Business Wire English

Dropbox Announces Fourth Quarter and Fiscal 2023 Results

16 Febbraio 2024

Fourth Quarter Revenue of $635.0 Million, up 6.0% year-over-year; on a constant currency basis, up 6.2% year-over-year

GAAP Operating Margin of 42.1% and Non-GAAP Operating Margin of 32.2%

Net Cash Provided by Operating Activities of $200.3 Million and Free Cash Flow of $190.3 Million

Fiscal 2023 Revenue of $2.502 Billion, up 7.6% year-over-year; on a constant currency basis, up 9.3% year-over-year

GAAP Operating Margin of 21.5% and Non-GAAP Operating Margin of 32.8%

Net Cash Provided by Operating Activities of $783.7 Million and Free Cash Flow of $759.4 Million

SAN FRANCISCO–(BUSINESS WIRE)–Dropbox, Inc. (NASDAQ: DBX), today announced financial results for its fourth quarter and fiscal year ended 31 Dicembre 2023.

“I’m encouraged by the progress we made in 2023 despite facing headwinds in Q4,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston. “We improved the overall profitability of the core business, while investing in growth initiatives with new AI-powered product experiences like Dash. Looking ahead, we’ll continue to focus on driving cash flow and improving efficiency in our core FSS business, while making strategic investments to capitalize on the new market opportunity that AI presents.”

Fourth Quarter Fiscal 2023 Results

Total revenue was $635.0 million, an increase of 6.0% from the same period last year. On a constant currency basis, year-over-year growth would have been 6.2%.⁽¹⁾Total revenue increased $2.0 million quarter-over-quarter.
Total ARR was $2.523 billion, a slight increase of 0.3% from the same period last year. On a constant currency basis, year-over-year growth would have been 3.8%.⁽²⁾Total ARR decreased $2.2 million quarter-over-quarter.
Paying users was 18.12 million, as compared to 17.77 million for the same period last year. Average revenue per paying user was $138.83, as compared to $134.53 for the same period last year. Paying users decreased 0.05 million quarter-over-quarter.
GAAP gross margin was 80.8%, as compared to 80.7% for the same period last year. Non-GAAP gross margin was 82.3%, as compared to 82.0% for the same period last year.
GAAP operating margin was 42.1%, as compared to (13.4%) for the same period last year. In the fourth quarter of 2023, the Company recorded a net gain on real estate assets of $158.8 million related to the partial termination of the Company’s lease for its San Francisco, California corporate headquarters. In the fourth quarter of 2022, the Company recorded impairment charges related to real estate assets of $162.5 million. Non-GAAP operating margin was 32.2%, as compared to 29.9% for the same period last year.
GAAP net income was $227.3 million, as compared to $328.3 million for the same period last year. In the fourth quarter of 2023, the Company recorded the aforementioned net gain on real estate assets. In the fourth quarter of 2022, the Company recorded a one-time income tax benefit from the release of a valuation allowance of $420.2 million, offset by the aforementioned impairment charges. Non-GAAP net income was $170.8 million, as compared to $141.2 million for the same period last year.
Net cash provided by operating activities was $200.3 million, as compared to $194.6 million for the same period last year. Free cash flow was $190.3 million, as compared to $181.7 million for the same period last year. For the fourth quarter of 2023, the Company paid $28.1 million for the aforementioned partial termination of the Company’s lease for its San Francisco, California corporate headquarters. For the fourth quarter of 2022, the Company paid $34.7 million related to deal consideration holdbacks pertaining to acquisitions.
GAAP diluted net income per share attributable to common stockholders was $0.66, as compared to $0.93 in the same period last year. Non-GAAP diluted net income per share attributable to common stockholders was $0.50, as compared to $0.40 in the same period last year.⁽³⁾
Cash, cash equivalents and short-term investments ended at $1.356 billion.

Full Year Fiscal 2023 Results

Total revenue was $2.502 billion, an increase of 7.6% year over year. On a constant currency basis, year-over-year growth would have been 9.3%.⁽¹⁾
Average revenue per paying user was $139.38, as compared to $134.51 in the prior year.
GAAP gross margin was 80.9%, consistent with the prior year. Non-GAAP gross margin was 82.5%, as compared to 82.3% in the prior year.
GAAP operating margin was 21.5%, as compared to 7.8% in the prior year. Non-GAAP operating margin was 32.8%, as compared to 30.9% in the prior year.
GAAP net income was $453.6 million, as compared to $553.2 million in the prior year. Non-GAAP net income was $685.0 million, as compared to $573.9 million in the prior year.
Net cash provided by operating activities was $783.7 million as compared to $797.3 million in the prior year. Free cash flow was $759.4 million as compared to $763.5 million in the prior year.
GAAP diluted net income per share attributable to common stockholders was $1.31, as compared to $1.52 in the prior year. Non-GAAP diluted net income per share attributable to common stockholders was $1.98, as compared to $1.58 in the prior year.⁽⁴⁾

⁽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⁾	GAAP and Non-GAAP diluted net income per share attributable to common stockholders is calculated based upon 343.9 million and 354.0 million diluted weighted-average shares of common stock for the three months ended 31 Dicembre 2023 and 2022, respectively.
⁽⁴⁾	GAAP and Non-GAAP diluted net income per share attributable to common stockholders is calculated based upon 345.6 million and 363.3 million diluted weighted-average shares of common stock for the fiscal year ended 31 Dicembre 2023 and 2022, 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 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 hosting meetings at the JMP Technology Conference on Monday, March 4th, 2024.

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 and artificial intelligence and machine learning 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. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our 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 expectations regarding general economic, political, and market trends and their respective impacts on our business; (iv) impacts to our financial results and business operations as a result of pricing and packaging changes to our subscription plans; (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 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; (xiii) our ability to improve quality and ease of adoption of our new and enhanced product experiences, features, and capabilities; (xiv) our ability to manage our growth or plan for future growth; (xv) our various acquisitions of businesses and the potential of such acquisitions to require significant management attention, disrupt our business, or dilute stockholder value; (xvi) our ability to attract, retain, integrate, and manage key and other highly qualified personnel, including as a result of our transition to a Virtual First model with an increasingly distributed workforce and in light of the reduction of our workforce announced last year; (xvii) our capital allocation plans with respect to our stock repurchase program and other investments; and (xviii) 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 30 Settembre 2023. Additional information will be made available in our annual report on Form 10-K for the year ended 31 Dicembre 2023 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,
		2023			2022			2023			2022
Revenue	$	635.0		$	598.8		$	2,501.6		$	2,324.9
Cost of revenue⁽¹⁾⁽²⁾		122.0			115.8			478.5			444.2
Gross profit		513.0			483.0			2,023.1			1,880.7
Operating expenses⁽¹⁾⁽²⁾:
Research and development		222.1			238.5			936.5			891.9
Sales and marketing		119.6			105.1			466.0			409.4
General and administrative		61.3			57.3			237.1			222.9
Net (gain) loss on real estate assets⁽³⁾		(157.4	)		162.5			(155.2	)		175.2
Total operating expenses		245.6			563.4			1,484.4			1,699.4
Income (expense) from operations		267.4			(80.4	)		538.7			181.3
Interest income, net		6.8			3.5			19.4			3.3
Other (expense) income, net		(1.9	)		(1.5	)		(3.7	)		8.1
Income (expense) before income taxes		272.3			(78.4	)		554.4			192.7
(Provision for) benefit from income taxes⁽⁴⁾		(45.0	)		406.7			(100.8	)		360.5
Net income	$	227.3		$	328.3		$	453.6		$	553.2
Basic net income per share	$	0.67		$	0.93		$	1.33		$	1.53
Diluted net income per share	$	0.66		$	0.93		$	1.31		$	1.52
Weighted-average shares used in computing net income per share attributable to common stockholders, basic		337.5			352.1			341.2			361.2
Weighted-average shares used in computing net income per share attributable to common stockholders, diluted		343.9			354.0			345.6			363.3

⁽¹⁾	Includes stock-based compensation expense as follows (in millions):

	Three Months Ended December 31,				Twelve Months Ended December 31,
		2023		2022		2023		2022
Cost of revenue	$	5.7	$	5.9	$	23.3	$	24.7
Research and development⁽⁵⁾		58.7		62.7		237.6		232.3
Sales and marketing		5.0		6.0		22.0		22.4
General and administrative		13.5		12.7		55.1		51.3
Total stock-based compensation	$	82.9	$	87.3	$	338.0	$	330.7

⁽²⁾	Includes expenses related to our reduction in workforce such as severance, benefits and other related items during the year ended 31 Dicembre 2023.
⁽³⁾	Includes a one-time gain of $158.8 million related to the partial termination of the Company’s lease for its San Francisco, California corporate headquarters for the quarter ended and year ended 31 Dicembre 2023 and impairment charges related to real estate assets for the quarters ended and years ended 31 Dicembre 2023, and 2022.
⁽⁴⁾	Results of Operations for the quarter ended and year ended 31 Dicembre 2022 include a one-time benefit from income taxes of $420.2 million due to the release of a valuation allowance on the Company’s U.S. federal and certain state deferred tax assets.
⁽⁵⁾	On 15 Marzo 2023, the Company’s President resigned, resulting in the reversal of $6.7 million in stock-based compensation expense. Of the total amount reversed, $4.4 million related to expense recognized prior to 1 Gennaio 2023.


Dropbox, Inc. Condensed Consolidated Balance Sheets (In millions) (Unaudited)

	As of December 31,
		2023			2022
Assets
Current assets:
Cash and cash equivalents	$	614.9		$	232.8
Short-term investments		741.1			1,110.6
Trade and other receivables, net		68.7			53.8
Prepaid expenses and other current assets		91.9			92.6
Total current assets		1,516.6			1,489.8
Property and equipment, net		309.2			308.4
Operating lease right-of-use asset		183.8			260.6
Intangible assets, net		58.1			88.3
Goodwill		402.2			403.3
Deferred tax assets		460.4			498.7
Other assets		53.2			61.0
Total assets	$	2,983.5		$	3,110.1
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	38.5		$	38.6
Accrued and other current liabilities		155.2			139.9
Accrued compensation and benefits		109.2			131.7
Operating lease liability		57.4			68.9
Finance lease obligation		116.2			114.8
Deferred revenue		725.0			702.6
Total current liabilities		1,201.5			1,196.5
Operating lease liability, non-current		310.7			585.2
Finance lease obligation, non-current		168.5			151.7
Convertible senior notes, net, non-current		1,377.8			1,374.0
Other non-current liabilities		90.8			112.1
Total liabilities		3,149.3			3,419.5
Stockholders’ deficit:
Additional paid-in-capital		2,598.0			2,511.6
Accumulated deficit		(2,742.3	)		(2,772.1	)
Accumulated other comprehensive loss		(21.5	)		(48.9	)
Total stockholders’ deficit		(165.8	)		(309.4	)
Total liabilities and stockholders’ deficit	$	2,983.5		$	3,110.1


Dropbox, Inc. Condensed Consolidated Statements of Cash Flows (In millions) (Unaudited)

	Three Months Ended December 31,						Twelve Months Ended December 31,
		2023			2022			2023			2022
Cash flows from operating activities
Net income	$	227.3		$	328.3		$	453.6		$	553.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		43.0			39.6			170.0			157.1
Stock-based compensation		82.9			87.3			338.0			330.7
Net (gain) loss on real estate assets		(157.4	)		162.5			(155.2	)		175.2
Amortization of debt issuance costs		1.0			1.1			4.2			4.2
Net gains on equity investments		—			—			—			(5.0	)
Amortization of deferred commissions		8.4			10.6			38.6			39.5
Non-cash operating lease expense		9.5			15.6			43.5			63.8
Deferred taxes		26.7			(414.8	)		38.4			(396.3	)
Other		(2.9	)		(8.3	)		(0.6	)		(0.8	)
Changes in operating assets and liabilities:
Trade and other receivables, net		(3.9	)		(2.9	)		(14.5	)		(5.5	)
Prepaid expenses and other current assets		(17.1	)		(26.4	)		(41.1	)		(50.0	)
Other assets		16.8			(13.6	)		23.3			(9.7	)
Accounts payable		(6.2	)		2.7			1.2			13.0
Accrued and other current liabilities		(11.5	)		2.3			(20.8	)		4.7
Accrued compensation and benefits		22.6			29.1			(22.6	)		(6.8	)
Deferred revenue		(9.9	)		(0.5	)		21.6			25.6
Other non-current liabilities		9.1			(4.7	)		(1.5	)		(17.9	)
Operating lease liabilities		(11.0	)		(13.8	)		(65.4	)		(86.4	)
Tenant improvement allowance reimbursement		1.0			0.5			1.1			8.7
Cash paid for lease termination		(28.1	)		—			(28.1	)		—
Net cash provided by operating activities		200.3			194.6			783.7			797.3
Cash flows from investing activities
Capital expenditures		(10.0	)		(12.9	)		(24.3	)		(33.8	)
Purchase of intangible assets		—			—			(0.3	)		(1.1	)
Business combinations, net of cash acquired		—			(75.4	)		—			(75.4	)
Purchases of short-term investments		(96.1	)		(131.3	)		(208.7	)		(571.2	)
Proceeds from sales of short-term investments		16.6			59.5			352.4			213.7
Proceeds from maturities of short-term investments		55.1			49.3			252.2			389.1
Proceeds from sales of equity investments		—			—			—			10.6
Other		12.4			5.7			23.9			19.6
Net cash (used in) provided by investing activities		(22.0	)		(105.1	)		395.2			(48.5	)
Cash flows from financing activities
Payments of debt issuance costs		—			—			(0.1	)		—
Payments for taxes related to net share settlement of restricted stock units and awards		(34.5	)		(28.4	)		(135.1	)		(119.4	)
Proceeds from issuance of common stock, net of taxes withheld		0.1			0.1			2.5			0.5
Principal payments on finance lease obligations		(31.4	)		(31.5	)		(126.6	)		(127.5	)
Common stock repurchases		(106.2	)		(174.3	)		(539.9	)		(795.4	)
Net cash (used in) financing activities		(172.0	)		(234.1	)		(799.2	)		(1,041.8	)
Effect of exchange rate changes on cash and cash equivalents		4.3			5.4			2.4			(7.2	)
Change in cash and cash equivalents		10.6			(139.2	)		382.1			(300.2	)
Cash and cash equivalents – beginning of period		604.3			372.0			232.8			533.0
Cash and cash equivalents – end of period	$	614.9		$	232.8		$	614.9		$	232.8

Supplemental cash flow data:
Property and equipment acquired under finance leases	$	50.6		$	53.4		$	144.7		$	105.8


Dropbox, Inc. Three Months Ended 31 Dicembre 2023 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			Net (gain) loss on real estate assets⁽¹⁾			Workforce reduction expense⁽²⁾			Non-GAAP
Cost of revenue	$	122.0		$	(5.7	)	$	—		$	(3.7	)	$	—		$	—		$	112.6
Cost of revenue margin		19.2	%		(0.9	%)		—	%		(0.6	%)		—	%		—	%		17.7	%
Gross profit		513.0			5.7			—			3.7			—			—			522.4
Gross margin		80.8	%		0.9	%		—	%		0.6	%		—	%		—	%		82.3	%
Research and development		222.1			(58.7	)		(4.3	)		—			—			(0.2	)		158.9
Research and development margin		35.0	%		(9.2	%)		(0.7	%)		—	%		—	%		—	%		25.0	%
Sales and marketing		119.6			(5.0	)		—			(3.4	)		—			(0.1	)		111.1
Sales and marketing margin		18.8	%		(0.8	%)		—	%		(0.5	%)		—	%		—	%		17.5	%
General and administrative		61.3			(13.5	)		—			—			—			(0.1	)		47.7
General and administrative margin		9.7	%		(2.1	%)		—	%		—	%		—	%		—	%		7.5	%
Net (gain) loss on real estate assets		(157.4	)		—			—			—			157.4			—			—
Net (gain) loss on real estate assets margin		(24.8	%)		—	%		—	%		—	%		24.8	%		—	%		—	%
Income from operations	$	267.4		$	82.9		$	4.3		$	7.1		$	(157.4	)	$	0.4		$	204.7
Operating margin		42.1	%		13.1	%		0.7	%		1.1	%		(24.8	%)		0.1	%		32.2	%

⁽¹⁾	Includes a one-time gain of $158.8 million related to the partial termination of the Company’s lease for its San Francisco, California corporate headquarters and impairment charges related to real estate assets.
⁽²⁾	Includes expenses related to our reduction in workforce such as severance, benefits and other related items.


Dropbox, Inc. Three Months Ended 31 Dicembre 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			Net (gain) loss on real estate assets⁽¹⁾			Non-GAAP
Cost of revenue	$	115.8		$	(5.9	)	$	—		$	(2.4	)	$	—			107.5
Cost of revenue margin		19.3	%		(1.0	%)		—	%		(0.4	%)		—	%		18.0	%
Gross profit		483.0			5.9			—			2.4			—			491.3
Gross margin		80.7	%		1.0	%		—	%		0.4	%		—	%		82.0	%
Research and development		238.5			(62.7	)		(2.2	)		—			—			173.6
Research and development margin		39.8	%		(10.6	%)		(0.4	%)		—	%		—	%		29.0	%
Sales and marketing		105.1			(6.0	)		(1.7	)		(1.6	)		—			95.8
Sales and marketing margin		17.6	%		(1.0	%)		(0.3	%)		(0.3	%)		—	%		16.0	%
General and administrative		57.3			(12.7	)		(1.8	)		—			—			42.8
General and administrative margin		9.6	%		(2.1	%)		(0.3	%)		—	%		—	%		7.1	%
Net (gain) loss on real estate assets		162.5			—			—			—			(162.5	)		—
Net (gain) loss on real estate assets margin		27.1	%		—	%		—	%		—	%		(27.1	%)		—	%
Income from operations	$	(80.4	)	$	87.3		$	5.7		$	4.0		$	162.5		$	179.1
Operating margin		(13.4	%)		14.4	%		1.0	%		0.7	%		27.1	%		29.9	%

⁽¹⁾	Includes impairment charges related to real estate assets.


Dropbox, Inc. Twelve Months Ended 31 Dicembre 2023 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			Net (gain) loss on real estate assets⁽¹⁾			Workforce reduction expense⁽²⁾			Non-GAAP
Cost of revenue	$	478.5		$	(23.3	)	$	—		$	(14.6	)	$	—		$	(2.9	)	$	437.7
Cost of revenue margin		19.1	%		(0.9	%)		—	%		(0.6	%)		—	%		(0.1	%)		17.5	%
Gross profit		2,023.1			23.3			—			14.6			—			2.9			2,063.9
Gross margin		80.9	%		0.9	%		—	%		0.6	%		—	%		0.1	%		82.5	%
Research and development		936.5			(237.6	)		(22.2	)		—			—			(27.8	)		648.9
Research and development margin		37.4	%		(9.5	%)		(0.9	%)		—	%		—	%		(1.1	%)		25.9	%
Sales and marketing		466.0			(22.0	)		(8.3	)		(13.6	)		—			(6.7	)		415.4
Sales and marketing margin		18.6	%		(0.9	%)		(0.3	%)		(0.5	%)		—	%		(0.3	%)		16.6	%
General and administrative		237.1			(55.1	)		(0.4	)		—			—			(1.9	)		179.7
General and administrative margin		9.5	%		(2.2	%)		—	%		—	%		—	%		(0.1	%)		7.2	%
Net (gain) loss on real estate assets		(155.2	)		—			—			—			155.2			—			—
Net (gain) loss on real estate assets margin		(6.2	%)		—	%		—	%		—	%		6.2	%		—	%		—	%
Income from operations	$	538.7		$	338.0		$	30.9		$	28.2		$	(155.2	)	$	39.3		$	819.9
Operating margin		21.5	%		13.5	%		1.2	%		1.1	%		(6.2	%)		1.6	%		32.8	%