DROPBOX, INC. Q1 FY2025 earnings call

• Business highlights: Q1 revenue slightly ahead of forecast, highest ever non-GAAP operating margin. - Dash updates: Spring release improved search across formats, performance, integrations, AI writing; GDPR compliant, ISO 27,001 and SOC two certified. - Core business: Improved mission-critical features, new desktop activations up >50% YOY, admin console enhanced, pricing simplified, DocsZen grew double digits, Sign faced competitive landscape, Formswift saw user decline but improved operating income/free cash flow.

Total revenue for Q1 2025 declined 1% year-over-year to $625 million. Constant currency revenue declined 60 basis points year-over-year to $628 million. FormSwift acted as a 70 basis point headwind to revenue. Total ARR was $2.552 billion, down 20 basis points year-over-year and flat on a constant currency basis. FormSwift acted as a 120 basis point headwind to ARR. Paying users were 18 million, down approximately 60,000 sequentially. Average revenue per paying user was $139.26. Gross margin was 82.9% for the quarter, down 170 basis points. Operating margin was 41.7%, ahead of guidance and up more than 500 basis points from the year ago period.

• Q2 2025: Revenue expected $616M-$619M, non-GAAP operating margin ~37.5%. - Full year 2025: Reported revenue guidance raised to $2.475B-$2.490B, constant currency revenue unchanged at $2.483B-$2.498B. Operating margin raised to 38%-38.5%, unlevered free cash flow raised to at or above $950M. Diluted weighted average shares outstanding expected 276-281M.

• Macroeconomic uncertainty could introduce volatility. - Uncertain impact of evolving geopolitical dynamics. - Uncertain pacing of revenue from elimination of FormSwift marketing and nascent state of Dash.

Q: Steve Enders asked about better user levels and levers to manage; A: Drew Houston and Tim Regan discussed progress in core business, onboarding improvements, and Dash's potential.

Q: Rishi Jaluria asked about Dash early adopters and reasons for choosing Dash; A: Drew Houston talked about AI search, organizing/sharing content, IT protection features.

Q: Matt Bullock asked about R&D spend sustainability and Dash integrations; A: Tim Regan said R&D spend is largely sustainable, Drew Houston mentioned self-serve Dash and integrations.

Q: Alex Nguyen asked about Promoted AI addition; A: Drew Houston discussed leveraging their ML/AI expertise for Dash.

Q: Patrick Walravens asked about connector building difficulty and expensive/time-consuming areas; A: Drew Houston talked about challenges in building connectors and the complexity of supporting images/video.