Dropbox Announces Fiscal 2024 Second Quarter Results
August 8, 2024 8:04 PM EDT
Second Quarter Revenue of $634.5 Million, up 1.9% year-over-year; on a constant currency basis, up 1.8% year-over-year
GAAP Operating Margin of 20.0% and Non-GAAP Operating Margin of 35.9%
Net Cash Provided by Operating Activities of $230.6 Million and Free Cash Flow of $224.7 Million
SAN FRANCISCO--(BUSINESS WIRE)--Aug. 8, 2024-- Dropbox, Inc. (NASDAQ: DBX), today announced financial results for its second quarter
ended June 30, 2024.
“In Q2, we improved the functionality and experience of our core FSS product, and made it easier for our customers to discover, try, and buy
everything we have to offer,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston. “As we navigate the natural pressures of amaturing FSS business, we’re focused on solving our customers’ biggest new pain points in securing, organizing and sharing their content, and areinvesting in our future bets for AI-powered universal search with Dropbox Dash. As this work continues, we remain committed to operating efficiently
and driving improved shareholder returns.”
Second Quarter Fiscal 2024 Results

Total revenue was $634.5 million, an increase of 1.9% from the same period last year. On a
constant currency basis, year-over-year growth would have been 1.8%.(1)Total ARR was $2.573 billion, an increase of 2.9% from the same period last year. On a
constant currency basis, year-over-year growth would have been 2.2%.(2) Total ARR
increased $17.3 million quarter-over-quarter.
Paying users was 18.22 million, as compared to 18.04 million for the same period last year.
Average revenue per paying user was $139.93, as compared to $138.94 for the same period
last year. Paying users increased 63,000 quarter-over-quarter.
GAAP gross margin was 83.1%, as compared to 80.7% for the same period last year.
Non-GAAP gross margin was 84.5%, as compared to 82.7% 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 second quarterof 2024, the change in useful life reduced depreciation expense in the amount of $9.0 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 20.0%, as compared to 9.1% for the same period last year which
included $37.5 million in expenses incurred in the second quarter of 2023 related to theCompany's reduction in workforce, including severance, benefits and other related items.
Non-GAAP operating margin was 35.9%, as compared to 34.2% for the same period last year.
GAAP net income was $110.5 million, as compared to $43.2 million for the same period lastyear which included expenses related to the reduction in workforce in the second quarter of2023. Non-GAAP net income was $194.1 million, as compared to $174.0 million for the same
period last year.
Net cash provided by operating activities was $230.6 million, as compared to $187.6 million forthe same period last year. Free cash flow was $224.7 million, as compared to $184.6 million
for the same period last year. In the second quarter of 2024, the Company paid $14.9 million
for the second tranche of the partial termination of the Company's lease in San Francisco. In
the second quarter of 2023, the Company had $34.0 million of expenditures relating to the
reduction in workforce.
GAAP diluted net income per share attributable to common stockholders was $0.34, ascompared to $0.13 in the same period last year. Non-GAAP diluted net income per share
attributable to common stockholders was $0.60, as compared to $0.51 in the same period lastyear.(3)Cash, cash equivalents and short-term investments ended at $1.063 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 theend of the period, multiplied by their annualized subscription price to our platform. We adjust our exchange rates used to calculate Total ARR on anannual 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 323.7 million and 343.8 million
diluted weighted-average shares of common stock for the three months ended June 30, 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 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.
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 ourability to capitalize on those opportunities, as well as our ability to improve shareholder returns. 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 theseforward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect ourbusiness, 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 ourrecurring 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, grossprofit or gross margin, operating expenses, paying users, and free cash flow; (vi) our ability to achieve or maintain profitability; (vii) our liability or otherpotential legal, regulatory, or reputational consequences of any unauthorized access to our data or our users’ content, including through privacy anddata security breaches; (viii) significant disruption of service on our platform or loss of content; (ix) any decline in demand for our platform or forcontent 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 ourtransition to a Virtual First model with an increasingly distributed workforce; (xvii) our capital allocation plans with respect to our stock repurchaseprogram 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 March 31, 2024.
Additional information will be made available in our quarterly report on Form 10-Q for the quarter ended June 30, 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
June 30,
2024
2023
Revenue
Cost of revenue(1)(2)Gross profit
Operating expenses:

$

634.5
107.0

$

622.5
120.1

Six Months Ended
June 30,
2024
2023
$

1,265.8212.8$

1,233.6
236.9

527.5

502.4

1,053.0

996.7

Research and development(1)(2)

227.1

262.8

446.2

498.0

Sales and marketing(1)(2)

112.5

120.9

221.3

240.1

General and administrative(1)(2)
Net loss on real estate assets(3)Total operating expenses

60.9
—

60.0
2.2

115.0
—

115.8
2.2

400.5

445.9

782.5

856.1

Income from operations
Interest income, net
Other income (expense), net

127.0
4.7
1.9

56.5
3.7
(1.2)

270.5
12.0
2.2

140.6
7.6
(1.6)

Income before income taxes
Provision for income taxes

133.6(23.1)

59.0(15.8)

284.7(41.9)

146.6(34.4)Net income

$

110.5

$

43.2

$

242.8

$

112.2

Basic net income per share

$

0.34

$

0.13

$

0.74

$

0.33

Diluted net income per share

$

0.34

$

0.13

$

0.73

$

0.32

Weighted-average shares used in computing net income per share attributable tocommon stockholders, basic
Weighted-average shares used in computing net income per share attributable tocommon stockholders, diluted

322.4

341.4

328.6

344.2

323.7

343.8

332.4

346.8

(1) Includes stock-based compensation expense as follows (in millions):Three Months Ended
June 30,
2024
2023
Cost of revenue$

Research and development(4)Sales and marketing
General and administrative

6.0

$

64.2
6.2
14.1

Total stock-based compensation

$

90.5

$

Six Months Ended
June 30,
2024
2023
6.4 $

11.2

67.4
6.3
15.2

119.6
11.3
26.4

95.3 $

168.5

$

11.8
120.3
11.8
27.4

$

171.3

(2) Includes expenses related to our reduction in workforce such as severance, benefits and other related items during the three and six months ended

June 30, 2023.
(3) Includes impairment charges related to real estate assets as a result of our Virtual First work model.
(4) On March 15, 2023, the former 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)

June 30, 2024
AssetsCurrent assets:
Cash and cash equivalents
Short-term investments
Trade and other receivables, net
Prepaid expenses and other current assets$

Total current assets
Property and equipment, net
Operating lease right-of-use asset
Intangible assets, net
Goodwill
Deferred tax assets
Other assets
Total assets
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable
Accrued and other current liabilities
Accrued compensation and benefits
Operating lease liability
Finance lease obligation
Deferred revenue
Total current liabilities
Operating lease liability, non-current
Finance lease obligation, non-current

As ofDecember 31, 2023

515.1
547.4
67.1
101.8

$

1,231.4
323.7
176.9
56.4
411.9
461.5
56.7

614.9
741.1
68.7
91.9
1,516.6
309.2
183.8
58.1
402.2
460.4
53.2

$

2,718.5$

2,983.5

$

37.8
151.6
67.0
69.1
115.5
743.0

$

38.5
155.2
109.2
57.4
116.2
725.0

1,184.0
274.9
167.2

1,201.5
310.7
168.5

Convertible senior notes, net, non-current
Other non-current liabilities
Total liabilities
Stockholders' deficit:
Additional paid-in-capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders' deficit

1,379.7
84.0

1,377.8
90.8

3,089.8

3,149.3

2,519.9(2,872.6)(18.6)

2,598.0(2,742.3)(21.5)(371.3)

Total liabilities and stockholders' deficit$

2,718.5(165.8)$2,983.5

Dropbox, Inc.
Condensed Consolidated Statements of Cash Flows(In millions)(Unaudited)Three Months Ended
June 30,
2024
2023
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Net loss on real estate assets
Amortization of debt issuance costs
Amortization of deferred commissions
Non-cash operating lease expense
Deferred taxes
Other
Changes in operating assets and liabilities:
Trade and other receivables, net
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued and other current liabilities
Accrued compensation and benefits
Deferred revenue
Other non-current liabilities
Operating lease liabilities

$

110.5

$

43.2

Six Months Ended
June 30,
2024
2023
$

242.8

$

112.2

32.4
90.5
—
1.0
7.4
8.8
1.0
(1.1)

42.7
95.3
2.2
1.1
10.1
10.8
4.1
(0.2)

63.8
168.5
—
2.1
14.9
18.1
0.5
0.1

85.2
171.3
2.2
2.1
20.8
23.5
7.5
0.5

Cash paid for lease termination
Net cash provided by operating activities(0.5)(11.0)
1.1
6.4(12.5)
24.3—
1.0(13.8)(14.9)(2.7)(10.4)
2.6
7.2(33.2)
26.5
6.6
(2.9)
(15.4)—

1.1(21.7)
2.0(1.8)(18.0)(42.0)
16.6
2.4(28.4)(14.9)(6.5)(17.6)
3.7
6.9
(7.6)
(65.1)
31.3(7.6)(35.3)
—

230.6

187.6

406.1

327.5

Cash flows from investing activities
Capital expenditures
Business combinations, net of cash acquired
Purchases of short-term investments
Proceeds from sales of short-term investments
Proceeds from maturities of short-term investments
Other

(5.9)
(21.1)
—
3.0
82.6
4.6

(3.0)
—
(17.0)
178.9
41.8
5.4

(15.1)(21.1)(62.3)
58.6
206.5
10.3

(4.9)
—
(47.9)
331.6
119.4
8.7

Net cash provided by investing activities

63.2

206.1

176.9

406.9

Cash flows from financing activities
Payments of debt issuance costs
Payments for taxes related to net share settlement of restricted stock units andawardsProceeds from issuance of common stock, net of taxes withheld
Principal payments on finance lease obligations
Common stock repurchases

—

(0.1)

—

(0.1)

(34.7)—(31.8)(260.2)(32.1)
1.0(31.9)(154.2)(76.0)
0.1(63.9)(539.6)(66.2)
1.2(63.9)(329.6)

Net cash used in financing activities(326.7)(217.3)(679.4)(458.6)

Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents - beginning of period(0.9)(33.8)
548.9

1.2
177.6
332.7

(3.4)
(99.8)
614.9

1.7
277.5
232.8

Cash and cash equivalents - end of period

$

515.1

$

510.3

$

515.1

$

510.3

Supplemental cash flow data:
Property and equipment acquired under finance leases

$

35.3

$

33.4

$

61.9

$

67.9

Dropbox, Inc.
Three Months Ended June 30, 2024
Reconciliation of GAAP to Non-GAAP results(In millions, except for percentages, which may not foot due to rounding)(Unaudited)

Stock-based
GAAP
compensation
$
107.0
$
(6.0)
16.9%
(0.9%)
527.5
6.0
83.1%
0.9%
227.1
(64.2)
35.8%(10.1%)
112.5
(6.2)
17.7%
(1.0%)
60.9(14.1)
9.6%(2.2%)
$
127.0
$
90.5
20.0%
14.3%

Cost of revenue
Cost of revenue margin
Gross profit
Gross margin
Research and development
Research and development margin
Sales and marketing
Sales and marketing margin
General and administrative
General and administrative margin
Income from operations
Operating margin

Acquisitionrelated andotherexpenses
$
—
—%
—
—%
(3.3)
(0.5%)——%(1.3)(0.2%)$
4.6
0.7%

Intangibles
amortization$(2.8)(0.4%)
2.8
0.4%
—
—%
(3.0)
(0.5%)
—
—%
$
5.8
0.9%

Non-GAAP
$
98.2
15.5%
536.3
84.5%
159.6
25.2%
103.3
16.3%
45.5
7.2%
$
227.9
35.9%

Dropbox, Inc.
Three Months Ended June 30, 2023
Reconciliation of GAAP to Non-GAAP results(In millions, except for percentages, which may not foot due to rounding)(Unaudited)

Cost of revenue
Cost of revenue margin
Gross profit
Gross margin
Research and development
Research and development margin
Sales and marketing
Sales and marketing margin
General and administrative
General and administrative margin
Net loss on real estate assets
Net loss on real estate assets margin
Income from operations
Operating margin

Net loss
Acquisitionon real
related andestateStock-based
otherIntangibles
GAAP compensation expenses amortization assets(1)$ 120.1
$
(6.4)
$
—
$
(3.6)
$
—
19.3%
(1.0%)—%(0.6%)
—%
502.4
6.4
—
3.6
—
80.7%
1.0%
—%
0.6%
—%
262.8
(67.4)
(7.9)
—
—
42.2%
(10.8%)(1.3%)
—%
—%
120.9
(6.3)
(6.6)
(3.4)
—
19.4%
(1.0%)(1.1%)(0.5%)—%
60.0(15.2)
(0.1)
—
—
9.6%
(2.4%)
—%
—%
—%
2.2
—
—
—
(2.2)
0.4%
—%
—%
—%
(0.4%)$ 56.5
$
95.3
$
14.6
$
7.0
$
2.2
9.1%
15.3%
2.3%
1.1%
0.4%

Workforce
reduction
expense(2) Non-GAAP$(2.7)$ 107.4(0.4%)
17.3%
2.7
515.1
0.4%
82.7%
(27.0)
160.5(4.3%)
25.8%
(6.3)
98.3
(1.0%)
15.8%
(1.5)
43.2
(0.2%)
6.9%
—
—
—%
—%
$ 37.5$ 213.1
6.0%
34.2%(1) Includes impairment charges related to real estate assets as a result of our Virtual First work model.
(2) Includes expenses related to our reduction in workforce such as severance, benefits and other related items.

Dropbox, Inc.
Six Months Ended June 30, 2024
Reconciliation of GAAP to Non-GAAP results(In millions, except for percentages, which may not foot due to rounding)(Unaudited)

Cost of revenue
Cost of revenue margin
Gross profit
Gross margin
Research and development
Research and development margin
Sales and marketing
Sales and marketing margin
General and administrative

$

GAAP
212.8
16.8%
1,053.0
83.2%
446.2
35.3%
221.3
17.5%
115.0

Stock-based
compensation$(11.2)(0.9%)
11.2
0.9%(119.6)(9.4%)(11.3)(0.9%)(26.4)

Acquisitionrelated andother expenses
$
—
—%
—
—%
(6.3)
(0.5%)——%(1.3)

Intangibles
amortization
Non-GAAP
$
(5.9)
$
195.7
(0.5%)
15.5%
5.9
1,070.1
0.5%
84.5%
—
320.3
—%
25.3%
(6.1)
203.9
(0.5%)
16.1%
—
87.3

General and administrative margin
Income from operations
Operating margin

$

9.1%
270.5
$
21.4%

(2.1%)
168.5
13.3%(0.1%)
7.6
0.6%

$

—%
12.0
0.9%

$

6.9%
458.6
36.2%

$

Dropbox, Inc.
Six Months Ended June 30, 2023
Reconciliation of GAAP to Non-GAAP results(In millions, except for percentages, which may not foot due to rounding)(Unaudited)

Cost of revenue
Cost of revenue margin
Gross profit
Gross margin
Research and development
Research and development margin
Sales and marketing
Sales and marketing margin
General and administrative
General and administrative margin
Net loss on real estate assets
Net loss on real estate assets margin
Income from operations
Operating margin

Stock-based
GAAP
compensation$ 236.9$(11.8)
19.2%(1.0%)
996.7
11.8
80.8%
1.0%
498.0
(120.3)
40.4%(9.8%)
240.1(11.8)
19.5%(1.0%)
115.8(27.4)
9.4%(2.2%)
2.2
—
0.2%
—%
$ 140.6
$
171.3
11.4%
13.9%

AcquisitionNet loss on Workforce
related andreduction
other
Intangibles real estate
expenses
amortization assets(1)expense(2) Non-GAAP
$
—
$
(7.2)
$
—
$
(2.7)
$ 215.2—%(0.6%)—%(0.2%)
17.4%
—
7.2
—
2.7
1,018.4
—%
0.6%
—%
0.2%
82.6%
(13.3)——(27.0)
337.4(1.1%)—%—%(2.2%)
27.4%
(8.3)
(6.8)
—
(6.3)
206.9
(0.7%)(0.6%)—%(0.5%)
16.8%
(0.4)
—
—
(1.5)
86.5
—%
—%
—%
(0.1%)
7.0%
—
—
(2.2)
—
—
—%
—%
(0.2%)
—%
—%
$
22.0
$
14.0
$
2.2
$
37.5
$ 387.6
1.8%
1.1%
0.2%
3.0%
31.4%

(1) Includes impairment charges related to real estate assets as a result of our Virtual First work model.
(2) Includes expenses related to our reduction in workforce such as severance, benefits and other related items.

Dropbox, Inc.
Three and Six Months Ended June 30, 2024 and 2023
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 30,2024
2023
GAAP net income
Stock-based compensation
Acquisition-related and other expenses
Amortization of acquired intangible assets
Net loss on real estate assets
Workforce reduction expense

Six Months Ended
June 30,
2024
2023

$

110.5
90.5
4.6
5.8
—
—
(17.3)

$

43.2
95.3
14.6
7.0
2.2
37.5
(25.8)

$

242.8
168.5
7.6
12.0
—
—
(40.1)

$

112.2
171.3
22.0
14.0
2.2
37.5
(39.1)

Non-GAAP net income

$

194.1

$

174.0

$

390.8

$

320.1

Non-GAAP diluted net income per share
Weighted-average shares used to compute Non-GAAP diluted net income per
share

$

0.60

$

0.51

$

1.18

$

0.92

Income tax effects of non-GAAP adjustments

323.7

343.8

332.4

346.8

Dropbox, Inc.
Three and Six Months Ended June 30, 2024 and 2023
Reconciliation of free cash flow and supplemental cash flow disclosure(In millions, except for percentages)(Unaudited)Three Months Ended
June 30,2024
2023Free cash flow reconciliation:
Net cash provided by operating activities
Less:

$

$

(5.9)

Capital expenditures
Free cash flow

230.6

$

224.7

187.6

Six Months Ended
June 30,
2024
2023
$

(3.0)
$

184.6

406.1

$

(15.1)
$

391.0

327.5
(4.9)

$

322.6

Free cash flow margin
Supplemental disclosures:

35.4%

29.7%

30.9%

26.2%

Key employee holdback payments related to acquisitions(1)

$

0.5

$

10.6

$

1.0

$

21.4

Payments related to workforce reduction(2)

$

—

$

34.0

$

—

$

34.0

Cash paid for lease termination(3)

$

14.9

$

—

$

14.9

$

—

(1) Includes payments related to employee holdbacks pertaining to our acquisitions. The related expenses are recognized within research anddevelopment expenses over the required service period during the three and six months ended June 30, 2024.
(2) Includes payments made related to our reduction in workforce such as severance, benefits, and other related items.
(3) Includes the second tranche payment made for the partial termination of the Company's lease for its San Francisco, California corporate

headquarters.
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 andadministrative), 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 thatthey 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, net loss on real estate assets, expenses related to our
reduction in workforce 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 byrevenue. In order to present revenue on a constant currency basis for the quarter ended June 30, 2024, 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 forassessing 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, forinternal 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 thatallows 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 bemasked 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 affectDropbox'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 key employee holdback payments related to our various acquisitions. These non-GAAP financial measures should beconsidered 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/20240808328442/en/
Investors:
Peter Stabler
ir@dropbox.com
orMedia:
Maddy Peltonpress@dropbox.com
Source: Dropbox, Inc.