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Dropbox Announces Second Quarter Fiscal 2021 Results ( MY OPINION:10/10)

Aug 5, 2021

Second Quarter Revenue of $530.6 Million, Up 13.5% Year-over-year

GAAP and Non-GAAP Operating Income of $84.4 Million and $169.4 Million, Up 558.4% and 76.1% Year-over-year

Net Cash Provided by Operating Activities of $219.9 Million and Free Cash Flow of $216.0 Million

SAN FRANCISCO--(BUSINESS WIRE)--Aug. 5, 2021-- Dropbox, Inc. (NASDAQ: DBX), today announced financial results for its second quarter ended June 30, 2021.

“Q2 was a standout quarter, driven by strong revenue growth, record free cash flow, and margin expansion,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston. “Our results reflect the strength of our business model and our ability to make significant progress on our strategic objectives. We’re proud of our execution this quarter as we delivered even more value to our customers and shareholders and are excited about the opportunity ahead to build next-generation tools to support the new world of distributed work.”

Second Quarter Fiscal 2021 Results

Total revenue was $530.6 million, an increase of 13.5% from the same period last year. On a constant currency basis, year-over-year growth would have been 11.4%.(1)

Total ARR ended at $2.166 billion, an increase of $53.8 million quarter-over-quarter and an increase of 12.2% year-over-year. On a constant currency basis, year-over-year growth would have been 10.6%.(2)

Paying users ended at 16.14 million, as compared to 14.96 million for the same period last year. Average revenue per paying user was $133.15, as compared to $126.88 for the same period last year.

GAAP gross margin was 79.8%, as compared to 78.1% in the same period last year. Non-GAAP gross margin was 81.2%, as compared to 79.2% in the same period last year.

GAAP operating margin was 15.9%, as compared to 2.7% in the same period last year. Non-GAAP operating margin was 31.9%, as compared to 20.6% in the same period last year.

GAAP net income was $88.0 million, as compared to $17.5 million in the same period last year. Non-GAAP net income was $160.5 million, as compared to $93.2 million in the same period last year.

Net cash provided by operating activities was $219.9 million, as compared to $145.9 million in the same period last year. Free cash flow was $216.0 million, as compared to $119.8 million in the same period last year.

GAAP diluted net income per share attributable to common stockholders was $0.22, as compared to $0.04 in the same period last year. Non-GAAP diluted net income per share attributable to common stockholders was $0.40, as compared to $0.22 in the same period last year.(3)

Cash, cash equivalents and short-term investments ended at $1.944 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 rate to prior period results.

(3) Non-GAAP diluted net income per share attributable to common stockholders is calculated based upon 397.0 million and 420.5 million diluted weighted-average shares of common stock for the three months ended June 30, 2021 and 2020, 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 dialing (877) 300-7844 from the United States or (786) 815-8440 internationally with reference to the company name and conference title, and a live webcast and replay of the conference call can be accessed from the Dropbox investor relations website at http://investors.dropbox.com. Following the completion of the call, a telephonic replay will be available through 8:00 PM ET on August 12, 2021 at (855) 859-2056 from the United States or (404) 537-3406 internationally with recording access code 8414818.

Other Upcoming Events

Tim Regan, Chief Financial Officer, will be presenting at the KeyBanc Technology Leadership Forum on Monday, August 9th.
Tim Regan, Chief Financial Officer, will be hosting meetings at the NASDAQ Virtual Asia Investor Conference on Wednesday, August 11th, local time.
Tim Regan, Chief Financial Officer, will be hosting meetings at the Canaccord Genuity Growth Conference on Wednesday, August 11th.
Drew Houston, Co-Founder and Chief Executive Officer, will be presenting at the Jefferies Virtual Software Conference on Wednesday, September 15th.

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 180 countries, we're on a mission to design a more enlightened way of working. Dropbox is headquartered in San Francisco, CA, and has offices 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 remote work trends, related market opportunities and our ability to capitalize on those opportunities. Words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "plans," and similar expressions are intended to identify forward-looking statements. Dropbox has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that Dropbox believes may affect its business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to risks, uncertainties, and assumptions including, but not limited to: (i) our ability to realize anticipated benefits to our business from our shift to a Virtual First work model as well as impacts to our financial results and business operations as a result of this shift, (ii) impacts to our financial results, business operations and the business of our customers, suppliers, partners and the economy as a result of the COVID-19 pandemic, and related public health measures, as well as the potential for a more permanent global shift to remote work, (iii) our ability to retain and upgrade paying users, and increase our recurring revenue; (iv) our ability to attract new users or convert registered users to paying users; (v) our future financial performance, including trends in revenue, costs of revenue, gross profit or gross margin, operating expenses, paying users, and free cash flow; (vi) our history of net losses and our ability to achieve or maintain profitability; (vii) our liability for any unauthorized access to our data or our users’ content, including through privacy and data security breaches; (viii) significant disruption of service on our platform or loss of content; (ix) any decline in demand for our platform or for content collaboration solutions in general; (x) changes in the interoperability of our platform across devices, operating systems, and third-party applications that we do not control; (xi) competition in our markets; (xii) our ability to respond to rapid technological changes, extend our platform, develop new features or products, or gain market acceptance for such new features or products, particularly in light of potential disruptions to the productivity of our employees that may result from our shift to a Virtual First work model; (xiii) our ability to manage our growth or plan for future growth; (xiv) our acquisition of other businesses and the potential of such acquisitions to require significant management attention, disrupt our business, or dilute stockholder value; (xv) our ability to attract and retain key personnel and highly qualified personnel; (xvi) our capital allocation plans with respect to our stock repurchase program and other investments; and (xvii) the dual class structure of our common stock and its effect of concentrating voting control with certain stockholders who held our capital stock prior to the completion of our initial public offering. Further information on risks that could affect Dropbox’s results is included in our filings with the Securities and Exchange Commission ("SEC"), including our Form 10-Q for the quarter ended March 31, 2021. Additional information will be made available in our quarterly report on Form 10-Q for the quarter ended June 30, 2021 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)