Dropbox: Fiscal 3Q23 Financial Results

(in $ million)	3Q22	3Q23	9 mo. 22	9 mo. 23
Revenue	591.0	663.0	1,726	1,877
*Growth*		7%		9%
Net income (loss)	83.2	114.1	224.9	226.3

Dropbox, Inc. announced financial results for its third quarter ended September 30, 2023.

“In 3FQ23, we delivered a solid quarter, beating our revenue guidance and driving better than expected profitability,” said co-founder and CEO Drew Houston. “We also released Dropbox Dash into open beta, redesigned the core Dropbox web experience, and introduced new business plans that seamlessly integrate workflow solutions beyond storage. We continue to see an opportunity to leverage AI and machine learning to improve the experience of distributed work that will provide long term value for our customers and shareholders.”

3FQ23 Results

Total revenue was $633.0 million, an increase of 7.1% from 3FQ22. On a constant currency basis, Y/Y growth would have been 8.3%.
Total ARR ended at $2.525 billion, an increase of 3.8% from 3FQ22. On a constant currency basis, total ARR grew $24.5 million Q/Q, and Y/Y.
Paying users ended at 18.17 million, as compared to 17.55 million for 3FQ22. Average revenue per paying user was $138.71, as compared to $134.31 for 3FQ22
GAAP gross margin was 81.1%, as compared to 81.4% for 3FQ22. Non-GAAP gross margin was 82.6%, as compared to 82.9% for 3FQ22.
GAAP operating margin was 20.6%, as compared to 15.1% for 3FQ22. Non-GAAP operating margin was 36.0%, as compared to 31.6% for 3FQ22.
GAAP net income was $114.1 million, as compared to $83.2 million for 3FQ22. Non-GAAP net income was $194.1 million, as compared to $153.1 million for 3FQ22.
Net cash provided by operating activities was $255.9 million, as compared to $251.4 million for 3FQ22. Free cash flow was $246.5 million, as compared to $245.2 million for 3FQ22.
GAAP diluted net income per share attributable to common stockholders was $0.33, as compared to $0.23 in 3FQ22. Non-GAAP diluted net income per share attributable to common stockholders was $0.56, as compared to $0.43 in 3FQ22.
Cash, cash equivalents and short-term investments ended at $1.309 billion.

Comments

Tim Regan, CFO, commented: "While we continue to navigate an uncertain economic climate, we beat our revenue guidance, driven by strengths within our individual SKUs for the 2nd straight quarter. And we again drove better than expected profitability. However, we continue to see pressure across our Teams' customers and document workflow businesses, including seasonal softness within FormSwift."

Revenue in 3FQ23 increased 7.1% Y/Y and 2% Q/Q to $633.0 million, beating guidance range of $626 million to $629 million.

The revenue app performance was driven by strengths across individuals' plans, which were once again partially offset by headwinds we continue to see across company's teams and document workflow businesses.

Total ARR for 3FQ23 grew 3.8% Y/Y to $2.525 billion. During this 3-month period, the firm largely lapped the pricing and packaging changes it made to its Teams plans last June and hence added less quarterly net new ARR relative to 1FH23.

It exited the quarter with 18.2 million paying users and added approximately 130,000 net new paying users Q/Q. Average revenue per paying user for 3FQ23 was $138.71, down slightly on a sequential basis, but up over $4 Y/Y, driven by the Teams pricing increase, FormSwift as well as a shift to premium plans.

In October, the cloud storage company executed a buyout with its landlord of approximately 40% of its remaining sublease space in San Francisco, CA, for $79 million to be paid over 3 years, beginning with an approximate $28 million payment in 4FQ23.

Fiscal period

Revenue
in $ million

Y/Y growth

Net loss
in $ million

FY15

603.8

(352.9)

FY16

844.8

40%

(210.2)

FY17