Dropbox: Fiscal 2Q23 Financial Results

Dropbox, Inc. announced financial results for its second quarter ended June 30, 2023.

“In 2Q, we delivered a solid quarter beating our guidance across all metrics, and introduced exciting AI-powered product experiences to our customers, including Dropbox Dash and Dropbox AI,” said co-founder and CEO Drew Houston. “As we navigate this period of economic uncertainty, we remain focused on improving the product experience within core Dropbox and creating more value across workflows and AI driven capabilities.”

2FQ23 Results
• Total revenue was $622.5 million, an increase of 8.7% from 2FQ22. On a constant currency basis, Y/Y growth would have been 11.2%.
• Total ARR ended at $2.500 billion, an increase of 7.2% from 2FQ22. On a constant currency basis, total ARR grew $32.6 million Q/Q, and Y/Y growth would have been 10.9%.
• Paying users ended at 18.04 million, as compared to 17.37 million for 2FQ22. Average revenue per paying user was $138.94, as compared to $133.34 for 2FQ22.
• GAAP gross margin was 80.7%, as compared to 81.5% for 2FQ22. Non-GAAP gross margin was 82.7%, as compared to 83.0% for 2FQ22.
• GAAP operating margin was 9.1%, as compared to 14.5% for 2FQ22, with such change partially due to $37.5 million in expenses related to the company’s reduction in workforce, such as severance, benefits and other related items, which were incurred in 2FQ23. Non-GAAP operating margin was 34.2%, as compared to 31.9% for 2FQ22.
• GAAP net income was $43.2 million, as compared to $62.0 million for 2FQ22 due to expenses related to the reduction in workforce in 2FQ22, such as severance, benefits and other related items. Non-GAAP net income was $174.0 million, as compared to $138.1 million for 2FQ22.
• Net cash provided by operating activities was $187.6 million, as compared to $209.9 million for 2FQ22. Free cash flow was $184.6 million, as compared to $205.9 million for 2FQ22. Cash flows in the second quarter of 2023 included $34.0 million of expenditures relating to the reduction in workforce.
• GAAP diluted net income per share attributable to common stockholders was $0.13, as compared to $0.17 in 2FQ22. Non-GAAP diluted net income per share attributable to common stockholders was $0.51, as compared to $0.38 in 2FQ22.
• Cash, cash equivalents and short-term investments ended at $1.228 billion.

Share Repurchase Authorization
On July 26, 2023, the board of directors authorized the company to repurchase an additional $1.2 billion of its Class A common stock. Repurchases will be made from time-to-time, subject to general business and market conditions, other investment opportunities and applicable legal requirements. Repurchases may be made through open market purchases or in privately negotiated transactions, including through Rule 10b5-1 plans.

GAAP and Non-GAAP diluted net income per share attributable to common stockholders is calculated based upon 343.8 million and 365.7 million diluted weighted-average shares of common stock for the three months ended June 30, 2023 and 2022, respectively.