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Operator: Hello and welcome to Dropbox’s First Quarter 2025 Earnings Conference Call. At this time all participants will be in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Peter Stabler. Sir, you may begin.

Peter Stabler: 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 @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. These 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. In 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 Co-Founder and CEO, Drew Houston.

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 form switch marketing and pursuing higher efficiencies in our core business, though 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 mock up 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 in 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 year, and we’ve begun addressing sales opportunities in other English-speaking countries. Dash has also received ISO 27,001 compliance and SOC two 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 need. I’ll share a quick customer example. South based 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 thirty 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 motions. Improving our outbound sales efficiency is a top priority, but 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 installed base of FSS customers.

Now let’s turn to our core business. Last quarter, we outlined our goals of strengthening and simplifying our DFSS user experience while driving higher operating efficiency. This meant more focused investments, a shift that we also knew would create some growth headwind. And in q one, we improved mission critical features that refine key workflows and reduce friction. 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 up and early engagement. This has increased new desktop activations by over 50% year-over-year. This is an important metric because multi surface 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. DocsZen 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 pro 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 those 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.

Tim Regan: Thank you, Drew. I’ll cover our financial highlights from Q1 and then provide guidance for the second quarter and the full year 2025. As a reminder, our financial objectives this year are aimed at positioning our core file sync and share and document workflow business lines for increased efficiency by driving higher levels of operating margins and free cash flow from these areas. We are then leveraging this profitability and the strength of our balance sheet to reduce our share count, thereby driving growth in free cash flow per share. Concurrently, we are investing in areas where we see opportunities to return to positive revenue growth, most notably with Dash. The first quarter was a solid step forward in executing against this strategy.

Starting with our financial highlights from Q1. As a reminder, we recently eliminated our marketing spend behind our FormSwift business, and we reduced the number of outbound sellers supporting our core FileSecondShare business. As expected, these factors pressured our year-over-year revenue growth. Total revenue for Q1 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 on a year-over-year basis. 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 in the quarter. We exited the quarter with 18 million paying users, down approximately 60,000 paying users on a sequential basis.

Average revenue per paying user was $139.26 as compared to $140.06 in the prior quarter. The quarter’s sequential decline in paying users was driven largely by our reduced level of investment in FormSwift. ARPU declined sequentially due to both FX as well as a mix shift away from FormSwift where these subscriptions carry a higher average selling price. Despite these collective metrics declining year-over-year, in part due to our strategic decisions, we outperformed our expectations for the quarter. This outperformance largely stemmed from our self-serve teams and individual SKUs. Before we continue with further discussion of our P&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 adjustment. Gross margin was 82.9% for the quarter, down 170 basis points from the year ago period as we continue to support our data center refresh cycle. I would also note that we saw a smaller depreciation benefit from the change in useful life of our servers versus the year ago period. Operating margin was 41.7%, ahead of our guidance of 38.5% and up more than 500 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 delayed outside services and marketing spend that we expect to incur later this year, a release of certain international tax reserves and a disciplined approach to hiring.

Net income for the first quarter was $207 million up 5% year-over-year. Diluted EPS for the first quarter was $0.70 based on 296 million diluted weighted average shares outstanding compared to $0.58 in the year ago quarter, representing a 21 year-over-year increase. Moving on to our cash balance and balance sheet, cash flow from operations was $154 million, a decrease of 12% versus the year ago period. As a reminder, this quarter included a $36 million payment for the third and final tranche of our San Francisco lease buyout that we executed in 2023, as well as $10 million of severance and benefits payments related to our reduction in force. Q1 also included $21 million of interest payments related to our December 2024 term loan transaction.

We had immaterial capital expenditures in the quarter due to a shift in timing for certain facility restoration costs and delivery time lines for data center build outs. Q1 unlevered free cash flow was therefore $174 million or $0.59 per share. As a reminder, we define unlevered free cash flow as free cash flow, excluding the impact of interest payments associated with our term loan, net of their associated tax benefit. In the quarter, we also added $44 million 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 $1.2 billion. In the first quarter, we repurchased approximately 18 million shares, spending approximately $500 million.

As of the end of the first quarter, we had approximately $870 million remaining under our existing share repurchase authorization. I’ll now offer our updated outlook for Q2 and the full year 2025. For the second quarter of 2025, we expect revenue to be in the range of $616 million to $619 million. We are expecting a currency headwind of approximately $1 million. On a constant currency revenue basis, we expect revenue to be in the range of 6$17 million to $620 million. We expect Form Swift to serve as a roughly 150 basis point headwind to revenue in the second quarter. We expect our non-GAAP operating margin to be approximately 37.5%. Finally, we expect diluted weighted average shares outstanding to be in the range of 279 million to 284 million shares based on our 30 day trailing average share price for the full year 2025.

Based on current foreign exchange rates, we are raising our previous guidance range for reported revenue by $10 million to $2.475 billion to $2.490 billion. Our full year constant currency revenue guidance is unchanged at $2.483 to $2.498 billion. We continue to expect Forum SWIFT to serve as a 150 basis point headwind to revenue this year. Our gross margin outlook is unchanged. We are raising our outlook for non-GAAP operating margin by 50 basis points to be in the range of 38% to 38.5%. We are raising unlevered free cash flow by $10 million to be at or above $950 million. We are also maintaining our CapEx guidance to be in the range of $25 million to $30 million dollars for the full year, in addition to finance lease lines to be approximately 6% of revenue.

Finally, as a result of our recent repurchase activity, we are now expecting diluted weighted average shares outstanding to be in the range of 276 to 281 million shares, down 7 million shares from our original guidance. I’ll now share some additional perspective on this guidance for 2025. We had a solid start to the year, in particular executing against our objective of driving higher levels of efficiency across our core file second share and document workflow businesses. Despite this, we are facing an uncertain macroeconomic environment that could introduce some volatility to our results. While we have not yet seen any meaningful impact to our customer dem and are optimistic that our diversified customer base will help insulate us from near term volatility, it is too early to estimate the impact of the evolving geopolitical dynamics.

We also continue to navigate the uncertain pacing of revenue stemming from the elimination of our marketing investment in FormSwift as well as the nascent state of Dash. We are therefore maintaining our constant currency revenue guidance for the year. However, we are flowing through the benefit from the improvement in FX rates to our as reported revenue guidance. Regarding paying users and in light of the aforementioned perspective, we are maintaining our initial commentary and expecting paying users to decline by roughly 1.5% or 300,000 users with these declines to be roughly evenly spread throughout the year. We continue to expect that forms with 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.

Moving on to operating margins, we are raising our full year guidance by 50 basis points, which largely reflects our latest outlook on FX. While we outperformed on operating margins in Q1, some of this outperformance was due to delayed spend that we expect to incur later this year as we plan to invest in headcount and marketing behind Dash. We are also maintaining our full year CapEx and finance lease guidance. While we are monitoring the macroeconomic conditions closely and assessing mitigation plans to the extent tariffs are applied to equipment needed for data centers, we are currently assuming no material impact to cash CapEx or to our finance leases. We are also raising unlevered free cash flow in line with our raise to operating margins.

In conclusion, we’re off to a good start to the year. We are executing well against our strategy of generating higher levels of efficiency across our core file ticket share and document workflow businesses as we outperformed against our expectations for the first quarter. We also reduced our share count via our share repurchase program, thus putting ourselves in position to drive a meaningful increase in free cash flow per share this year. While we are pleased with the start and the progress we are making on Dash, we are also keeping a close watch on the evolving macro environment for any potential impact to our business. We look forward to sharing further updates on our progress in future quarters. With that, operator, please open the line for questions.

Operator: Thank you. Our first question comes from the line of Steve Enders with Citi. Your line is open.

Steve Enders: Okay. Great. Thanks for thanks for taking the questions here. I guess I just want to ask on or to start asking about some of the, I guess, just better user levels. It looks like was a little bit better than you expected. But just what is it that’s maybe supporting that or helping to drive the better outcomes there? And, guess, how do you kind of feel about the incremental levers or, you know, additional things that you can that are in your control to manage levels from, from here?

Drew Houston: Sure. I can start, and Tim can add on. So we’re making progress on a lot of our priorities in the core business. So, in particular, we’re focused on the Teams business, which has higher retention rates, higher ARPU, as has a good attach potential for Dash. And the improvements really stemmed from product performance improvements. So we’ve been focused on making onboarding easier and reducing friction and streamlining that experience. And we’ve seen some of that pay off with from leading indicators like the number of desktop activations to be let successfully install and get up and running on the desktop app. But that number has increased 50% year-over-year. We’ve made similar efforts and improvements on team expansion.

We continue iterating iterate on pricing to get the price value equation right. So I think we both made progress on those fronts, and we still have headroom in each of those areas too. And, ultimately, one of the best things we can do for core retention is to complement it with Dash so that the value we provide extends from syncing your files to organizing all your cloud content and providing an intelligence layer over everything and doing that safely.

Tim Regan: Hey, Steve. It’s Tim. As Drew talked about, we did see some outperformance on our individual and team SKUs relative to expectations. But as related to the full year, what we did outperform in the first quarter, certainly mindful of the evolving macro environment. And so that’s why we’re maintaining our initial commentary in expecting paying users to decline by roughly 300,000 users. Still expect that FormSwift will represent about half of the paying user decline, and we expect that decline to be roughly evenly spread throughout the year.

Steve Enders: Okay. Great. That’s that’s helpful. And then maybe just on on on Dash, you know, I guess, any kind of change in your view since, I guess, over the the past ninety days since we last talked around, you know, the monetization potential or how you expect the, you know, the the rollout and and the sales initiatives back into the base to to play out from here?

Drew Houston: Nothing major. I think the things I’m most excited about are things like our recent product release, a couple weeks ago. So our spring release for Dash breaks a lot of new grounds in being able to support images and video, for example, whereas a lot of, other products are focused on text and documents. And we’ve closed a lot of or we we’ve been responsive to a lot of key customer requests, particularly on some of our connector coverage with adding connectors for, apps like Slack and Teams and Zoom and Canva, which are some of our most heavily requested. And then more broadly, the the basic value prop continues to resonate in our our existing customers. Certainly, see this as a natural evolution of what we do.

We’ve got half a million paying businesses on Dropbox who also need to organize their cloud content and need to roll out AI safely. And it’s also been good just the progress we’ve been seeing in building pipeline and getting our pilot customers up and running. I mean, I think we’ve had some expected friction. Just there’s opportunities for us to just compress the cycle times of getting customers up and running and making onboarding easier and making teams set up an education easier. So those are the kinds of things we’re iterating on. But overall, no major changes, pretty excited about the opportunity.

Steve Enders: Okay. Awesome. Great to, great to hear, and, thanks for taking the questions. Thanks.

Operator: Thank you. Our next question comes from the line of Rishi Jaluria with RBC. Your line is open.

Rishi Jaluria: Wonderful. Thanks so much for taking my questions. Maybe I want to continue to follow-up on Dash. So I know it’s going take a while before this turns into monetization. But maybe can you be a little bit more specific in terms of early adopters? Kind of what sort of feedback you’re getting from them? And maybe more importantly than that, given the space is competitive and arguably getting more competitive with a number of different players entering it, when you are seeing customers use Dash versus any of the other alternatives, what are typically the reasons you hear from them about why they chose to go with Dash versus using another one of those services? And then I got a quick follow-up.

Drew Houston: So one is, as we expected, things like just the basic AI search resonates. But but we’ve actually also seen that, the features around organizing and sharing content, specifically stacks resonate with a lot of our, early users. And so our customers have challenges not just around search, but around organizing and sharing all their content in a cross-platform way. Because if you think about it, you know, getting ready for a board meeting or working on a project and you have a, you know, Google Doc and a video file and an Airtable or something, there’s not really a common container, until stacks. And so, I think customers get really excited about the possibilities and especially when you combine that with the multimodal support to being able to organize images and video, anything about especially the sort of the Dropbox customers skew, or we have a lot of adoption in, like, the creative community or people that work with big files and video.

Dash is pretty unique in how, we support that. And then also on the IT side, protect and control really resonates. So when you think about rolling out AI within a company or search, but really AI of any kind, one challenge is it makes it a lot easier for employees to access content that shouldn’t have been shared in the first place and protect and control really helps you identify improperly shared or sensitive content across every platform which is unique and then actually lets you remediate it at its source. So it allows you to identify over shared content, mass unshare it, and set policies, to keep that in line going forward and that’s something that, again, is unique to Dash and a really resonating part of the the value prop beyond, search.

Rishi Jaluria: Alright. Wonderful. Helpful. And then maybe just turning to the macro environment. Look, I appreciate the color, out there. I want to think maybe specifically about the consumer side of the business. I know this stuff takes time to flow through, but we’ve seen kind of reports of weakening consumer confidence. And I imagine that’s kind of maybe a little bit of a challenged area. Maybe can you walk me through what are you seeing specifically in the consumer business? And as we think about your guidance for the rest of the year, unless consumer kind of stays at this sort of level, how should we see this playing out? Thanks.

Drew Houston: Yes. So in in our world, consumer adoption often in our context means a mixed personal and work use case. And and that’s important because a lot of our individual subscribers are often using Dropbox for something like 80% of our users are using Dropbox or of our subscribers using Dropbox for either a entirely a work use case or a mixed personal and work use case. And then a lot of our that subscriber base has been with us for a long time. And in that context, Dropbox is a pretty, you know, mission critical thing. The reason that people stay on Dropbox is because their most important information is on there and they have this whole sharing network set up in both personal and work context. And so we and we’ve also just observed that while there are the general trends, I think we’re all looking in, you know, keeping an eye on the macro environment, and we haven’t really seen major changes in these trends.

And so some of what we’ve seen around we we have seen, like, price sensitivity with SMBs, but both in our, like, SMB segment and consumer segment or individual segment, we haven’t really seen, like, major new changes to leading indicators that indicate some big impact on the macro environment. I mean, obviously, that that can change, but it’s not something we’ve seen yet.

Tim Regan: And, Rishi, this is Tim. And maybe as Drew was alluding to as related to guidance, we’ve not seen any meaningful change in our trends at this point, but certainly mindful of this incremental macro risk. We’re also facing some uncertainty as to the pacing of Formswift’s revenue just given the elimination of our marketing investment in that business. And so I’d say we are being prudent with the guidance we’ve shared.

Operator: Our next question comes from the line of Matt Bullock with Bank of America.

Matt Bullock: This is Matt on for Mike Funk. So really strong margin during the quarter. It sounds like there was some timing benefit in sales and marketing, but there was also a pretty substantial downtick in R&D spend, I think down about 20% year-over-year. Should we expect that run rate to be sustainable under the new operational structure? Or should we expect R&D intensity to come back up as some of these investments in Dash contain a ramp?

Tim Regan: Sure. I’d say it’s largely sustainable. If you look at our guidance, we’re raising our guidance to 38% to 38.5%, certainly largely reflects our latest outlook on FX. And as you noted, while we beat on operating margins in the first quarter, some of that was due to delayed vendor spend and hiring that we expect to incur later this year. And specific to R&D, certainly mindful of our R&D spend. We’re very focused on optimizing the core business for efficiency. We’re certainly making good progress with that effort but also rotating investments towards our higher growth opportunities such as Dash, where we will continue to invest marketing and headcount to support that.

Matt Bullock: Understood. Thank you. And then just one more quick follow-up if I could. Sounds like the integration work on Dash is progressing nicely. Are there are there any other major integrations coming down the pipeline that are worth noting that you think could be an unlock for demand?

Drew Houston: So one area where we’re really focused is building a self-serve version of Dash to which is, important for unlocking the potential of our self-serve base. So if you think about the more than half a million business customers on Dropbox, the vast majority of those are self-serve. So having a version of Dash that you can just kind of get up and download and get up and running, on your own is important. And then we also have a lot of historical strength which will leverage again in in the self-serve and viral motion and things like stacks and sharing really accelerating growth. So really building that connectivity between FSS and Dash and then making it so it’s, like, really easy for folks to both existing customers to get up and running on Dash in in a seamless way and also for new customers, we think that’s going to be a big accelerant.

And I’d just say another part is just touching on the competitive comment before is in our sweet spot, which is largely SMBs in mid-market, we really don’t see a lot of competition. And when I talk to customers and prospects, most of them have not even heard of some of the enterprise focused competitors. So we see this as a lot of white space for Dropbox, which is another area another reason why we’re really focused on building from strength in our in our home field.

Operator: Thank you. Our next question comes from the line of Alex Nguyen with Jefferies. Your line is your line is open.

Alex Nguyen: Yes. Hi. This is Alex for Brent Thill. I want to ask about the recent addition of Promoted AI to the team. It looks like the senior individuals there specialize in marketplace app technology. So can you talk more about the strategic implication of this addition, and how are you intending to leverage Promoted AI expertise within your overall business?

Drew Houston: Yes. So Promoted AI is a recent acquisition we made. It’s a really talented team with a lot of machine learning and AI experience both within their startup, but then also at a lot of established companies. And they’re coming in to really strengthen our machine learning and search and AI talent on Dash. And they were doing some work on or their company is doing work on advertising, but we’re we’re not going to be leveraging that here.

Alex Nguye: Yes. Okay. That’s helpful. And then I have another follow-up. I want to ask about the investment throughout the year for Dash that you were implying in your commentary and guidance. What do those expenditures look like? I imagine some of it, it would be to increase the headcount in sales and then the overall sales channel distribution. So, yeah, would love to hear more about that.

Tim Regan: Sure. So we will continue to invest in in hiring and marketing investments behind Dash, and that will be some degree of r and d, some as well as as sales and marketing. Drew just alluded to Promoted.ai, which is an r and d investment that we’re making behind Dash. And, certainly, as we’re scaling up our our sales and marketing function, gaining momentum behind that, we’ll continue to add sellers to support Dash. So I expect that investment to hit both sales and marketing and R&D throughout the year.

Operator: Thank you. Our next question comes from the line of Patrick Walravens with Citizens.

Patrick Walravens: Congratulations on the better-than-expected results in the quarter. So I actually have sort of a product related question, Drew. What so, you know, you’re talking about, like, connectors for Slack and Team and Zoom and Canva. How hard is it to build those connectors? Like, what what’s involved?

Drew Houston: It’s pretty challenging. It it sort of sounds easy, but, it is deceptively difficult, and requires a pretty significant r and d, investment to do it properly. So in a lot of ways, what we’re really talking about is a a new form of sync where we have, obviously, lot of experience. But this is a pretty mission critical, capability where it needs to be to operate at Dropbox’s scale. It needs to be totally reliable. It needs to be completely permissions aware. We have to be good partners in terms of consumption and are you making sure that we’re making an appropriate number of API calls and handling rate limits? And, anyway, that’s a very long tail of technical considerations. And we just as some color, we early on, we experimented with using some of these third party, you know, integrations as a service, type partners, but we found that they had significant scalability and engineering correctness and reliability issues.

So we both. You know, just sort to safeguard our customers’ data. We felt, the responsible choice was to bring this in house, but we also see that as also we also see that as a potential part of our moat and a and a technical advantage to really make the experience as seamless and performant as possible. And and so it’s an important investment.

Patrick Walravens: Yeah. I agree. And so my follow-up is when you, when you rolled out the spring twenty five release, you sort of summarized the four areas of, you know, search across video audio images, kick start content creation. Number three, connect to even more of the tools. We just discussed that. Number four, more control over what your team can and can’t. Right? Which of those is the most expensive and time consuming for you? Is it what we just talked about?

Drew Houston: I think they’re all big big investments with somewhat different shape. I think, certainly, when you’re supporting images and video, that’s really like, on the one hand, that that is an expensive capability and requires a lot of storage and compute. That said, you know, certainly for the Dropbox customers, we’re already we’re already handling the storage at scale and doing it really efficiency efficiently. So while on the one hand, it is, you know, it’s a big technical lift, on the other hand, it’s way you know, it’s much easier for us to support these use cases efficiently and profitably than, than a smaller the smaller scale competitor. And we’re drafting off of a lot of the technical investments we’ve made over the last eighteen years.

Operator: Thank you. Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Peter for closing remarks.

Peter Stabler: Thanks, Towanda, and thank you, everyone, for joining us today. We look forward to speaking you to again next quarter. Have a good day.

Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.