(0.3
%)
—
%
18.8
%
Gross profit
423.5
5.9
—
1.6
0.1
431.1
Gross margin
79.8
%
1.1
%
—
%
0.3
%
—
%
81.2
%
Research and development
185.5
(49.5
)
(5.0
)
—
(0.5
)
130.5
Research and development margin
35.0
%
(9.3
%)
(0.9
%)
—
%
(0.1
%)
24.6
%
Sales and marketing
100.8
(6.2
)
(1.7
)
(1.9
)
(0.2
)
90.8
Sales and marketing margin
19.0
%
(1.2
%)
(0.3
%)
(0.4
%)
—
%
17.1
%
General and administrative
52.8
(12.3
)
—
—
(0.1
)
40.4
General and administrative margin
10.0
%
(2.3
%)
—
%
—
%
—
%
7.6
%
Income from operations
$
84.4
$
73.9
$
6.7
$
3.5
$
0.9
$
169.4
Operating margin
15.9
%
13.9
%
1.3
%
0.7
%
0.2
%
31.9
%
(1) Includes expenses related to workforce
reduction such as severance, benefits and other related items.
Dropbox, Inc.
Six Months Ended June 30,
2022
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
$
218.7
$
(12.4
)
$
—
$
(3.9
)
$
—
$
202.4
Cost of revenue margin
19.3
%
(1.1
%)
—
%
(0.3
%)
—
%
17.8
%
Gross profit
916.4
12.4
—
3.9
—
932.7
Gross margin
80.7
%
1.1
%
—
%
0.3
%
—
%
82.2
%
Research and development
425.8
(109.0
)
(4.6
)
—
—
312.2
Research and development margin
37.5
%
(9.6
%)
(0.4
%)
—
%
—
%
27.5
%
Sales and marketing
200.7
(10.4
)
(3.4
)
(2.7
)
—
184.2
Sales and marketing margin
17.7
%
(0.9
%)
(0.3
%)
(0.2
%)
—
%
16.2
%
General and administrative
108.8
(25.5
)
(0.2
)
—
—
83.1
General and administrative margin
9.6
%
(2.2
%)
—
%
—
%
—
%
7.3
%
Impairment related to real estate
assets
8.7
—
—
—
(8.7
)
—
Impairment related to real estate assets
margin
0.8
%
—
%
—
%
—
%
(0.8
%)
—
%
Income from operations
$
172.4
$
157.3
$
8.2
$
6.6
$
8.7
$
353.2
Operating margin
15.2
%
13.9
%
0.7
%
0.6
%
0.8
%
31.1
%
(1) Includes impairment charges related to
real estate assets as a result of our decision to shift to a
Virtual First work model.
Dropbox, Inc.
Six Months Ended June 30,
2021
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)
Workforce
reduction
expense(2)
Non-GAAP
Cost of revenue
$
216.4
$
(11.3
)
$
—
$
(2.6
)
$
—
$
(1.7
)
$
200.8
Cost of revenue margin
20.8
%
(1.1
%)
—
%
(0.2
%)
—
%
(0.2
%)
19.3
%
Gross profit
825.8
11.3
—
2.6
—
1.7
841.4
Gross margin
79.2
%
1.1
%
—
%
0.2
%
—
%
0.2
%
80.7
%
Research and development
366.7
(93.0
)
(9.3
)
—
—
(3.1
)
261.3
Research and development margin
35.2
%
(8.9
%)
(0.9
%)
—
%
—
%
(0.3
%)
25.1
%
Sales and marketing
203.5
(13.1
)
(1.9
)
(3.3
)
—
(6.5
)
178.7
Sales and marketing margin
19.5
%
(1.3
%)
(0.2
%)
(0.3
%)
—
%
(0.6
%)
17.1
%
General and administrative
111.4
(24.4
)
(1.2
)
—
—
(2.4
)
83.4
General and administrative margin
10.7
%
(2.3
%)
(0.1
%)
—
%
—
%
(0.2
%)
8.0
%
Impairment related to real estate
assets
17.3
—
—
—
(17.3
)
—
—
Impairment related to real estate assets
margin
1.7
%
—
%
—
%
—
%
(1.7
%)
—
%
—
%
Income from operations
$
126.9
$
141.8
$
12.4
$
5.9
$
17.3
$
13.7
$
318.0
Operating margin
12.2
%
13.6
%
1.2
%
0.6
%
1.7
%
1.3
%
30.5
%
(1) Includes impairment charges related to
real estate assets as a result of our decision to shift to a
Virtual First work model.
(2) Includes expenses related to workforce
reduction such as severance, benefits and other related items.
Dropbox, Inc.
Three and Six Months Ended
June 30, 2022 and 2021
Reconciliation of GAAP net
income to Non-GAAP net income and Non-GAAP diluted net income per
share
(In millions, except per share
data)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
GAAP net income
$
62.0
$
88.0
$
141.7
$
135.6
Stock-based compensation
85.0
73.9
157.3
141.8
Acquisition-related and other expenses
3.2
6.7
8.2
12.4
Amortization of acquired intangible
assets
3.1
3.5
6.6
5.9
Impairment related to real estate
assets
8.7
—
8.7
17.3
Workforce reduction expense
—
0.9
—
13.7
Net gains on equity investments
(5.0
)
—
(5.0
)
—
Income tax effects of non-GAAP
adjustments
(18.9
)
(12.5
)
(37.9
)
(24.4
)
Non-GAAP net income
$
138.1
$
160.5
$
279.6
$
302.3
Non-GAAP diluted net income per share
$
0.38
$
0.40
$
0.76
$
0.75
Weighted-average shares used to compute
Non-GAAP diluted net income per share
365.7
397.0
369.6
401.2
Dropbox, Inc.
Three and Six Months Ended
June 30, 2022 and 2021
Reconciliation of free cash
flow and supplemental cash flow disclosure
(In millions, except for
percentages)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Free cash flow reconciliation:
Net cash provided by operating
activities
$
209.9
$
219.9
$
351.3
$
335.6
Less:
Capital expenditures
(4.0
)
(3.9
)
(14.7
)
(10.8
)
Free cash flow
$
205.9
$
216.0
$
336.6
$
324.8
Free cash flow margin
36.0
%
40.7
%
29.7
%
31.2
%
Supplemental disclosures:
Key employee holdback payments related to
acquisitions(1)
$
—
$
4.0
$
14.3
$
8.0
Payments related to workforce
reduction(2)
$
—
$
1.3
$
—
$
13.7
(1) We make payment installments of deal
consideration employee holdbacks pertaining to our various
acquisitions in accordance with the acquisition agreements. The
related expenses are recognized within research and development and
sales and marketing expenses over the required service period.
(2) Includes payments made related to
workforce reduction such as severance, benefits, and other related
items.
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,
impairment charges related to real estate assets, expenses related
to our reduction in force, net gains on equity investments and 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. 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 June 30, 2022, 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, 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 expenses related to reduction in workforce and
key employee holdback payments related to its acquisitions. 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/20220804005740/en/
Investors: Kern Kapoor ir@dropbox.com or Media:
Alissa Stewart press@dropbox.com
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