Q2 2025 Dropbox Inc Earnings Call

August 7, 2025

Operator: Good day, and thank you for standing by. Welcome to the Dropbox Q2 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I'll now like to hand the conference over to your first speaker today, Peter Stabler, Head of Investor Relations. Please go ahead.

Good day, and thank you for standing by. Welcome to the Dropbox, second quarter 2025 earnings conference call.

At this time, all participants on listen-only mode.

At this speaker's presentation, there will be a question and answer session.

To ask a question during the session. You'll need to press Start 1. 1 on your telephone, you will then hear automated message advising. Your hand is raised.

To withdraw your question. Please press star 1 on again.

Please be advised that today's conference is being recorded on like the hand the conference over to your first Speaker today. Peter Stabler head of investor relations. Please go ahead.

Peter Stabler: Good afternoon and welcome to Dropbox's Q2 2025 Earnings Call. As a reminder, we will discuss non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.dropbox.com. We will also make forward-looking statements on this call, including statements about our future outlook for the Q3 and fiscal year 2025, as well as our expectations regarding our business, assets, strategies, and the macroeconomic environment. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our most recent and forthcoming reports on Form 10-Q. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made.

Good afternoon and welcome to Dropbox's second quarter 2025 earnings call. As a reminder, we will discuss non-GAAP financial measures on this call.

Definitions and reconciliations between our gaap and non-gaap results can be found in our earnings release. And our earnings presentation posted on our IR website at investors dropbox.com.

We will also make forward looking statements on this call, including statements about our future outlook for the third quarter and fiscal year 2025 as well. As our expectations regarding our business assets strategies and the macroeconomic environment.

Peter Stabler: Many of those risks and uncertainties are described in our SEC filings, including our most recent and forthcoming reports on Form 10-Q. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made.We disclaim any obligation to update any forward-looking statements except as required by law. I will now turn the call over to Dropbox's CEO and co-founder, Drew Houston.

Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described.

Many of those risks and uncertainties are described in our SEC filings including our most recent and forthcoming reports on form 10q.

Peter Stabler: We disclaim any obligation to update any forward-looking statements except as required by law. I will now turn the call over to Dropbox's CEO and co-founder, Drew Houston.

Forward-looking statements represent our beliefs and assumptions. Only, as of the date, such statements are made, we disclaim any obligation to update any forwarding statements except as required by law.

I will now turn the call over to Dropbox CEO and co-founder Drew Houston.

Drew Houston: Thanks, Peter. And good afternoon, everyone. Welcome to our Q2 2025 Earnings Call. I'm here with Tim Regan, our CFO. I'll start with our business and product highlights, and then Tim will walk through our Q2 results and outlook for the rest of the year. Let's dive in. Q2 capped off a solid first half of the year. Revenue came in ahead of guidance, and our continued focus on operating efficiency delivered another quarter of strong margin performance. Now I'll share an update on our two strategic priorities for this year, which are scaling Dash and simplifying and strengthening our core FSS business. Starting with Dash, I'll walk through what's going well, highlight areas we're focused on improving, and share where we're headed. We just finished the second full quarter where Dash for Business has been in market, and it's clear the value proposition is resonating.

Call. I'm here with Tim Regan our CFO.

I'll start with our business and product highlights and then Tim will walk through our Q2 results and outlook for the rest of the year.

Let's Dive In.

Q2 capped off a solid first half of the year.

Revenue came in ahead of guidance and our continued focus on operating efficiency delivered. Another quarter of strong margin performance.

Now, I'll share an update on our 2, strategic priorities for this year, which are scaling Dash and simplifying, and strengthening our core FSS business.

Starting with Dash.

I'll walk through what's going well, highlight areas. We're focused on improving and share where we're headed.

Drew Houston: We're seeing customers expand their license count, which is a great early signal. Our top priority has been building a great product experience and gathering user feedback to inform future development. As we noted last quarter, in April, we launched features designed to expand Dash's use cases and improve user productivity, and we're excited by the feedback and engagement gains we're seeing. Since launch, we've continued building new capabilities and most recently launched intranet features like org charts, people pages, and top requested integrations like Workday. We've also made meaningful improvements to support faster activation and a more intuitive first-use experience as we concentrate on streamlining onboarding. With a strong feature set in place, we're now focused on fine-tuning Dash's performance to build deeper user engagement, and although we're in early stages, recent results are encouraging.

We just finished the second full quarter of our data business in market, and it's clear. The value proposition is resonating.

We're seeing customers expand their license count, which is a great early signal.

Our top priority has been building a great product experience and gathering user feedback to inform future development.

As we noted last quarter in April, we launched features designed to extend Dash's use cases and improve user productivity and we're excited by the feedback and engagement gains we're seeing

since launch, we've continued building new capabilities and most recently launched internet features like org charts people pages and top requested Integrations like workday

We've also made meaningful improvements to support faster activation in a more intuitive first-use experience, as we concentrate on streamlining onboarding.

Drew Houston: Rich media search, which was part of our April launch, now accounts for a double-digit percent of total queries, and we're seeing growing adoption of Dash Chat for answering questions, summarizing long documents, and providing draft writing assistance. We've also seen strong sequential growth in key cohort metrics like weekly active users and activity rates per week, which is evidence that as customers gain familiarity with Dash, repeat usage climbs. Building on this product and engagement momentum for the second half of the year, we're ramping our focus on user growth and monetization. Customer conversations and usage data have helped us to refine our ideal customer profiles across industries and team sizes as we look to better target our outbound sales motion towards marketing, creative, and technology teams in the SMB to mid-market space, which are all historically strong verticals for us.

For the strong feature set in place. We're now focused on fine-tuning Dash's performance to build deeper user engagement. And although in an early stages, recent results are encouraging.

Rich media search which was part of our April launch now accounts for double digit percent of total queries. And we're seeing growing adoption of Dash chat for answering questions, summarizing long documents, and providing draft writing assistance.

We've also seen strong sequential growth and key cohort metrics like weekly active users and activity rates per week, which is evident. That is customers, gain familiarity with Dash, repeat usage clients,

Building on this product and engagement momentum for the second half of the Year. We're ramping. Our focus on user growth and monetization.

Drew Houston: Of course, our large base of FSS customers represents a huge opportunity for Dash since virtually all of our FSS users also have cloud content, and by bringing elements of Dash into our FSS product experience, we can accelerate awareness of Dash's functionality and ultimately help bridge our FSS users onto Dash. And finally, we remain on track to complement our outbound sales effort with a self-serve version of Dash in the coming months to address the underserved SMB space for both our current FSS customers and those using other FSS solutions. Moving on to core FSS. As a reminder, our key focus for FSS this year is strengthening and simplifying our user experience while also improving operating efficiency. This quarter, we made solid progress against both objectives, and we're beginning to see tangible improvement in key operating metrics.

And team sizes, as we look to better Target, our outbound sales motion towards marketing, creative, and Technology teams in the SMB to mid-market space which are all historically strong verticals for us.

Of course, our large base of FSS, customers represents a huge opportunity for dash, since virtually all of our FSS users also have cloud content and by bringing elements of Dash into our FSS product experience. We can accelerate awareness of Dash's functionality and ultimately help bridge. Our FSS users onto Dash.

And finally, we remain on track to complement our outbound sales effort with a self-serve version of Dash in the coming months to address. The underserved, SMB stays for both our current FSS customers and those using other FSS Solutions,

Moving on to core FSS.

as a reminder, our key Focus for FSS, this year is strengthening and simplifying your user experience while also improving operating efficiency,

this quarter, we made Solid progress against both objectives and we're beginning to see tangible improvements in key. Operating metrics.

Drew Houston: For example, we redesigned the team's onboarding experience to make it easier than ever to get users up and running. The early signal we're seeing is that faster onboarding has improved activation and setup rates by 5% and 10%, respectively, while at the same time driving a 100% increase in desktop downloads. And this is an important metric since web and desktop cross-platform activity associated with higher engagement and improved retention. Our new unified checkout provides frictionless multi-product purchasing, which enables customers to transact multiple purchases, including Dash, within a single purchase flow. We've also been making good progress on our retention initiatives. A good example is our redesigned cancellation flow that more clearly highlights the value we're providing. So as a result of these and other initiatives, we've seen meaningful retention gains for both teams and individual customers.

For example, we redesigned the teams onboarding experience to make it easier than ever to get users up and running.

The early signal we're seeing is that faster onboarding has improved activation and setup rates by 5 and 10 percent respectively, while at the same time, driving 100% increase in desktop downloads.

And this is an important metric since web and desktop crafts platform activity associated with higher engagement. Improved retention.

Our new unified checkout provides frictionless multi-product purchasing which enables customers to transact, multiple purchases, including Dash, within a single purchase flow.

We've also been making good progress on our retention initiatives.

A good example is our redesign cancellation flow that more clearly highlights the value. We're providing,

Drew Houston: On the infrastructure side, we continue investing in backend improvements aimed at strengthening the usability and security of our platform. This quarter, improvements to our desktop sync engine reduced startup times for large accounts, and we continue to drive higher adoption of important security features like multifactor authentication with new prompts and Teams admin controls. Within the individuals' business, we continue to see good traction with our simple plan, which is our low-price, entry-level plan designed for mobile-first customers. Across our document workflow business, we continue to invest in DocSend, and we've improved document upload flows, processing speeds, and simplified sharing permissions. These improvements are resonating with customers as DocSend continues to grow at a double-digit pace year-over-year. As mentioned previously, we remain focused on operating both Sign and FormSwift for maximum profitability, and both of these business lines continue to perform well against this objective.

so, as a result of these and other initiatives, we've seen meaningful retention games for both teams and individual customers,

On the infrastructure side, we continue to investing and back in improvements aimed at strengthening the usability and security of our platform.

This quarter improvements to our desktop sync, engine reduced startup times for large accounts and we continue to drive higher. Adoption of important security features like multi-factor authentication with new prompts and teams admin controls.

Within the individual's business. We continue to see good traction with our simple plans, which is our low price. Entry-level plan designed for mobile first customers.

Across our document workflow business, we continue to invest in DocSend, and we've improved document upload flows, processing speeds, and simplified sharing and permissions.

These improvements are resonating with customers as doc. Send continues to grow to double-digit Pace year-over-year.

As mentioned previously, we remain focused on operating both sign and form Swift for maximum profitability. And both of these business lines continue to perform well against the subjective.

Drew Houston: In closing, we're pleased with the progress we've made on our two key objectives in the first half of this year. Our Dash offering continues to improve, and we're seeing positive early signals with key engagement metrics. While we continue to optimize our outbound sales motion and improve our onboarding flows, we have a strong roadmap in place to unlock product-led adoption of Dash that will accelerate the adoption among our customers. I'll now turn the call over to Tim to share a recap of our second quarter financial performance as well as our updated full-year outlook.

In closing, we're pleased with the progress we've made on our 2, key objectives. In the first half of this year.

Our Dash offering continues to improve and we're seeing positive early signals with key engagement metrics.

While we continue to optimize our outbound sales, motion, and improve our onboarding flows, we have a strong road map in place to unlock product LED adoption of Dash. That will accelerate the adoption among our customers.

I'll now turn the call over to Tim to share a recap of our second quarter financial performance as well as our updated flow, your outlook.

Timothy Regan: Thank you, Drew. I'll cover our financial highlights from Q2 and then provide guidance for the third quarter and the full year 2025. We executed well in the quarter, with results coming in ahead of guidance and operating margin meaningfully exceeding our expectations. This performance reflects our continued commitment to driving efficiency within our core File Sync and Share and document workflow businesses, as well as the stability of the core business, which gives us the opportunity to invest in future growth opportunities. With that context in mind, let's turn to our Q2 financial performance. Starting with revenue, where we are managing through expected year-over-year revenue headwinds related to our strategic decisions to scale back our FormSwift business and to reduce the number of outbound sellers supporting our core File Sync and Share business. In Q2, total revenue declined 1.4% year-over-year to $626 million.

Thank you, drew.

I'll cover our financial highlights from Q2.

and then provide guidance for the third quarter and the full year 2025

we executed well in the quarter with results coming in ahead of guidance and operating margin meaningfully exceeding. Our expectations

This performance reflects our continued commitment to driving efficiency within our core file sync, and share and document workflow businesses as well as the stability of the Core Business, which gives us the opportunity to invest in future growth opportunities.

With that context in mind. Let's turn to our Q2 financial performance.

starting with Revenue where we are managing through expected year-over-year Revenue headwinds related to our strategic decisions to scale back our formswift business,

And to reduce the number of outbound sellers supporting our core file signature business.

Timothy Regan: Constant currency revenue declined 1.3% year-over-year to $626 million. Excluding the impact of FormSwift, which acted as a 140 basis point headwind to revenue, our year-over-year revenue growth would have been flat. Total ARR was $2.542 billion, down 1.2% year-over-year and 1.1% on a constant currency basis. FormSwift acted as a 160 basis point headwind to ARR in the quarter. We exited the quarter with 18.13 million paying users, a sequential decline of approximately 34,000 paying users. This quarter's decline in paying users was primarily driven by our reduced level of investment in FormSwift. Excluding the impact of FormSwift, paying users would have grown nominally in the quarter. The outperformance relative to our paying user expectations was primarily driven by our individual SKUs aided by retention gains stemming from improvements to our cancellation flows. Our Simple plan also contributed modestly.

Ac2 total revenue declined, 1.4% year-over-year to 626 million.

Content, currency, and revenue declined 1.3% year-over-year to $626 million.

Excluding the impact of forms with which acted, as a 140 basis, point headwind to revenue.

Our year-over-year revenue growth would have been flat.

Down 1.2% year-over-year and 1.1% on a constant currency basis.

Formswift acted as a 160 basis point headwind to ARR in the quarter.

We exited the quarter with 18.13 million paying users.

A sequential decline of approximately 34,000 paying users.

This quarter is decline in paying users, West, primarily driven by our reduced level of investment in form Swift.

Excluding the impact of form Swift paying users would have grown nominally in the quarter.

The outperformance relative to our paying user expectations.

Was primarily driven by our individual skus aided by a retention gains stemming from improvements to our cancellation flows.

Our Simple Plan also contributed modestly.

Timothy Regan: Average revenue per paying user was $138.32 as compared to $139.26 in the prior quarter. Our ARPU decline sequentially primarily due to the impact of FormSwift as well as the continued rollout of our Simple plan. Before we continue with further discussion of our P&L, I would like to note that unless otherwise indicated, all income statement figures mentioned are non-GAAP and exclude stock-based compensation, amortization of purchase intangibles, certain acquisition-related expenses, net gains and losses on our real estate assets, workforce reduction expenses, and net losses on equity investments. Our non-GAAP net income also includes the income tax effect of the aforementioned adjustments. Gross margin was 82.2% for the quarter, down 230 basis points from the year-ago period as we continue to support our data center refresh cycle. Operating margin was 41.5% ahead of our guidance of 37.5% and up roughly 560 basis points from the year-ago period.

Average revenue per paying user was 138.32.

As compared to 139.26 in the prior quarter.

Rpu declined sequentially primarily due to the impact of form Swift as well as the continued rollout of our Simple Plan.

Before we continue with further discussion of our p&l, I would like to note that unless otherwise indicated all income statement figures mentioned are non-gaap.

And excludes stock-based compensation, the amortization of purchase intangibles, certain acquisition related expenses.

net gains and losses on our real estate assets, Workforce reduction expenses, and net losses on Equity Investments

Our non-gaap net income also includes the income tax effect of the aforementioned adjustments.

Gross margin was 82.2% for the quarter down 230 basis points from the year ago, period.

As we continue to support our data center refresh cycle.

Operating margin was 41.5%.

Timothy Regan: Operating margin increased year-over-year largely due to our headcount reduction from our RIF last fall and lower marketing spend following the strategic shift away from FormSwift. Compared to our guidance, operating margin benefited primarily from a disciplined approach to hiring as well as targeted reductions in performance marketing within our core business as we continue to find ways to drive efficiencies within our business. Net income for the second quarter was $198 million, up 2% year-over-year. Diluted EPS for the second quarter was $0.71 based on 277 million diluted weighted average shares outstanding compared to $0.60 in the year-ago quarter, representing an 18% year-over-year increase. Moving on to our cash flow and balance sheet, cash flow from operations was $261 million, an increase of 13% versus the year-ago period.

Ahead of our guidance of 37.5% and up roughly 560 basis points from the year ago. Period.

Operating margin increased year-over-year. Largely due to our headcount reduction from our Rift last fall and lower marketing. Spend following the Strategic shift away from formswift.

Compared to our guidance, operating margin benefited primarily from a disciplined approach to hiring.

As well as targeted, reductions in Performance Marketing within our Core Business. As we continue to find ways to drive efficiencies within our business.

Net income for the second quarter was 198 million up 2% year-over-year.

Due to DPS for the second quarter was 71 cents.

based on 20077 million diluted weighted, average shares outstanding

Compared to 60 cents in the year ago, quarter.

Representing an 18% year-over-year increase.

Moving on to our cash flow and balance sheet cash flow from operations.

Timothy Regan: Q2 also included $18 million of interest payments net of the associated tax benefit related to amounts drawn under our Term Loan Facility. Capital expenditures were $2 million in the quarter, resulting in Unlevered Free Cash Flow of $276 million or $1 per share. In the quarter, we also added $25 million to our Finance Leases for data center equipment as we continue to invest in refreshing our data centers. We ended the quarter with cash and short-term investments of $955 million. In the second quarter, we repurchased approximately 14 million shares, spending approximately $400 million. As of the end of the second quarter, we had approximately $470 million remaining under existing share repurchase authorization. I'll now offer our updated outlook for Q3 and the full year 2025. For the third quarter of 2025, we expect revenue to be in the range of $622 to $625 million.

It was $261 million, an increase of 13% compared to the year ago period.

Q2 also included, 18 million dollars of interest payments. Net of the Associated Tax Benefit?

Related to amounts drawn, under our Term Loan facility.

Capital expenditures were $2 million in the quarter.

Resulting in unlevered, free cash flow of 276 million or 1 dollar per share.

In the quarter, we also added 25 million to our finance leases for data center equipment. As we continue to invest in refreshing our data centers.

We entered the quarter with cash and short-term Investments of 955 million.

and the second quarter we repurchased approximately 14 million shares spending approximately 400 million

As of the end of the second quarter, we had a proximately, 470 million remaining under existing share repurchase authorization.

I'll now offer our updated outlook for Q3 and the full year 2025.

For the third quarter of 2025, we expect revenue to be in the range.

Timothy Regan: We are expecting a currency tailwind of approximately $3 million. On a constant currency revenue basis, we expect revenue to be in the range of $619 to 622 million. We expect FormSwift to serve as a roughly 170 basis point headwind to revenue in the third quarter. We expect our non-GAAP operating margin to be approximately 37%. Finally, we expect diluted weighted average shares outstanding to be in the range of 269 to 274 million shares based on our 30-day trailing average share price. For the full year 2025, we are raising the midpoint of our as-reported revenue guidance range by $12.5 million, now expecting a range of $2.490 to 2.500 billion. We are also raising the midpoint of our constant currency revenue guidance by $2.5 million, now expecting a range of $2.488 to 2.498 billion.

Of 622, to 625 million.

We are expecting a currency Tailwind of approximately 3 million.

Revenue basis.

We expect Revenue to be in the range of 619.

To 622 million.

We expect forms to have to serve as a roughly 170 basis. Point headwind to revenue in the third quarter.

We expect our non-gaap operating margin to be approximately 37%.

Finally, we expect diluted weighted average shares outstanding to be in the range of 269.

To 20074 million shares based on our 30-day trailing average share price.

For the full year, 2025 we are raising the midpoint of our as reported Revenue guidance range by 12.5 million.

Now, expecting a range of 2.490.

To 2.500.

Billion dollars.

We are also raising the midpoint of our constant currency Revenue, guidance by 2.5 million.

now, expecting a range of 2.488,

The 2. 4 9 8.

Timothy Regan: We continue to expect FormSwift to serve as a roughly 150 basis point headwind to revenue this year. Our gross margin outlook is unchanged at approximately 82%. We are raising our outlook for non-GAAP operating margin by 50 basis points from the high end of our previously provided range, where we now expect full-year operating margin to be approximately 39%. We are raising unlevered free cash flow to be at or above $970 million. We also now expect cash interest expense net of tax benefits of approximately $85 million, down from $90 million. We are also maintaining our Capex guidance to be in the range of $25 to $30 million for the full year, in addition to finance leases to be approximately 6% of revenue. Finally, we continue to expect diluted weighted average shares outstanding to be in the range of 276 to 281 million shares.

we continue to expect Forum, Swift to serve as a roughly 150 basis, point headwind to revenue this year,

Our gross margin Outlook is unchanged at approximately 82%.

We are raising our outlook for non-gaap operating margin by 50 basis points from the high end of our previously provided range.

We now expect the full-year operating margin to be approximately 39%.

We are raising unlevered free cash flow to be at or above 970 million.

We also now expect cash interest expense, net of tax benefits.

Of approximately 85 million down from 90 million.

We are also maintaining our capex guidance to be in the range of 25 to 30 million.

For the full year in addition to finance lease lines to be approximately 6% of Revenue.

Finally, we continue to expect diluted weighted average shares outstanding to be in the range of 276.

To 281 million shares.

Timothy Regan: I'll now share some additional perspective on this guidance for 2025. With respect to revenue, we are raising our guidance range as we flow through the benefit of recent FX tailwind and as we are seeing some positive momentum across our core business, particularly across our retention efforts. Turning to paying users, we continue to anticipate a decline of approximately 1.5% or about 300,000 users for the full year, with the remaining decline to be fairly balanced between Q3 and Q4. We continue to expect that FormSwift will represent roughly half of the paying user decline this year, where these plans also carry a higher average selling price, and thus this decline will also introduce some pressure to our RPU trends. The remainder largely represents expected near-term downsells across our managed sales motion.

I'll now share some additional perspective on this guidance for 20125.

With respect to revenue, we are raising our guidance range as we flow through the benefit of recent FX Tailwind.

And as we are seeing some positive momentum across our Core Business, particularly across our retention efforts.

Turning to paying users, we continue to anticipate a decline of approximately 1.5%.

Or about 300,000 users for the full year.

With the remaining decline to be fairly balanced between Q3 and Q4.

We continue to expect that the Forum Swift will represent roughly half of the paying user decline this year.

Where these plans also carry a higher average selling price. And thus, this decline will also introduce some pressure to our arbeau trends.

The remainder of largely represents expected near-term down cells across our managed sales motions.

Timothy Regan: Moving on to operating margins, we are raising our full-year guidance by 50 basis points above the high end of our previously provided range, which largely reflects our outperformance thus far this year as we remain disciplined with our hiring and continue to find ways to optimize our marketing spend. We do, however, expect to invest further behind Dash as well as hire open roles in the second half of the year. We are also maintaining our full-year CapEx and finance lease guidance. We expect cash CapEx to ramp in the back half of the year to support certain facility restoration costs and data center buildouts. Regarding free cash flow, we are raising our Unlevered Free Cash Flow guidance roughly in line with the increased operating margins, largely reflecting our latest outlook on FX and the aforementioned cost savings.

Moving on to operating margins, we are raising our fill your guidance by 50 basis points above the high end of our previously provided range.

Which largely reflects our outperformance thus far this year as we remain disciplined with our hiring.

and continue to find ways to optimize our marketing spend

We do however expect to invest further behind Dash as well as higher open roles in the second half of the year.

We are also maintaining our fully your capex and finance lease guidance. We expect cash capex to ramp and the back half of the year to support certain facility restoration costs and data center build outs.

Regarding free cash flow. We are raising our unlevered free cash flow. Guidance, roughly in line with the increase operating emergence.

Timothy Regan: Our updated outlook also includes a modest expected benefit in the second half from lower cash taxes related to the one big, beautiful bill. Turning to WASO, our latest WASO guidance assumes we exhaust our existing share repurchase program by the end of the year. In conclusion, we are executing well against our plans for the year. We are generating higher levels of efficiency across our core file sync and share business as well as our document workflow businesses, and we are seeing stability across our core business despite reductions in headcount and marketing spend. We've also reduced our share count substantially, thus putting ourselves in a position to drive a meaningful increase in free cash flow per share this year. And we are making progress on both our product and go-to-market efforts for Dash. We look forward to sharing further updates on our progress in future quarters.

Largely reflecting our latest outlook on FX in the aforementioned cost savings.

Our updated Outlook also includes a modest expected benefit in the second half from lower cash, taxes related to the 1 big beautiful bill.

Turning the, woah.

Programs by the end of the year.

In conclusion, we are executing well against our plans for the year.

We are generating higher levels of efficiency across our core files. We could share business

Timothy Regan: We've also reduced our share count substantially, thus putting ourselves in a position to drive a meaningful increase in free cash flow per share this year. And we are making progress on both our product and go-to-market efforts for Dash. We look forward to sharing further updates on our progress in future quarters. With that, operator, please open the line for questions.

As well as our document workflow businesses and we are seeing stability across our Core Business, despite reductions in headcount and marketing spends.

We've also reduced our share count substantially thus putting ourselves in a position to drive a meaningful increase in free cash flow per share this year.

And we are making progress on both our product and go to market efforts for dash.

Timothy Regan: With that, operator, please open the line for questions.

We look forward to sharing further updates on our progress in future quarters.

Operator: Thank you. At this time, we will conduct a question-and-answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and a follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Mark Murphy of JPMorgan. Your line is now open.

Remember that operator, please open the line for questions.

Thank you at this time. We'll connect the question and answer session as a reminder, to ask a question. You'll need to press star 1 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please press star 1 1 1 again.

Please submit yourself to 1 question and a follow-up please. Stand by while we compile the Q&A roster.

Peter Stabler: Great. Thank you. This is Jaden Patel on for Mark Murphy. I appreciate you taking the questions. You talked about Dash having positive early signals with key engagement metrics. Can you discuss qualitatively some of the retention or even downgrade prevention lift you have observed among early Dash adopters versus existing cohorts?

Jaiden Patel: Great. Thank you. This is Jaden Patel on for Mark Murphy. I appreciate you taking the questions. You talked about Dash having positive early signals with key engagement metrics. Can you discuss qualitatively some of the retention or even downgrade prevention lift you have observed among early Dash adopters versus existing cohorts?

And our first question comes from the line of Mark Murphy of JP Morgan. Your line is now open,

Great. Thank you. This is Jaden. Patel on for Mark Murphy, appreciate you taking the questions. Um, you talked about Dash having a positive early signals, you know, with key engagement metrics. Um, can you discuss qualitatively? Some of the retention or even downgrade. Prevention lift. You have observed among early Dash adopters versus existing cohorts.

Drew Houston: Speaker, your mute is on mic. Your mic is on mute, speaker.

Operator: Speaker, your mute is on mic. Your mic is on mute, speaker.

Speaker, your mute is on mic.

Your mic is on mute speaker.

Timothy Regan: Let me know if it's coming on.

Drew Houston: Let me know if it's coming on.

Drew Houston: You're still not in clear.

Operator: You're still not in clear.

Like, let me know if it's coming on.

Timothy Regan: Okay. We're good? All right. Sorry about that. Not sure what happened, but we're good now. So with Dash, I mean, the first thing we're talking about momentum we're seeing with customers and just early adoption. I mean, our first focus is building a great product experience and product quality. And so things like our launch in April; we're really proud of what we launched in April with things like image and media search. We really think that breaks new ground in our category. And we're seeing good engagement, double-digit engagement, or double-digit percent of users engaging with image and media search. And then we look at a number of onboarding metrics.

Drew Houston: Okay. We're good? All right. Sorry about that. Not sure what happened, but we're good now. So with Dash, I mean, the first thing we're talking about momentum we're seeing with customers and just early adoption. I mean, our first focus is building a great product experience and product quality. And so things like our launch in April; we're really proud of what we launched in April with things like image and media search. We really think that breaks new ground in our category. And we're seeing good engagement, double-digit engagement, or double-digit percent of users engaging with image and media search. And then we look at a number of onboarding metrics.

You're still not clear.

Okay, we're good. All right. Um sorry about that. Um, not sure what happened but we're good now. Um, so with that I mean the first thing we've or you talk about momentum we're seeing with with customers and just early adoption. Um, I mean our first focus is making is building a great product experience and and product quality and so things like our launch in April. Um

Timothy Regan: As you can imagine, getting the percentage of licenses provisioned up, making sure that people are having a good first experience with the product, making sure that week two, week three, week four retention is healthy, and we've made big progress in each of those areas. And so those are some of the leading indicators we look at, just to make sure that we're retaining new customers as we turn on the faucet for user growth and attaching to the Dropbox base.

Drew Houston: As you can imagine, getting the percentage of licenses provisioned up, making sure that people are having a good first experience with the product, making sure that week two, week three, week four retention is healthy, and we've made big progress in each of those areas. And so those are some of the leading indicators we look at, just to make sure that we're retaining new customers as we turn on the faucet for user growth and attaching to the Dropbox base.

Uh, we're, we're, we're really proud of what we launched in April, with things like image and media search. Um, we really think that's, um, breaks new ground in our category, um, and we're seeing good engagement, double digit engagement or double digit percent of users, engaging with image and media search. Um, and then we look at a number of onboarding metrics

Tricks, as you can imagine, like getting the percentage of licenses provisioned up, making sure that people are having a good first experience with the product. Making sure that week, 2 week 3, week 4 retention, um, is healthy, and we've made big progress in each of those areas. Um,

Peter Stabler: Got it. And then can you talk a bit about the cancellation flow? What sort of uplift or improvement did you see due to this change?

Jaiden Patel: Got it. And then can you talk a bit about the cancellation flow? What sort of uplift or improvement did you see due to this change?

and so, those are some of the leading indicators. We look at, just make sure that we're retaining new customers. Um, as we turn on the faucet for user growth and attaching to the Dropbox space,

Timothy Regan: Sure. I think it's an example. We're looking across the funnel at different sources of regretted, or of voluntary and involuntary churn. And we saw that there's a number. This is sort of a lot. We're stacking up a lot of small wins, but an illustrative example might be in a or is in the cancellation flow as we better articulate the value that we're providing with Dropbox or all the things that are in your Dropbox. Often, we find that customers might not be fully aware of how deeply they're using the product or the value they're getting, and so better messaging around that we've shown to be creative. So lots of things like that. And then, as you'd imagine, things like billing optimizations and other things on involuntary churn are examples of the kinds of things that we've been tightening up.

Drew Houston: Sure. I think it's an example. We're looking across the funnel at different sources of regretted, or of voluntary and involuntary churn. And we saw that there's a number. This is sort of a lot. We're stacking up a lot of small wins, but an illustrative example might be in a or is in the cancellation flow as we better articulate the value that we're providing with Dropbox or all the things that are in your Dropbox. Often, we find that customers might not be fully aware of how deeply they're using the product or the value they're getting, and so better messaging around that we've shown to be creative. So lots of things like that. And then, as you'd imagine, things like billing optimizations and other things on involuntary churn are examples of the kinds of things that we've been tightening up.

Got it. And then can you talk a bit about the cancellation flow? Um, you know, what sort of uplift or Improvement? Did you see due to this change?

Sure. I think it's an example. We're looking at across the funnel at different sources of regretted and or of um voluntary and involuntary churn and um we saw that, you know there's a number. This is sort of a lot stacking up, a lot of you know, small wins but an illustrative example might be in a in a or or is in a cancellation flow.

Peter Stabler: Great. Thank you for taking the questions.

Jaiden Patel: Great. Thank you for taking the questions.

Um, as we better articulate, the value that we're providing with Dropbox, or, like, all the things that are in your Dropbox. You know, often we find that customers might not be fully aware of of, um, How Deeply they're using the product, or the value they're getting, and so better messaging around that. Um, we've shown to be, um, agreed it. So, um, lots of things like that. And then as you'd imagine things, like billing optimizations, and other things on involuntary, turn our examples of the kinds of things that we've been tightening up.

Timothy Regan: Yep.

Drew Houston: Yep.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Stephen Enders, Citi. Your line is now open.

Great. Thank you for taking the questions.

Yep.

Thank you. 1 moment for our next question.

And our next question comes from the line of Steven Enders a city. Your line is now open.

Steven Enders: Hi. This is Palak for Stephen Enders. Thank you for taking the questions. So my first question was, I think you had much better churn than expected for the second quarter in a row. Yet, you maintained the 300,000 guide. So is FormSwift declining at a slower pace than was expected, or what is going well, which is contributing to improved churn in the first half?

Palak Chandak: Hi. This is Palak for Stephen Enders. Thank you for taking the questions. So my first question was, I think you had much better churn than expected for the second quarter in a row. Yet, you maintained the 300,000 guide. So is FormSwift declining at a slower pace than was expected, or what is going well, which is contributing to improved churn in the first half?

Hi. This is palak for Steven Andres. Uh, thank you for taking the questions. So my first question was

Drew Houston: Sure. With respect to paying users, yes, we do continue to anticipate a decline of about 1.5% or about 300,000 users for the full year. Expect that to be fairly balanced between Q3 and Q4, and continue to expect that FormSwift will represent roughly half of that decline. FormSwift performing well so far in the year, but still expect the same roughly half of that 300,000 impact from FormSwift for this year. And then the remainder largely represents expected near-term downsells across our managed sales motion. And then as far as churn, Drew just touched on a lot of factors that the team's focused on. Seeing some positive momentum on that front, and that's part of why we're able to raise our guidance for the full year is seeing some strong performance as far as the team working on retention.

Timothy Regan: Sure. With respect to paying users, yes, we do continue to anticipate a decline of about 1.5% or about 300,000 users for the full year. Expect that to be fairly balanced between Q3 and Q4, and continue to expect that FormSwift will represent roughly half of that decline. FormSwift performing well so far in the year, but still expect the same roughly half of that 300,000 impact from FormSwift for this year. And then the remainder largely represents expected near-term downsells across our managed sales motion. And then as far as churn, Drew just touched on a lot of factors that the team's focused on.

Um sure with respect to paying users, yes, we do. Continue to anticipate

A decline of about 1 and a half percent or about 300,000 users for the full year, expect that to, uh, be fairly balanced between Q3 and Q4 and continue to expect.

Timothy Regan: Seeing some positive momentum on that front, and that's part of why we're able to raise our guidance for the full year is seeing some strong performance as far as the team working on retention. So good signals on churn, and pleased to see that flow through the results.

Drew Houston: So good signals on churn, and pleased to see that flow through the results.

That form Swift will represent roughly half of of that decline form Swiss performing well, so far in the year, but still expect the same roughly half of that 300,000 impact from formswift for this year and then the remainder largely represents expected near-term down cells across our managed sales motion and then as far as churn I drew just touched on a lot of factors that the teams focused on seeing some positive momentum on that front. And that's part of why we're able to uh, raise our guidance, for the full year, is seeing some strong uh, performance uh uh uh, as far as the team working on retention. So, um, good signals on churn and and uh, pleased to see that flow through the results.

Steven Enders: Perfect. Thank you. My next question is on Dash. So just curious, you mentioned the soft-sell motion, and what would be the timeframe for the soft-sell motion this year? And what are the key areas of investment you're looking at in Dash going forward, and what would be the monetization expectations for next year?

Palak Chandak: Perfect. Thank you. My next question is on Dash. So just curious, you mentioned the soft-sell motion, and what would be the timeframe for the soft-sell motion this year? And what are the key areas of investment you're looking at in Dash going forward, and what would be the monetization expectations for next year?

Timothy Regan: Sure. So for Dash, we plan to launch a self-serve version of Dash, so basically a version anyone can download and start using, similar to what we did with Dropbox 1.0. And we believe that's going to unlock both the large population in general, and then also unlock the Dropbox self-serve base because if you look at it or if you think about it, we've got 500,000 business accounts, self-serve business accounts on Dropbox. And to best drive adoption of Dash, we need a self-serve version of the product. So that's a big area of focus for us for the second half of the year. And then second is integrating Dash into the Dropbox FSS experience.

Drew Houston: Sure. So for Dash, we plan to launch a self-serve version of Dash, so basically a version anyone can download and start using, similar to what we did with Dropbox 1.0. And we believe that's going to unlock both the large population in general, and then also unlock the Dropbox self-serve base because if you look at it or if you think about it, we've got 500,000 business accounts, self-serve business accounts on Dropbox. And to best drive adoption of Dash, we need a self-serve version of the product. So that's a big area of focus for us for the second half of the year. And then second is integrating Dash into the Dropbox FSS experience.

Perfect. Thank you. Um and my next question is on uh Dash. So just curious like uh you mentioned. This is also motion and what would be the time frame for this also have a motion this year and what are the key areas of investment you're looking at in dash going forward. Um, and what would be the monetization expectations for next year?

Sure. Uh, so for dash. We are, uh, we plan to launch a self-serve version of Dash, so basically a version anyone can download and start using, uh, similar to, to, um, what we did with Dropbox, 1.0,

um, and we believe that's going to unlock, uh,

Timothy Regan: And so you can think of Dash as both a standalone product that allows us to reach a new audience of people beyond our file syncing audience, and it's also the AI layer across Dropbox FSS for our existing customers. And so to that end, we expect that or the way we're our plan is to have Dash be something that you add on top of FSS to be able to get AI or be able to interact in natural language with your files. We'll have a lot more share on the specifics of that and specifics of pricing and packaging, but how we monetize Dash overall is for non-FSS users, it'll be a separate product and separate subscription. And then we'll have different packages for people who are existing FSS customers to also adopt Dash.

Drew Houston: And so you can think of Dash as both a standalone product that allows us to reach a new audience of people beyond our file syncing audience, and it's also the AI layer across Dropbox FSS for our existing customers. And so to that end, we expect that or the way we're our plan is to have Dash be something that you add on top of FSS to be able to get AI or be able to interact in natural language with your files. We'll have a lot more share on the specifics of that and specifics of pricing and packaging, but how we monetize Dash overall is for non-FSS users, it'll be a separate product and separate subscription. And then we'll have different packages for people who are existing FSS customers to also adopt Dash.

Uh, both the large population in general, and then also unlock the Dropbox self-serve base, because if you, if you look at it, if you think about it, we've got half a million business accounts, self-service business accounts on Dropbox and, uh, to best Drive adoption of Dash it. We need us help serve version of the product. So that's a big area of focus for us for the second half of the year. And then second is integrating Dash into the Dropbox, FSS experience, and so, you can think of Dash as both a standalone product. Uh, that allows us to reach a new audience of people beyond our file syncing audience, and it's also the AI layer across Dropbox FSS, um, for our existing customers. Um, and so to that end, we expect that you or the way we're, um, our plan is to have Dash be something that you add on top of FSS, uh, to be able to get AI or be able to interact with natural languages.

Their files. Um, we'll have a lot more share on the specifics of that, um, and specifics of pricing and packaging. But how we monetize, um,

Timothy Regan: As you'd imagine, we'll be experimenting and iterating on pricing and packaging specifically, and different bundling and discount approaches.

Drew Houston: As you'd imagine, we'll be experimenting and iterating on pricing and packaging specifically, and different bundling and discount approaches.

Drew Houston: Just to also briefly add on as far as the monetization expectations, I'd say our guidance certainly reflects our expectations and incorporates this self-serve rollout. I do think it will take time before Dash contributes meaningfully to our revenue growth given the size of our ARR base. So again, refer to our guidance for our expectations for this year.

Timothy Regan: Just to also briefly add on as far as the monetization expectations, I'd say our guidance certainly reflects our expectations and incorporates this self-serve rollout. I do think it will take time before Dash contributes meaningfully to our revenue growth given the size of our ARR base. So again, refer to our guidance for our expectations for this year.

Dash overall is for for non FSS users. It'll be a separate product and separate subscription, and then we'll have different um, packages for people who are existing FSS, customers to also, adopt Dash and and um, and as you'd imagine, we'll we'll be experimenting in and iterating on, um, pricing and packaging specifically in different bundling and discount, um, approaches.

Uh just to also briefly add on as far as the monetization expectations. Uh, I'd say our guidance certainly reflects our expectations and incorporates this self-serve roll out.

Uh I I do think it will take time before Dash contributes meaningfully to our Revenue growth, given the size of our ARR base.

Um, and so again, refer to our guidance for our expectations for this year.

Steven Enders: Perfect. Thank you so much.

Palak Chandak: Perfect. Thank you so much.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Patrick Walravens of Citizen. Your line is now open.

Perfect, thank you so much.

Thank you. 1 moment for our next question.

In our next question, comes online of Patrick Wall. Rivers of citizens in line is now open.

[Analyst] (Citizens JMP): Hi guys. Thank you for taking the question. This is Nick on for Pat. Just one from me. We've seen Slack and others tighten API access, really limiting third-party indexing and message history. Has Dash been affected by these changes, and how are you navigating this kind of environment of limitations?

Nicholas Freeman Jones: Hi guys. Thank you for taking the question. This is Nick on for Pat. Just one from me. We've seen Slack and others tighten API access, really limiting third-party indexing and message history. Has Dash been affected by these changes, and how are you navigating this kind of environment of limitations?

Hi guys. Thank you for taking the question. This is Nick on for Pat just 1 for me. We've seen slack and others Titan API access really limiting third party indexing and message history as Dash been affected by these changes. And how are you navigating this kind of this environment of uh, limitations

Timothy Regan: Yep. So yeah, for Color, as you said, Slack's been changing some of their APIs or sunsetting certain integrations, creating other ones. And so that forces all their partners to adapt to the new APIs. And so we've certainly been doing that. And importantly, we still have access to Slack and a good partnership with them. And so we're still able to provide the basic value of the product. I mean, some things around the edges might be a little bit more onerous from a technical perspective, or results might not be as exhaustive as we'd like. But I think the one world that would be concerning is if partners or if we're in a world where partners were cutting off API access, we don't see that as likely.

Drew Houston: Yep. So yeah, for Color, as you said, Slack's been changing some of their APIs or sunsetting certain integrations, creating other ones. And so that forces all their partners to adapt to the new APIs. And so we've certainly been doing that. And importantly, we still have access to Slack and a good partnership with them. And so we're still able to provide the basic value of the product. I mean, some things around the edges might be a little bit more onerous from a technical perspective, or results might not be as exhaustive as we'd like. But I think the one world that would be concerning is if partners or if we're in a world where partners were cutting off API access, we don't see that as likely.

Yep. So, um, yeah, for caller. As you said, their Stock's been changing. Some of their apis are, um, uh, you know, sun setting, certain Integrations, creating other ones, um, and so that has that forces all their Partners to adapt to the new apis. And so, we've certainly been doing that. Um,

And uh and we importantly we still have access uh to slack and um a good partnership with them. And so we're still able to provide the basic value of the product. I mean some things around the edges might um,

Timothy Regan: And mainly because customers, as you'd imagine, they put their data into these services and a service that locks out these integrations. I mean, that's a pretty customer-hostile thing to do. So I think it's a difficult stance for a company to take in the long run. We know different companies are going to play with different knobs and dials with access. But we feel good both from a business and partnership standpoint because Dropbox also has a lot of content and integrations with other services. And so we provide value to folks that integrate with us. And so there's a good kind of business foundation there. And then there are also technical measures that you can take to improve coverage and ultimately give customers access to their data regardless of what service it's in.

Drew Houston: And mainly because customers, as you'd imagine, they put their data into these services and a service that locks out these integrations. I mean, that's a pretty customer-hostile thing to do. So I think it's a difficult stance for a company to take in the long run. We know different companies are going to play with different knobs and dials with access. But we feel good both from a business and partnership standpoint because Dropbox also has a lot of content and integrations with other services. And so we provide value to folks that integrate with us. And so there's a good kind of business foundation there. And then there are also technical measures that you can take to improve coverage and ultimately give customers access to their data regardless of what service it's in.

Perspective, um, or results might not be as exhaustive as we'd like, um, but I think, you know that 1 World we'd be that would be concerning as if, um, Partners or, you know, for in a world where Partners were cutting off API access. We don't see that as likely, um,

And uh mainly because customers as you'd imagine, you know, they put their data into these services in a service that locks out these Integrations. Um,

Timothy Regan: Actually, to that end, our ability to integrate more deeply and leverage some of these technical measures could be a competitive advantage for Dash. We feel good about the trajectory of supporting Slack, although yeah, it's been a winding road.

Drew Houston: Actually, to that end, our ability to integrate more deeply and leverage some of these technical measures could be a competitive advantage for Dash. We feel good about the trajectory of supporting Slack, although yeah, it's been a winding road.

Uh, at the I mean, that's a pretty customer hostile thing to do. So I think it's like a difficult stance, um, for a company to take in the long run. Um, you know, we know different companies are going to play with different, um, you know, D different knobs and dials with with access. Um, but we feel good both from a business and partnership standpoint, because Dropbox also has a lot of content that, um, and Integrations with other services, um, and so we provide value to to folks that integrate with us. And so, there's a good kind of business Foundation there. And then there are also technical measures that you can take to improve coverage, um, and ultimately give customers access to their data. Um, regardless of what service is it? It's in. And, and actually, to that end, um, our ability to integrate more deeply. Um, and leverage, some of these technical measures could be a competitive Advantage for dash. So, um, we feel good. We feel good about the trajectory of supporting slack. Although yeah, it's been a Winding Road.

[Analyst] (Citizens JMP): Got it. Thank you very much.

Nicholas Freeman Jones: Got it. Thank you very much.

Got it. Thank you very much.

Operator: Thank you. One moment for our next question. Again, as a reminder to ask the question, you'll need to press star 11 on your telephone. And our next question comes from the line of Matt Bullock of Bank of America. Your line is now open.

Thank you. One moment for our next question. Again, as a reminder, to ask a question, you will need to press *11 on your telephone.

Matt Bullock: Great. Hi. Thanks. Thanks for taking the question. I wanted to ask about the strategy going forward for attacking the free base of 700 million+ registered users. I know over the years, you've pushed a little bit harder on converting those users, but maybe help us think about the strategy going forward if there's potential to accelerate or maybe be a little bit harsher on creating some more prepaid conversion. Thanks. And then I have one follow-up.

Matthew John Bullock: Great. Hi. Thanks. Thanks for taking the question. I wanted to ask about the strategy going forward for attacking the free base of 700 million+ registered users. I know over the years, you've pushed a little bit harder on converting those users, but maybe help us think about the strategy going forward if there's potential to accelerate or maybe be a little bit harsher on creating some more prepaid conversion. Thanks. And then I have one follow-up.

And our next question comes from the line of Matt Bullock of bagel America. Your line is now open.

Great. Hi thanks. Thanks for taking the question. I wanted to ask about

Timothy Regan: Yep. So we're tackling this in a number of directions. I think the most important is continuing to provide more and more value so that people get a lot of value, and then they pay for that value. So Dash is a good example of providing a lot of new value to our existing free users beyond files, right, because all of those free users have cloud content as well and are a good fit for Dash. And then since the beginning, our free users are sort of the top of the funnel for our eventual paid users. Virtually every subscriber started out as a free user in some form. So the free users are an important part of the engine. That said, there's tons of optimizations we continue to do.

Drew Houston: Yep. So we're tackling this in a number of directions. I think the most important is continuing to provide more and more value so that people get a lot of value, and then they pay for that value. So Dash is a good example of providing a lot of new value to our existing free users beyond files, right, because all of those free users have cloud content as well and are a good fit for Dash. And then since the beginning, our free users are sort of the top of the funnel for our eventual paid users. Virtually every subscriber started out as a free user in some form. So the free users are an important part of the engine. That said, there's tons of optimizations we continue to do.

a strategy going forward for attacking, you know, the free base of, you know, 700 million plus registered users. I know over the years, you've you've pushed a little bit harder on converting those users, but maybe help us think about the strategy going forward. You know, if there's potential to accelerate or maybe, uh, be a little bit harsher on on, on, uh, creating some more prepaid conversion. Thanks then I have 1, follow-up.

Yep. Um, so we're tackling this in the number of directions, um, I think the most important is providing is continuing to provide more and more value so that people, um, get a lot of value. And then then they pay for that value. Uh, so Dash is a good example of, um, providing a lot of, uh, providing a lot of new value to our free to our existing free users um Beyond files, right? Because all of those free users have cloud content as well and are a good fit um for dash. Uh and then since the beginning, our free users are are sort of the top of the funnel. For our eventual paid users. You know, virtually every subscriber started out as a free user.

Timothy Regan: So I mentioned, for example, we launched a Dropbox Simple plan targeted at our mobile-only customers where we were able to provide an entry point that's more affordable to folks who are more price-sensitive without cannibalizing the rest of our base. And so that's a way to capture some of the demand that otherwise would be unwilling or unable to subscribe to a higher-priced plan. And then to your point, as you're alluding to, we've had success with just getting the balance of the free value we provide and making sure that's in balance with the premium subscriber value that we provide. Over the years, we've put in different or phased in different things like device limits for free users so that extremely engaged users aren't getting too much value for free.

Drew Houston: So I mentioned, for example, we launched a Dropbox Simple plan targeted at our mobile-only customers where we were able to provide an entry point that's more affordable to folks who are more price-sensitive without cannibalizing the rest of our base. And so that's a way to capture some of the demand that otherwise would be unwilling or unable to subscribe to a higher-priced plan. And then to your point, as you're alluding to, we've had success with just getting the balance of the free value we provide and making sure that's in balance with the premium subscriber value that we provide. Over the years, we've put in different or phased in different things like device limits for free users so that extremely engaged users aren't getting too much value for free.

In some form. Um so it's just an the free users are an important part of the engine that said there's uh tons of optimizations, we continue to do. So I mentioned uh for example we launched a Dropbox Simple Plan targeted at our mobile only customers. Um

Where we were able to provide an entry point. Um, that's more affordable to folks, who are more price sensitive without cannibalizing, uh, the rest of our base. And so, that's a way to capture some of the demand that otherwise would be. Um,

You know, unwilling or unable to subscribe to a higher price plan. Um, and then there's, you know, to your point, as you're alluding to, we've had success with just getting the balance of the value, the free value we provide, um, and making sure that's in balance with the premium, you know, subscriber value that we provide. You know, over the years, we've put in.

Timothy Regan: We continue to iterate on all aspects of pricing and packaging to improve the balance of, we want to drive adoption and broad adoption, and it's a big advantage that we have this free top of funnel. But we obviously don't want to either under-monetize or over-monetize at the expense of one lever or the other.

Drew Houston: We continue to iterate on all aspects of pricing and packaging to improve the balance of, we want to drive adoption and broad adoption, and it's a big advantage that we have this free top of funnel. But we obviously don't want to either under-monetize or over-monetize at the expense of one lever or the other.

Different or, you know, phased in different things, like device limits for free users, um, so that extremely engaged users aren't getting, you know, too much value for free. Um, and we continue to iterate on all all aspects of pricing and packaging to get to, to improve the balance of like, we want to drive adoption and Broad adoption. And you know, there it's a big advantage that we have this free type of funnel. Um,

Matt Bullock: Super helpful, Drew. Thanks. And then just one quick follow-up on Dash. Obviously, the self-serve launch coming later this year, how should we be thinking about metrics and disclosures around Dash? We know how you're evaluating it internally, but how should we be thinking about modeling or even evaluating key metrics like users, etc.?

Matthew John Bullock: Super helpful, Drew. Thanks. And then just one quick follow-up on Dash. Obviously, the self-serve launch coming later this year, how should we be thinking about metrics and disclosures around Dash? We know how you're evaluating it internally, but how should we be thinking about modeling or even evaluating key metrics like users, etc.?

But we can, we obviously don't want to either under monetize or over monetize. Um, at the expense of 1 lever or the other

Timothy Regan: Sure. Yeah. As we mature, as we get further along the life cycle, we'll obviously have more to share. In principle, I mean, we start with just the quality of the experience, as I said. Then we focus on onboarding success. Then we make sure the experience is retentive, that people are expanding, that viral loops are working, that monetization's working, that paid retention's working. I mean, we don't focus on them completely in series, but that's sort of the general path. Sometimes it's noisy. So as we open up to large new audiences, and some of those, there's fluctuation in those metrics. And so we'll certainly provide more color on the different funnel metrics as we get more signal as we scale it up.

Drew Houston: Sure. Yeah. As we mature, as we get further along the life cycle, we'll obviously have more to share. In principle, I mean, we start with just the quality of the experience, as I said. Then we focus on onboarding success. Then we make sure the experience is retentive, that people are expanding, that viral loops are working, that monetization's working, that paid retention's working. I mean, we don't focus on them completely in series, but that's sort of the general path. Sometimes it's noisy. So as we open up to large new audiences, and some of those, there's fluctuation in those metrics. And so we'll certainly provide more color on the different funnel metrics as we get more signal as we scale it up.

Super helpful, thanks. And then just 1, quick follow up on on dash obviously, you know the self-serve launch coming later this year, you know, how should we be thinking about, you know, metrics and disclosures, um, around Dash, you know, how are you? We know how you're evaluating it internally. But how should we be thinking about, uh, modeling or, or even evaluating, um, key metrics like users? Uh, Etc.

Sure. Yeah, as we mature, as we get further along the life cycle, we'll we'll obviously have more to share um, in principle. And we start with the just the quality of the experience. As I said, then we focus on onboarding success.

Um, that people are expanding their viral Loops are working. That modernization, is working that paid retention is working. Um, I mean we we don't focus on them completely in series but that's sort of the general path. Um, sometimes it's noisy. So, uh, as we like, open up to large new audience and some of those um, you know, there's fluctuation in those metrics and so. But as soon as, um,

Uh, but what we'll certainly provide more. Um,

Matt Bullock: Super helpful. Thanks, Drew.

Matthew John Bullock: Super helpful. Thanks, Drew.

Color on these on the different funnel metrics, uh, as we get more signal as we scale it up.

Super helpful. Thanks Drew.

Operator: Thank you. I'm showing no further questions at this time. I'll now turn it back to Peter for closing remarks.

Thank you. I'm showing no further questions at this time. I'll now turn it back to Peter for a closer remarks.

Peter Stabler: Thank you, everyone, for joining us today. We look forward to speaking with you next quarter. Have a great afternoon.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Thank you everyone for joining us today. We look forward to speaking with you, next quarter, have a great afternoon.

Thank you for your participation. In today's conference, this does conclude the program. You may now disconnect

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