Dropbox, Inc. Q4 FY2025 earnings call

Andrew Houston started by recap of quarter, closing 2025 strong with revenue above guidance, margin performance exceeding expectations, and $1B+ unlevered free cash flow. Priorities in 2025 were strengthening core business and scaling Dash. In Core FSS, new leadership brought in, improvements in funnel quality, pricing, etc., with early tests in Q4 showing promising signs. Dash and Dropbox launched embedded capabilities in Teams plans with solid early engagement. Hired Eric Webster as CBO to evolve sales-led motion. Protect and Control showing promise with 6-figure deal in Q4. Ross Tennenbaum discussed business foundation, investment priority on growth, Core FSS improvements, Dash as impactful evolution, and M&A as growth lever.

Fourth quarter revenue came in above the high end of guidance. Excluding FormSwift impact, constant currency revenue was flat for the quarter and full year. Core FSS business had improvements with individuals business showing steady growth. Dash and Dropbox launched embedded capabilities in Teams plans with solid early engagement. Revenue in Q4 was $636 million, declined 110% y/y but up 40% y/y excluding FormSwift. Constant currency revenue declined 160% y/y to $633 million. Total ARR was $2.526 billion, down 190% y/y excluding FormSwift impact. Paying users ended the quarter at 18.08 million, up ~10,000 sequentially. Average revenue per paying user was $139.68. Gross margin was 80.8% for the quarter. Operating margin was 38.2%, ahead of guidance. Unlevered free cash flow was $251 million or $0.99 per share.

For Q1 2026, revenue expected $618M - $621M, excluding FormSwift implies 0.4% y/y growth at midpoint, constant currency revenue $610M - $613M, non-GAAP operating margin ~38%, diluted weighted average shares ~241M - 246M. For full year 2026, revenue $2.485B - $2.5B, excluding FormSwift flat y/y at midpoint, constant currency $2.458B - $2.473B, gross margin 81.5% - 82%, non-GAAP operating margin 39% - 39.5%, unlevered free cash flow at or above $1.040B, cash interest expense net of tax ~$190M, CapEx $20M - $25M, additions to finance lease lines ~4% of revenue, diluted weighted average shares ~227M - 232M.

Q: Can you give quantitative framework around Dash seats, attach rates or ARR contribution?

A: Drew Houston said they focus on product quality, engagement, then scaling and monetization, will share more specifics later.

Q: Metrics around engagement with Dash?

A: Ross Tennenbaum said Dash launched in Q4 to core with good results, exceeded expectations, and they're accelerating rollout.

Q: Longer-term strategy for Dash?

A: Andrew Houston talked about building new infrastructure, shifting from informational to workflow automation, examples like security and agent capabilities.

Q: What drove paying user retention improvements and sustainability?

A: Andrew Houston said new leadership brought in, improvements across funnel, with Core FSS and Dash integration driving gains.

Q: Why ARR diverges from revenue?

A: Ross Tennenbaum said ARPU has FX positives, ARR on constant currency, timing differences, but expect them to move together.

Q: Paying user growth assumptions?

A: Ross Tennenbaum said Q1 net new paying users expected to be negative, full year flat, with Core FSS and Dash driving.

Q: Potential M&A strategy?

A: Andrew Houston said M&A has been valuable, looking at infrastructure, application layer, security, etc., with more to share.