Earnings call transcript: Dropbox beats Q2 2025 forecasts, shares dip

Dropbox Inc. (NASDAQ:DBX), a cloud storage company with a market capitalization of $7.38 billion, reported its second-quarter earnings for 2025, surpassing analyst expectations with an earnings per share (EPS) of $0.71 compared to the forecasted $0.62. Revenue also exceeded projections, reaching $626 million against an expected $617.83 million. Despite the positive earnings surprise, Dropbox shares fell 1.17% post-market, closing at $26.20, reflecting investor concerns over future growth prospects and strategic adjustments. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations.

Key Takeaways

• Dropbox’s Q2 revenue and EPS both exceeded analyst forecasts.
• Stock price decreased by 1.17% in after-hours trading.
• The company highlighted strong operational efficiency and margin performance.
• Future guidance indicates a slight decline in paying users.

Company Performance

Dropbox demonstrated solid performance in Q2 2025, with revenue slightly declining by 1.4% year-over-year to $626 million. The company’s net income rose by 2% year-over-year to $198 million, indicating improved profitability despite revenue headwinds. The reduction in the FormSwift business was noted as a factor impacting revenue growth, yet operational efficiencies helped maintain robust margins.

Financial Highlights

• Revenue: $626 million, down 1.4% YoY
• Earnings per share: $0.71, up 18% YoY
• Gross Margin: 82.2%
• Operating Margin: 41.5%
• Total Annual Recurring Revenue (ARR): $2.542 billion, down 1.2% YoY

Earnings vs. Forecast

Dropbox’s Q2 EPS of $0.71 surpassed the forecasted $0.62 by 14.52%. Revenue of $626 million also exceeded expectations of $617.83 million by 1.27%. This performance marks a positive deviation from projections, driven by strong margin management and operational efficiencies.

Market Reaction

Despite beating earnings expectations, Dropbox’s stock price declined by 1.17% in after-hours trading, closing at $26.20. The stock’s movement reflects investor caution, possibly due to anticipated challenges and strategic shifts. The company’s performance remains within its 52-week range of $21.82 to $33.33. InvestingPro has identified several positive factors, including management’s aggressive share buybacks and high shareholder yield. Subscribers can access 8 additional exclusive ProTips and comprehensive analysis in the Pro Research Report.

Outlook & Guidance

With a PEG ratio of 13.28 indicating premium valuation relative to growth, Dropbox provided a cautious outlook, projecting full-year revenue between $2.49 and $2.50 billion. Discover deeper insights and make more informed investment decisions with InvestingPro’s comprehensive analysis of over 1,400 US stocks, including exclusive Fair Value calculations and detailed financial health scores. The company anticipates a 1.5% decline in paying users, approximately 300,000 users, as it continues to focus on expanding its AI capabilities and product development. The upcoming launch of a self-serve version of the Dash product is expected to contribute modestly to revenue growth.

Executive Commentary

CEO Drew Houston emphasized the company’s strategic focus, stating, "We’re seeing customers expand their license count, which is a great early signal." He also highlighted plans to launch a self-serve version of Dash to leverage Dropbox’s substantial user base. CFO Tim Regan tempered expectations, noting, "It will take time before Dash contributes meaningfully to our revenue growth."

Risks and Challenges

• Potential decline in paying users as projected.
• Integration challenges with new AI products.
• Market competition in the document workflow segment.
• Economic uncertainties affecting SMB and mid-market segments.
• Dependency on successful adoption of new product offerings.

Q&A

During the earnings call, analysts inquired about Dash adoption metrics and API integration challenges. Executives also addressed strategies for converting free users to paid plans and monetization approaches for the new Dash product, indicating a strategic focus on long-term growth initiatives.

Full transcript - Dropbox Inc (DBX) Q2 2025:

Conference Operator: Good day and thank you for standing by. Welcome to the Dropbox Second Quarter twenty twenty five 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. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your first speaker today, Peter Stabler, Head of Investor Relations. Please go ahead.

Peter Stabler, Head of Investor Relations, Dropbox: Good afternoon, and welcome to Dropbox’s second quarter twenty twenty five 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. 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. 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.

Drew Houston, CEO and Co-Founder, Dropbox: Thanks, Peter, and good afternoon, everyone. Welcome to our Q2 twenty twenty five 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 of our Dasher business has been 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 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 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.

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. 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 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 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.

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. Of course, our large base of FSS customers represents a huge opportunity for Dash since virtually all of our FSS users all 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. 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 510% respectively, while at the same time driving a 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 multiproduct 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. On the infrastructure side, we continue investing in back end improvements aimed at strengthening the usability and security of our platform.

This quarter, improvements to our desktop sync engine reduced start up 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 of 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.

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 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 full year outlook.

Tim Regan, CFO, Dropbox: 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 q two 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. In Q2, total revenue declined 1.4% year over year to $626,000,000 Constant currency revenue declined 1.3% year over year to $626,000,000 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 $2,542,000,000 down 1.2% year over year and 1.1 on a constant currency basis. Form Swift acted as a 160 basis point headwind to ARR in the quarter. We exited the quarter with 18,130,000 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. Average revenue per paying user was $138.32 as compared to $139.26 in the prior quarter.

ARPU declined 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 and 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 two thirty 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 five sixty basis points from the year ago period.

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 $198,000,000 up 2% year over year. Diluted EPS for the second quarter was $0.71 based on $277,000,000 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 $261,000,000, an increase of 13 versus the year ago period. Q two also included $18,000,000 of interest payments, net of the associated tax benefit related to amounts drawn under our term loan facility. Capital expenditures were $2,000,000 in the quarter, resulting in unlevered free cash flow of $276,000,000 or $1 per share. In the quarter, we also added $25,000,000 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 $955,000,000 In the second quarter, we repurchased approximately 14,000,000 shares, spending approximately $400,000,000 As of the end of the second quarter, we had approximately $470,000,000 remaining under existing share repurchase authorization.

I’ll now offer our updated outlook for Q3 and the full year 2025. For the 2025, we expect revenue to be in the range of $622,000,000 to $625,000,000 We are expecting a currency tailwind of approximately $3,000,000. On a constant currency revenue basis, we expect revenue to be in the range of 619 to $622,000,000. 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 $269,000,000 to $274,000,000 shares based on our thirty day trailing average share price. For the full year 2025, we are raising the midpoint of our as reported revenue guidance range by $12,500,000 now expecting a range of 2.49 to $2,500,000,000. We are also raising the midpoint of our constant currency revenue guidance by $2,500,000, now expecting a range of $2,488,000,000 to $2,498,000,000 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 $970,000,000 We also now expect cash interest expense net of tax benefits of approximately $85,000,000 down from $90,000,000 We are also maintaining our CapEx guidance to be in the range of $25,000,000 to $30,000,000 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 $2.76 to $281,000,000 shares. 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 q three and q four. We continue to expect that ForumSwift 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 ARPU trends. The remainder largely represents expected near term down sells across our managed sales motion. 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 higher 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 build outs. 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. 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 files that could 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. And with that, operator, please open the line for questions.

Conference Operator: Thank you. At this time, we’ll conduct a question and answer session. And And our first question comes from the line of Mark Murphy of JPMorgan. Your line is now open.

Jaden Patel, Analyst, JPMorgan: Great. Thank you. This is Jaden Patel on for Mark Murphy. I appreciate you taking the questions. You talked about DASH having a positive early signals, you know, 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?

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

Drew Houston, CEO and Co-Founder, Dropbox: Like, let me know if it’s coming on.

Conference Operator: You’re still not in clear.

Drew Houston, CEO and Co-Founder, Dropbox: Okay. We’re good? Alright. Sorry about that. Not sure what happened, but we’re good now.

So with Dash, I mean, the first thing we’ve or, you know, talking about momentum we’re seeing with with customers and just early adoption. 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, we’re we’re we’re really proud of what we launched in April with things like image and media search. We really think that breaks new grounds 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, 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 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 space.

Jaden Patel, Analyst, JPMorgan: Got it. And then can you talk a bit about the cancellation flow? You know, what sort of uplift or improvement did you see due to this change?

Drew Houston, CEO and Co-Founder, Dropbox: Sure. I think it’s an example. We’re looking at, across the funnel at different sources of regretted and or of, voluntary and involuntary churn. And, we saw that, you know, there’s a number this is sort of a lot we’re 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 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, how deeply they’re using the product or the value they’re getting, and so better messaging around that we’ve shown to be, accretive.

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.

Jaden Patel, Analyst, JPMorgan: Great. Thank you for taking the questions.

Drew Houston, CEO and Co-Founder, Dropbox: Yep.

Conference Operator: Thank you. One moment for our next question. And our next question comes from the line of Steven Anders of Citi. Your line is now open.

Palak, Analyst, Citi: Hi. This is Palak for Stephen Anders. Thank you for taking the questions. So my first question is, I 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 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?

Tim Regan, CFO, Dropbox: Sure. With respect to paying users, yes, we do continue to anticipate a decline of about one and a half percent or about 300,000 users for the full year. Expect that to be fairly balanced between q three and q four and continue to expect that FormSwift will represent roughly half of of that decline. FormSwift’s 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 sells 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. So good signals on churn, and and pleased to see that flow through the results.

Palak, Analyst, Citi: Perfect. Thank you. And my next question is on Dash. So just curious, like, you mentioned the self serve motion. And what would be the time frame for the self serve 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?

Drew Houston, CEO and Co-Founder, Dropbox: Sure. So for Dash, we are we plan to launch a self serve version of Dash. So basically, a version anyone can download and start using similar to to what we did with Dropbox one point o. And we believe that’s gonna unlock, both the large population in general and then also unlock the Dropbox self serve base. Because if you if you look at it or if you think about it, we’ve got half a million 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. 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 you 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 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. And and and as you’d imagine, we’ll we’ll be experimenting and and iterating on pricing and packaging specifically in different bundling and discount approaches.

Tim Regan, CFO, Dropbox: 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 I do think it will take time before Dash contributes meaningfully to our revenue growth given the size of our ARR base. And so again, refer to our guidance for our expectations for this year.

Palak, Analyst, Citi: Perfect. Thank you so much.

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

Tim Regan, CFO, Dropbox: Hi, guys. Thank you for taking the question. This is Nick on for Pat. Just one for 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 this environment of, limitation? Yep. So,

Drew Houston, CEO and Co-Founder, Dropbox: yeah, for Color, as as you said, their Slack’s been changing some of their APIs or, you know, sunsetting certain integrations, creating other ones. And so that has that forces all their partners to adapt to the new APIs, and so we’ve certainly been doing that. And and we 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, you know, that one world we’d be that would be concerning is if, partners or, you know, if we’re in a world where partners were cutting off API access, we don’t see that as likely.

And, mainly because customers, as you’d imagine, you know, 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 we think it’s like a difficult stance for a company to take in the long run. You know, we know different companies are gonna play with different, you know, different knobs and dials with with access. But we feel good both from a business and partnership standpoint because Dropbox also has a lot of content that, and integrations with other services.

And so we provide value to to folks that integrate with us. So there’s a, like, 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 services it it’s in. And and actually to that end, our ability to integrate more deeply, and leverage some these technical measures could be a competitive advantage for Dash. So, we feel good we feel good about the trajectory of supporting Slack, although, yeah, it’s been a winding road.

Tim Regan, CFO, Dropbox: Got it. Thank you very much.

Conference Operator: Thank you. One moment for our next question. And our next question comes from the line of Matt Bullock of Bank of America. Your line is now open.

Matt Bullock, Analyst, Bank of America: Great. Hi. Thanks. Thanks for taking the question. I I wanted to ask about the strategy going forward for attacking, you know, the the free base of, you know, 700,000,000 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, be a little bit harsher on on on creating some more prepaid conversion. Thanks. And then I have one follow-up.

Drew Houston, CEO and Co-Founder, Dropbox: Yep. So we’re tackling this in a number of directions. I think the most important is providing is continuing to provide more and more value so that people, get a lot of value, and then then they pay for that value. So Dash is a good example of providing a lot of providing a lot of new value to our free 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 are sort of the top of the funnel for our eventual paid users. You know, virtually every subscriber started out as a free user in some form. So it’s just an the free users are an important part of the engine. That said, there’s tons of optimizations we continue to do.

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, you know, unwilling or unable to subscribe to a higher price plan. And then there’s you know, to your 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, and making sure that’s in balance with the premium, you know, subscribe or subscriber value that we provide. Over the years, we’ve put in different we are phased in different things like device limits for free users, so that extremely engaged users aren’t getting, you know, too much value for free. And we continue to iterate on all all aspects of pricing and packaging to get to to improve the balance of, like, we wanna drive adoption and broad adoption and, you know, there’s it’s a big advantage that we have this free top of funnel, but we can we obviously don’t wanna either under monetize or over monetize at the expense of one lever or the other.

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

Drew Houston, CEO and Co-Founder, Dropbox: Sure. Yeah. As we mature, as we get further along the life cycle, we’ll we’ll obviously have more to share, in principle. And we start with the 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. And we we don’t focus on them completely in series, but that’s sort of the general path.

Sometimes it’s noisy. So, as we, like, open up to large new audience and some of those, you know, there’s fluctuation in those metrics and so but as soon as, but we’ll we’ll certainly provide more color on these on the different funnel metrics, as we get more signal as as we scale it up.

Tim Regan, CFO, Dropbox: Super helpful. Thanks, Drew.

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

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

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

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