Dropbox Announces Fiscal 2024 Second Quarter Results
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, Calif. - August 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 a maturing FSS business, we’re focused on solving our customers’ biggest new pain points
in securing, organizing and sharing their content, and are investing 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(1)•

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, yearover-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 perpaying user was $139.93, as compared to $138.94 for the same period last year. Paying users increased 63,000 quarterover-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 theuseful lives of certain infrastructure assets from four to five years due to recent technological advancements. In thesecond quarter of 2024, the change in useful life reduced depreciation expense in the amount of $9.0 million for assetsthat 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 the Company's reduction in workforce, including
severance, benefits and other related items. Non-GAAP operating margin was 35.9%, as compared to 34.2% for thesame period last year.

•

GAAP net income was $110.5 million, as compared to $43.2 million for the same period last year which included
expenses related to the reduction in workforce in the second quarter of 2023. 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 for the same period lastyear. 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, as compared 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 last year.(3)•Cash, cash equivalents and short-term investments ended at $1.063 billion.

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 thecurrent 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 acrossapproximately 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 accordancewith 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 of1995 including, among other things, our expectations regarding distributed work and artificial intelligence and machinelearning trends, related market opportunities and our ability 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 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 ofthis 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 topaying users; (iii) our expectations regarding general economic, political, and market trends and their respective impacts on ourbusiness; (iv) impacts to our financial results and business operations as a result of pricing and packaging changes to oursubscription plans; (v) our future financial performance, including trends in revenue, costs of revenue, gross profit or grossmargin, 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 ofcontent; (ix) any decline in demand for our platform or for content collaboration solutions in general; (x) changes in theinteroperability 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 newfeatures or products, or gain market acceptance for such new features or products; (xiii) our ability to improve quality and easeof adoption of our new and enhanced product experiences, features, and capabilities; (xiv) our ability to manage our growth orplan 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 affectDropbox’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 materiallyfrom 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)$

Revenue
Cost of revenue(1)(2)Gross profit
Operating expenses:
Research and development(1)(2)
Sales and marketing(1)(2)
General and administrative(1)(2)
Net loss on real estate assets(3)Total operating expenses
Income from operations
Interest income, net
Other income (expense), net
Income before income taxes
Provision for income taxes
Net income
Basic net income per share
Diluted net income per share
Weighted-average shares used incomputing net income per share
attributable to common stockholders,
basic
Weighted-average shares used incomputing net income per share
attributable to common stockholders,
diluted(1)$$$

Three Months Ended
June 30,2024
2023
634.5 $
622.5
107.0
120.1
527.5
502.4

$

Six Months Ended
June 30,2024
2023
1,265.8 $1,233.6
212.8
236.9
1,053.0
996.7

227.1
112.5
60.9
—
400.5
127.0
4.7
1.9
133.6
(23.1)
110.5 $
0.34 $
0.34 $

262.8
120.9
60.0
2.2
445.9
56.5
3.7
(1.2)
59.0
(15.8)
43.2 $
0.13 $
0.13 $

446.2
221.3
115.0
—
782.5
270.5
12.0
2.2
284.7
(41.9)
242.8 $
0.74 $
0.73 $

498.0
240.1
115.8
2.2
856.1
140.6
7.6
(1.6)
146.6
(34.4)
112.2
0.33
0.32

322.4

341.4

328.6

344.2

323.7

343.8

332.4

346.8

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

Cost of revenue
Research and development(4)Sales and marketing
General and administrative
Total stock-based compensation$$

Three Months Ended
June 30,
2024
2023
6.0 $
6.4
64.2
67.4
6.2
6.3
14.1
15.2
90.5 $
95.3$$

Six Months Ended
June 30,2024
2023
11.2 $
11.8
119.6
120.3
11.3
11.8
26.4
27.4
168.5 $
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)(4)

Includes impairment charges related to real estate assets as a result of our Virtual First work model.

On March 15, 2023, the former President resigned, resulting in the reversal of $6.7 million in stock-based compensation expense. Of thetotal amount reversed, $4.4 million related to expense recognized prior to January 1, 2023.

Dropbox, Inc.
Condensed Consolidated Balance Sheets(In millions)(Unaudited)
As ofJune 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
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
Total liabilities and stockholders' deficit$

December 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
2,718.5

$

37.8
151.6
67.0
69.1
115.5
743.0
1,184.0
274.9
167.2
1,379.7
84.0
3,089.8

$

38.5
155.2
109.2
57.4
116.2
725.0
1,201.5
310.7
168.5
1,377.8
90.8
3,149.3

2,519.9(2,872.6)(18.6)(371.3)
2,718.5 $2,598.0(2,742.3)(21.5)(165.8)2,983.5

$

614.9
741.1
68.7
91.9
1,516.6
309.2
183.8
58.1
402.2
460.4
53.2
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
Cash paid for lease termination
Net cash provided by operating activities
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
Net cash provided by investing activities
Cash flows from financing activities
Payments of debt issuance costs
Payments for taxes related to net share settlement of restricted stock units and awards

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

(0.5)
(11.0)
1.1
6.4(12.5)
24.3—
1.0(13.8)(14.9)
230.6(2.7)(10.4)
2.6
7.2(33.2)
26.5
6.6
(2.9)
(15.4)—
187.6

1.1(21.7)
2.0(1.8)(18.0)(42.0)
16.6
2.4(28.4)(14.9)
406.1(6.5)(17.6)
3.7
6.9
(7.6)
(65.1)
31.3(7.6)(35.3)
—
327.5

(5.9)
(21.1)
—
3.0
82.6
4.6
63.2

(3.0)
—
(17.0)
178.9
41.8
5.4
206.1

(15.1)(21.1)(62.3)
58.6
206.5
10.3
176.9

(4.9)
—
(47.9)
331.6
119.4
8.7
406.9

—

(0.1)

—

(0.1)

(32.1)
1.0(31.9)(154.2)(217.3)
1.2
177.6
332.7
510.3 $

(76.0)
0.1(63.9)(539.6)(679.4)(3.4)(99.8)
614.9
515.1 $

(66.2)
1.2(63.9)(329.6)(458.6)
1.7
277.5
232.8
510.3

33.4

61.9

67.9

Proceeds from issuance of common stock, net of taxes withheld
Principal payments on finance lease obligations
Common stock repurchases
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents - beginning of period
Cash and cash equivalents - end of period$(34.7)—(31.8)(260.2)(326.7)(0.9)(33.8)
548.9
515.1 $

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

$

35.3

$

$

$

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
compensation

GAAP
Cost of revenue

$

107.0

$

(6.0)

Acquisition-related
and other expenses$—

Intangibles
amortization
$

(2.8)

Non-GAAP$

98.2

Cost of revenue margin16.9 %(0.9%)—%(0.4%)

15.5 %

Gross profit

527.5

6.0

—

2.8

536.3

Gross margin

83.1 %

0.9 %

—%

0.4 %

84.5 %

Research and development

227.1(64.2)

(3.3)

—

159.6

Research and development margin

35.8 %(10.1%)(0.5%)—%

25.2 %

Sales and marketing

112.5

(6.2)

—

(3.0)

103.3

Sales and marketing margin17.7 %(1.0%)—%(0.5%)

16.3 %

General and administrative

60.9(14.1)

(1.3)

—

45.5

General and administrative margin

9.6 %(2.2%)(0.2%)—%

7.2 %Income from operations
Operating margin

$

127.0
20.0%

$

90.5
14.3 %

$

4.6
0.7 %

$

5.8
0.9 %

$

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)

GAAP
Cost of revenue$ 120.1

AcquisitionStock-based
related andcompensation other expenses

Intangibles
amortization

$

$

(6.4)

$

—

(3.6)

Net loss onreal estate
assets(1)$—Workforce
reduction
expense(2)Non-GAAP

$

$

(2.7)

107.4

Cost of revenue margin19.3 %(1.0%)—%(0.6%)—%(0.4%)

17.3 %

Gross profit

502.4

6.4

—

3.6

—

2.7

515.1

Gross margin
Research anddevelopment
Research anddevelopment margin80.7 %

1.0 %

—%

0.6 %

—%

0.4 %

82.7 %

Sales and marketing
Sales and marketing
marginGeneral andadministrative
General andadministrative margin
Net loss on real estate
assetsNet loss on real estate
assets margin
Income from operations
Operating margin

$

262.8

(67.4)

(7.9)

—

—

(27.0)

160.5

42.2 %(10.8%)(1.3%)—%—%(4.3%)

25.8 %

120.9

(6.3)

(6.6)

(3.4)

—

(6.3)

98.3

19.4 %(1.0%)(1.1%)(0.5%)—%(1.0%)

15.8 %

60.0(15.2)

(0.1)

—

—

(1.5)

43.2

9.6 %

(2.4%)—%—%—%(0.2%)

6.9 %

2.2

—

—

—

(2.2)

—

—

0.4 %

—%

—%

—%

(0.4%)

—%

—%

56.5
9.1%

$

95.3
15.3 %

$

14.6
2.3 %

$

7.0

$

1.1 %

(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.

2.2
0.4 %

$

37.5
6.0 %

$

213.1
34.2 %

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)
Stock-based
compensation

GAAP
Cost of revenue$

Cost of revenue margin

212.8

$

16.8 %

Gross profit

1,053.0(11.2)

Acquisition-related
and other expenses$—

Intangibles
amortization
$

(5.9)

Non-GAAP$

195.7(0.9%)—%(0.5%)

15.5 %

11.2

—

5.9

0.9 %

—%

0.5 %

84.5 %

(6.3)

—

320.3

1,070.1

Gross margin

83.2 %

Research and development

446.2

Research and development margin

35.3 %(9.4%)(0.5%)—%

25.3 %

Sales and marketing

221.3(11.3)

—

(6.1)

203.9

Sales and marketing margin17.5 %(0.9%)—%(0.5%)

16.1 %

General and administrative

115.0(26.4)

(1.3)

—

87.3

(2.1%)(0.1%)—%

6.9 %General and administrative margin
Income from operations
Operating margin(119.6)

9.1 %
$

270.5
21.4 %$

168.5
13.3 %

$

7.6
0.6 %

$

12.0
0.9 %

$

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)

GAAP
Cost of revenue$ 236.9

Stock-based
compensation

Acquisitionrelated andotherexpenses

Intangibles
amortization

Net loss onreal estate
assets(1)Workforce
reduction
expense(2)

$

$

$

$

$

(11.8)

—

(7.2)

—

(2.7)

Non-GAAP$

215.2

Cost of revenue margin19.2 %(1.0%)—%(0.6%)—%(0.2%)

Gross profit

996.7

11.8

—

7.2

—

2.7

Gross margin

80.8 %

1.0 %

—%

0.6 %

—%

0.2 %

Research and development
Research and development
margin498.0(13.3)——(27.0)

337.4

40.4 %(9.8%)(1.1%)—%—%(2.2%)

27.4 %

Sales and marketing
Sales and marketing
marginGeneral andadministrative
General andadministrative margin
Net loss on real estate
assetsNet loss on real estate
assets margin

240.1(11.8)

(8.3)

(6.8)

—

(6.3)

206.9

19.5 %(1.0%)(0.7%)(0.6%)—%(0.5%)

16.8 %

115.8(27.4)

(0.4)

—

—

(1.5)

86.5

9.4 %

(2.2%)—%—%—%(0.1%)

7.0 %

2.2

—

—

—

(2.2)

—

—

0.2 %

—%

—%

—%

(0.2%)—%—%

Income from operations$ 140.6

Operating margin

11.4%(120.3)$171.3
13.9 %

$

22.0
1.8 %

$

14.0

$

1.1 %

(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.

2.2
0.2 %

$

37.5
3.0 %

17.4 %
1,018.4
82.6 %$

387.6
31.4 %

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
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
Income tax effects of non-GAAP adjustments
Non-GAAP net income$
Non-GAAP diluted net income per share$
Weighted-average shares used to compute Non-GAAP
diluted net income per share

Six Months Ended
June 30,

2023

2024

2023

110.5 $
90.5
4.6
5.8
—
—
(17.3)
194.1 $
0.60 $

43.2 $
95.3
14.6
7.0
2.2
37.5
(25.8)
174.0 $
0.51 $

242.8 $
168.5
7.6
12.0
—
—
(40.1)
390.8 $
1.18 $

112.2
171.3
22.0
14.0
2.2
37.5
(39.1)
320.1
0.92

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
Free cash flow reconciliation:
Net cash provided by operating activities
Less:
Capital expenditures
Free cash flow
Free cash flow margin
Supplemental disclosures:
Key employee holdback payments related toacquisitions(1)Payments related to workforce reduction(2)Cash paid for lease termination(3)Six Months Ended
June 30,

2023
$

2024

$

230.6

$

(5.9)
224.7
$
35.4 %

(3.0)
184.6
$
29.7 %(15.1)
391.0$
30.9 %(4.9)
322.6
26.2 %

$
$
$

0.5
—
14.9

10.6
34.0
—

1.0
—
14.9

21.4
34.0
—

$
$
$

187.6

$

2023

$
$
$

406.1

$

$
$
$

327.5

(1)

Includes payments related to employee holdbacks pertaining to our acquisitions. The related expenses are recognized within research and development
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 andmarketing and general and administrative), non-GAAP income from operations, non-GAAP net income, free cash flow ("FCF") and nonGAAP 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, net loss on real estate assets, expenses related to our reduction in workforce and the income tax effect of theaforementioned 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. In order to present
revenue on a constant currency basis for the quarter ended June 30, 2024, Dropbox calculates constant currency revenue growth rates byapplying 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 aframework 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 performanceand 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 inthe 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 byoperating 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 accordancewith 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, andmay 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 mostcomparable 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 be considered in addition to, not as a substitute for or in isolation from, measures prepared inaccordance 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.

Contacts
Investors:
Peter Stabler
ir@dropbox.com
orMedia:
Maddy Peltonpress@dropbox.com