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Dropbox Announces Fiscal 2024 First Quarter Results

Dropbox, Inc. (NASDAQ: DBX), today announced financial results for its first quarter ended March 31, 2024. “In Q1, our core business delivered in-line revenue and better than anticipated profitabili...

Business Wire

First Quarter Revenue of $631.3 Million, up 3.3% year-over-year; on a constant currency basis, up 3.2% year-over-year

GAAP Operating Margin of 22.7% and Non-GAAP Operating Margin of 36.5%

Net Cash Provided by Operating Activities of $175.5 Million and Free Cash Flow of $166.3 Million

SAN FRANCISCO: Dropbox, Inc. (NASDAQ: DBX), today announced financial results for its first quarter ended March 31, 2024.

“In Q1, our core business delivered in-line revenue and better than anticipated profitability,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston. “We recently announced a collection of product updates designed to make it even easier for our users to secure, organize and share their content across different devices, locations and platforms. Looking ahead, we’ll stay disciplined in our operations, while investing in growth initiatives focused on building AI powered product experiences to improve distributed work for our customers.”

First Quarter Fiscal 2024 Results

  • Total revenue was $631.3 million, an increase of 3.3% from the same period last year. On a constant currency basis, year-over-year growth would have been 3.2%.(1)
  • Total ARR was $2.556 billion, an increase of 3.6% from the same period last year. On a constant currency basis, year-over-year growth would have been 2.8%.(2) Utilizing the exchange rates set at the beginning of 2024, total ARR increased $15.6 million quarter-over-quarter.
  • Paying users was 18.16 million, as compared to 17.90 million for the same period last year. Average revenue per paying user was $139.59, as compared to $138.97 for the same period last year. Paying users increased 35,000 quarter-over-quarter.
  • GAAP gross margin was 83.2%, as compared to 80.9% for the same period last year. Non-GAAP gross margin was 84.6%, as compared to 82.4% for the same period last year. Effective January 1, 2024, the Company increased the useful lives of certain infrastructure assets from four to five years due to recent technological advancements. In the first quarter of 2024, the change in useful life reduced depreciation expense in the amount of $10.4 million for assets that existed as of the effective date of the change and applying the revised estimated useful lives prospectively.
  • GAAP operating margin was 22.7%, as compared to 13.8% for the same period last year. Non-GAAP operating margin was 36.5%, as compared to 28.6% for the same period last year.
  • GAAP net income was $132.3 million, as compared to $69.0 million for the same period last year. Non-GAAP net income was $196.7 million, as compared to $146.1 million for the same period last year.
  • Net cash provided by operating activities was $175.5 million, as compared to $139.9 million for the same period last year. Free cash flow was $166.3 million, as compared to $138.0 million for the same period last year.
  • GAAP diluted net income per share attributable to common stockholders was $0.39, as compared to $0.20 in the same period last year. Non-GAAP diluted net income per share attributable to common stockholders was $0.58, as compared to $0.42 in the same period last year.(3)
  • Cash, cash equivalents and short-term investments ended at $1.176 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)

GAAP and Non-GAAP diluted net income per share attributable to common stockholders is calculated based upon 340.7 million and 348.8 million diluted weighted-average shares of common stock for the three months ended March 31, 2024 and 2023, 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 first 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 Jefferies Software Conference on Wednesday, May 29th, 2024.

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 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 or other potential legal, regulatory, or reputational consequences of 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; (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-K for the year ended December 31, 2023. Additional information will be made available in our quarterly report on Form 10-Q for the quarter ended March 31, 2024 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

March 31,

 

2024

 

2023

Revenue

$

631.3

 

 

$

611.1

 

Cost of revenue(1)

 

105.8

 

 

 

116.8

 

Gross profit

 

525.5

 

 

 

494.3

 

Operating expenses(1):

 

 

 

Research and development

 

219.1

 

 

 

235.2

 

Sales and marketing

 

108.8

 

 

 

119.2

 

General and administrative

 

54.1

 

 

 

55.8

 

Total operating expenses

 

382.0

 

 

 

410.2

 

Income from operations

 

143.5

 

 

 

84.1

 

Interest income, net

 

7.3

 

 

 

3.9

 

Other income (expense), net

 

0.3

 

 

 

(0.4

)

Income before income taxes

 

151.1

 

 

 

87.6

 

Provision for income taxes

 

(18.8

)

 

 

(18.6

)

Net income

$

132.3

 

 

$

69.0

 

Basic net income per share

$

0.40

 

 

$

0.20

 

Diluted net income per share

$

0.39

 

 

$

0.20

 

Weighted-average shares used in computing net income per share attributable to common stockholders, basic

 

334.8

 

 

 

347.1

 

Weighted-average shares used in computing net income per share attributable to common stockholders, diluted

 

340.7

 

 

 

348.8

 

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

 

Three Months Ended

March 31,

 

2024

 

2023

Cost of revenue

$

5.2

 

$

5.4

Research and development(2)

 

55.4

 

 

52.9

Sales and marketing

 

5.1

 

 

5.5

General and administrative

 

12.3

 

 

12.2

Total stock-based compensation

$

78.0

 

$

76.0

 

(2) On March 15, 2023, our 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 January 1, 2023.

Dropbox, Inc.

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)

 

 

As of

 

March 31, 2024

 

December 31, 2023

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

548.9

 

 

$

614.9

 

Short-term investments

 

627.0

 

 

 

741.1

 

Trade and other receivables, net

 

66.7

 

 

 

68.7

 

Prepaid expenses and other current assets

 

96.6

 

 

 

91.9

 

Total current assets

 

1,339.2

 

 

 

1,516.6

 

Property and equipment, net

 

315.0

 

 

 

309.2

 

Operating lease right-of-use asset

 

177.6

 

 

 

183.8

 

Intangible assets, net

 

51.6

 

 

 

58.1

 

Goodwill

 

401.8

 

 

 

402.2

 

Deferred tax assets

 

460.8

 

 

 

460.4

 

Other assets

 

51.7

 

 

 

53.2

 

Total assets

$

2,797.7

 

 

$

2,983.5

 

Liabilities and stockholders' deficit

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

32.0

 

 

$

38.5

 

Accrued and other current liabilities

 

160.2

 

 

 

155.2

 

Accrued compensation and benefits

 

42.7

 

 

 

109.2

 

Operating lease liability

 

75.0

 

 

 

57.4

 

Finance lease obligation

 

115.1

 

 

 

116.2

 

Deferred revenue

 

741.8

 

 

 

725.0

 

Total current liabilities

 

1,166.8

 

 

 

1,201.5

 

Operating lease liability, non-current

 

281.6

 

 

 

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