Dropbox, Inc.

Hello, and welcome to Dropbox first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the conference over to Peter Stabler. Sir, you may begin.

Good afternoon, and welcome to Dropbox's first quarter 2025 earnings call. As a reminder, we will disclose 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 our second 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 these risks and uncertainties are described in our SEC filings, including our most recent report on Form 10-K and our forthcoming report 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.

Thanks, Peter, and good afternoon, everyone. Welcome to our Q1 2025 earnings call, and I'm here with Tim Regan, our CFO. I'll start with our business and product highlights, and then Tim will walk through our Q1 results and outlook for the rest of the year. Q1 revenue came in slightly ahead of our forecast. Our focus on operating efficiency, along with some timing-related expense savings, help us achieve our highest ever non-GAAP operating margin. As expected, we saw some sequential decline in paying users, after removing FormSwift marketing and pursuing higher efficiencies in our core business, though the decrease was less than we anticipated. 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. I'll start with Dash. A few weeks ago, we launched our major spring update, and I'm particularly excited about how it transforms the search experience for our customers. The update delivered three main improvements. First, most search tools today are still limited to text, but as we know, our work lives extend far beyond documents to images, videos, and other rich media. Our spring update breaks this barrier. For the first time, Dash can now search across all these formats, recognizing both metadata and increasingly the actual content within images and videos. Imagine being able to find that specific product photo or design mockup without having to remember what you named the file. That's now possible with Dash. This capability is especially valuable for creative professionals who work with visual content all day, which is why we're seeing strong interest from the creative services industry, where Dropbox has traditionally been strong. We also made significant performance improvements, cutting latency for Dash's summarize and answers capabilities by over 50%, and introducing a redesigned search box that serves as a single entry point for finding, asking, writing, and organizing your content. Second, we responded directly to our customers' top requests by adding customizable data exclusions that give administrators control over what content gets ingested by Dash. We also rolled out full integrations with essential workplace apps, including Slack, Zoom, and Microsoft Teams, and we also added deeper integrations with creative and project management tools like Canva and Jira. Third, we expanded Dash's AI writing capabilities. Users can now use simple prompts to have Dash find and summarize content across all your connected apps and draft documents in seconds. The system supports creating templates or even having Dash draft full documents for you. Users can adjust the tone and formality of the writing or even have Dash write in their personal voice. We've also been strengthening Dash's compliance posture. Dash has been GDPR compliant since the beginning of the year and we've begun addressing sales opportunities in other English-speaking countries. Dash has also received ISO 27001 compliance and SOC 2 certifications, reinforcing our commitment to content access control, risk management, and incident response. Customer feedback on these improvements has been encouraging, validating our product direction and rapid response to user needs. I'll share a quick customer example. SouthBase Construction, a cloud-enabled commercial construction firm, turned to Dash to modernize their operations across their distributed teams. With Dash's unified interface search and summarization tools, team members are saving an average of 30 minutes a day that they used to spend having to hunt for documents across different platforms. Accurate summarization is particularly valuable for SouthBase when their teams are comparing complex security and compliance documents, which they previously did manually. While a growing number of companies have deployed Dash, we still have work to do to streamline our sales, onboarding, and activation motion. Improving our outbound sales efficiency is a top priority We're also developing a self-serve motion for launch later this year. In the coming months, we'll also introduce select DASH functionality onto some of our FSS plans, accelerating our introduction of DASH to our large install base of FSS customers. Now let's turn to our core business. Last quarter, we outlined our goals of strengthening and simplifying the FSS user experience while driving higher operating efficiency. This meant more focused investments, a shift that we also knew would create some growth headwinds. And in Q1, we improved mission-critical features that refined key workflows and reduced restriction. As a result, we saw better-than-expected performance, particularly among self-serve teams, despite reduced investment levels. For example, we improved prompts for users to install and activate our desktop app during sign-ups and early engagement. This has increased new desktop activations by over 50% year-over-year. This is an important metric because multi-service users typically have higher engagement and retention. We also enhanced the admin console, knowing IT admins are often the purchasing decision makers. We improved billing management, enhanced the admin dashboard, and clarified our content management capabilities, leading to all-time high CSAT scores for admins. Our pricing and packaging team simplified our product lineup by reducing the number of SKUs and better aligning features with customer needs. This creates less friction in the buying process and clearer value proposition. Through strategic discounting, we also accelerated migration from monthly to annual plans, which should improve retention going forward. In our document workflow businesses, Q1 performance was largely as expected. DocSend delivered solid double-digit growth year over year, while Sign continued to face the challenging competitive landscape. And as mentioned, FormSwift saw an expected decline in paying users, but operating income and free cash flow improved significantly year over year. In closing, we've had a productive start to the year in addressing both of our strategic priorities. Our teams are moving with urgency, and our April Dash release was a significant step forward in solving real customer problems. We also continue to make progress improving our FSS business. As expected, we're still evolving our go-to-market engine and optimizing our Dash sales and onboarding motion, but we know what steps to take, and in the coming months, we'll augment our Dash sales effort with a product-led self-serve option. The macro landscape is still fluid, but we believe our subscription business, our strong profitability, and our broad customer diversification position us well to navigate the current market uncertainties. We're focused on what we can control and we'll continue refining our execution as we pursue the Dash opportunity. Now I'll turn it over to Tim to cover our financial results and our updated outlook. Thank you, Drew.