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What changed in DROPBOX, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of DROPBOX, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+395 added−395 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-16)

Top changes in DROPBOX, INC.'s 2024 10-K

395 paragraphs added · 395 removed · 333 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

54 edited+4 added−11 removed51 unchanged
Biggest changeAdditionally, we provide our employees with a quarterly allowance that can be used to cover expenses related to health and fitness, family and caregiver support, productivity and ergonomics, financial wellness, and learning and development programs, as well as resources to support their effectiveness in their work environments.
Biggest changeTeams also meet in person several times a year, using repurposed real estate called "Dropbox Studios" or flexible workspaces known as "On-Demand Spaces.” Part of Virtual First includes empowering our employees to adopt flexible working arrangements and providing tools for efficient remote collaboration and continuing to provide opportunities for in-person collaboration at “Dropbox Studios” or “On-Demand Spaces.” Additionally, we provide our employees with a quarterly allowance that can be used to cover expenses related to health and fitness, family and caregiver support, productivity and ergonomics, financial wellness, and learning and development programs, as well as resources to support their effectiveness in their work environments.
Doc scanner . The doc scanner in our mobile app lets users create content in Dropbox from hard copies. This includes transforming everything from printed materials to whiteboard brainstorming sessions into digital documents that users can edit and share.
The doc scanner in our mobile app lets users create content in Dropbox from hard copies. This includes transforming everything from printed materials to whiteboard brainstorming sessions into digital documents that users can edit and share.
Computer backup automatically syncs folders on a user's computer to the cloud. When turned on, files on the user's PC or Mac are continuously backed up on the cloud. Any changes made in synced folders are automatically updated in the Dropbox account and on the hard drive.
Dropbox Backup automatically syncs folders on a user's computer to the cloud. When turned on, files on the user's PC or Mac are continuously backed up on the cloud. Any changes made in synced folders are automatically updated in the Dropbox account and on the hard drive.
Computer backup allows users to get up-to-date versions of files stored on the user's PC or Mac from anywhere and from any device instantly. Content is secure in the cloud, no matter what happens to the user's computer. Passwords. Dropbox Passwords allows users to sign-in to websites and apps by creating and storing unique usernames and passwords across devices.
Dropbox Backup allows users to get up-to-date versions of files stored on the user's PC or Mac from anywhere and from any device instantly. Content is secure in the cloud, no matter what happens to the user's computer. Passwords. Dropbox Passwords allows users to sign-in to websites and apps by creating and storing unique usernames and passwords across devices.
Dropbox Transfer gives users a quick and secure way to send large files or collections of files to anyone. With Transfer, users can send up to 100 GB of files in just a few clicks, depending on the users’ subscription.
Transfer. Dropbox Transfer gives users a quick and secure way to send large files or collections of files to anyone. With Transfer, users can send up to 100 GB of files in just a few clicks, depending on the users’ subscription.
Dropbox Rewind is a tool that lets a user take a folder, or their entire account, back to a specific point in time. The tool uses version history to undo changes made to files and folders, and can recover any file edits or deletions up to the last 365 days, depending on the users’ subscription. Computer Backup.
Dropbox Rewind is a tool that lets a user take a folder, or their entire account, back to a specific point in time. The tool uses version history to undo changes made to files and folders, and can recover any file edits or deletions up to the last 365 days, depending on the users’ subscription. Dropbox Backup.
More than 90% of our users’ data is stored on our own custom-built infrastructure, which has been designed from the ground up to be reliable and secure, and to provide annual data durability of at least 99.999999999%. We have datacenter co-location facilities in California, Oregon, Texas, and Virginia.
More than 90% of our users’ data is stored on our own custom-built infrastructure, which has been designed from the ground up to be reliable and secure, and to provide annual data durability of at least 99.999999999%. We have datacenter co-location facilities in Oregon, Texas, and Virginia.
Dropbox Business team administrators have many ways to customize security settings in both global and granular ways, including real-time detections of suspicious behavior, risky activity, and potential data leaks. • Sharing permissions : Team administrators can set up and monitor how their members share team folders, and can set sharing permissions on all folders, sub-folders, and links through the sharing tab. 9 Table of Contents • Remote device wipe : Team administrators can delete their organization’s Dropbox content from a member’s linked devices, which is especially useful should someone lose a device or leave the team. • Audit log : Team administrators can monitor which members are sharing files and logging into Dropbox, among other events.
Dropbox Business team administrators have many ways to customize security settings in both global and granular ways, including real-time detections of suspicious behavior, risky activity, and potential data leaks. • Sharing permissions : Team administrators can set up and monitor how their members share team folders, and can set sharing permissions on all folders, sub-folders, and links through the sharing tab. • Remote device wipe : Team administrators can delete their organization’s Dropbox content from a member’s linked devices, which is especially useful should someone lose a device or leave the team. • Audit log : Team administrators can monitor which members are sharing files and logging into Dropbox, among other events.
Over the past decade, we’ve largely accomplished that mission by building tools to help people work from anywhere—and along the way we recognized that for most of our users, sharing and collaborating on the Dropbox, Inc. platform (“Dropbox”) was even more valuable than storing files.
For over a decade, we’ve largely accomplished that mission by building tools to help people work from anywhere—and along the way we recognized that for most of our users, sharing and collaborating on the Dropbox, Inc. platform (“Dropbox”) was even more valuable than storing files.
Our customer base is highly diversified, and in 2023, 2022, and 2021, no customer accounted for more than 1% of our revenue. Our customers include individuals, families, teams, and organizations of all sizes, from freelancers and small businesses to Fortune 100 companies.
Our customer base is highly diversified, and in 2024, 2023, and 2022, no customer accounted for more than 1% of our revenue. Our customers include individuals, families, teams, and organizations of all sizes, from freelancers and small businesses to Fortune 100 companies.
Advanced and Enterprise team administrators have access to audit logs with file-event tracking. • Device approvals : Advanced and Enterprise team administrators can manage how members access Dropbox on their devices. • Tiered administrator roles : Advanced and Enterprise teams have the ability to set multiple administrator roles, each with a different set of permissions. • Network control : Enterprise team administrators can restrict personal Dropbox usage on their organization’s network.
Advanced and Enterprise team administrators have access to audit logs with file-event tracking. • Device approvals : Advanced and Enterprise team administrators can manage how members access Dropbox on their devices. 9 Table of Contents • Tiered administrator roles : Advanced and Enterprise teams have the ability to set multiple administrator roles, each with a different set of permissions. • Network control : Enterprise team administrators can restrict personal Dropbox usage on their organization’s network.
As of December 31, 2023, Dropbox was receiving over 75 billion API calls per month and just under 1,000,000 developers had registered and built applications on our platform. In addition, more than 80% of Dropbox Business teams have linked to one or more third-party applications. Rewind.
As of December 31, 2024, Dropbox was receiving over 75 billion API calls per month and just over 1,000,000 developers had registered and built applications on our platform. In addition, more than 80% of Dropbox Business teams have linked to one or more third-party applications. Rewind.
For third-party developers that create applications that connect to Dropbox, we also set forth terms and guidelines that explain their obligation to protect the privacy of our users' personal data. Other Government Regulations We are subject to compliance with various laws and regulations.
For third-party developers that create applications that connect to Dropbox, we also set forth terms and guidelines that explain their obligation to protect the privacy of our users' personal data. 11 Table of Contents Other Government Regulations We are subject to compliance with various laws and regulations.
We’ve developed an efficient marketing function that’s focused on building brand awareness and reinforcing our self-serve model. Our goal is to rapidly demonstrate the value of our platform to our users in order to convert them to paying users and upgrade them to our premium offerings.
We’ve developed an efficient marketing function that’s focused on building brand awareness and reinforcing our self-serve model. 10 Table of Contents Our goal is to rapidly demonstrate the value of our platform to our users in order to convert them to paying users and upgrade them to our premium offerings.
Our principal offices are located at 1800 Owens Street, San Francisco, California, 94158, and our telephone number is (415) 857-6800. Our Class A common stock is listed on the Nasdaq Global Select Market under the symbol “DBX.” Available Information Our website is located at http://www.dropbox.com/, our investor relations website is located at http://investors.dropbox.com/, and our blog is located at https://blog.dropbox.com/topics/news.
Our principal offices are located at 1800 Owens Street, San Francisco, California, 94158, and our telephone number is (415) 930-7766. Our Class A common stock is listed on the Nasdaq Global Select Market under the symbol “DBX.” Available Information Our website is located at http://www.dropbox.com/, our investor relations website is located at http://investors.dropbox.com/, and our blog is located at https://blog.dropbox.com/topics/news.
We cater to the needs of dynamic, dispersed teams. The overwhelming majority of our customers use Dropbox to share and collaborate. As we continue to grow, more users benefit from frictionless sharing, and powerful network effects increase the utility and stickiness of our platform. • Product experiences and integrations.
We cater to the needs of dynamic, dispersed teams. The overwhelming majority of our customers use Dropbox to share and collaborate. More users benefit from frictionless sharing, and powerful network effects increase the utility and stickiness of our platform. • Product experiences and integrations.
We also offer additional levels of support for our paying users depending on the subscription plan they choose. 10 Table of Contents Our Sales and Marketing Approach As users share content and collaborate on our platform, they introduce and invite new users, driving viral growth. We generate over 90% of our revenue from self-serve channels, which limits customer acquisition costs.
We also offer additional levels of support for our paying users depending on the subscription plan they choose. Our Sales and Marketing Approach As users share content and collaborate on our platform, they introduce and invite new users, driving growth. We generate over 90% of our revenue from self-serve channels, which limits customer acquisition costs.
With the shift to our Virtual First work model, we remain committed to supporting their wellness and development. A component of our comprehensive health and wellness benefits package to all employees includes additional time-off opportunities as well as mental and physical wellness benefits.
With our Virtual First work model, we remain committed to supporting their wellness and development. A component of our comprehensive health and wellness benefits package to all employees includes time-off opportunities as well as mental and physical wellness benefits.
We develop and provide access to internal learning and development resources to assist in professional development in various ways such as skills-building programs, on-demand learning options, mentoring programs, and leadership development courses. We also offer extensive onboarding and training programs to prepare our employees at all levels for career progression and individual development.
We develop and provide access to internal learning and development resources to assist in professional development in various ways such as 13 Table of Contents skills-building programs, on-demand learning options, mentoring programs, and leadership development courses. We also offer extensive onboarding and training programs to prepare our employees at all levels for career progression and individual development.
Our Subscription Plans We offer a range of subscription plans for our users, including a free, Basic plan, paid Personal plans, and Business plans. Our Customers We’ve built a thriving global business with 18.12 million paying users. As of December 31, 2023, we had more than 575,000 paying Dropbox Business teams.
Our Subscription Plans We offer a range of subscription plans for our users, including a free, Basic plan, paid Personal plans, and Business plans. Our Customers We’ve built a thriving global business with 18.22 million paying users. As of December 31, 2024, we had more than 575,000 paying Dropbox Business teams.
All submitted files are organized into a Dropbox folder that’s private to the requesting user. 8 Table of Contents Watermarking. Our Dropbox watermarking feature allows users to protect and share digital files quickly and easily. The watermark feature can be used to protect graphic designs, confidential contracts, and personal photographs.
All submitted files are organized into a Dropbox folder that’s private to the requesting user. Watermarking. Our Dropbox watermarking feature allows users to protect and share digital files quickly and easily. The watermark feature can be used to protect graphic designs, confidential contracts, and personal photographs.
Users can create their own custom watermark and watermark any file without leaving Dropbox. DocSend. DocSend is a secure document sharing and analytics platform that gives customers visibility into what happens to their documents after they send them.
Users can create their own custom watermark and watermark any file without leaving Dropbox. 8 Table of Contents DocSend. DocSend is a secure document sharing and analytics platform that gives customers visibility into what happens to their documents after they send them.
In addition to these core benefits, Dropbox also provides enhanced mental health benefits, family formation benefits and our adoption and surrogacy assistance program. Our comprehensive programs also provide various leave benefits - including paid parental leave for all eligible employees. 13 Table of Contents Employee Wellness and Safety We recognize the importance of the well-being of our employees.
In addition to these core benefits, we also provide enhanced mental health benefits, family formation benefits and our adoption and surrogacy assistance program. Our comprehensive programs also provide various leave benefits - including paid parental leave for all eligible employees. Employee Wellness and Safety We recognize the importance of the well-being of our employees.
Our platform capabilities are described below: Create Paper . With Dropbox Paper, users can co-author content, tag others, create timelines, assign tasks with due dates, embed and comment on files, tables, checklists, code snippets, and rich media—all in real-time. We designed Paper to be simple and beautiful so users can focus on the most important ideas and tasks at hand.
With Dropbox Paper, users can co-author content, tag others, create timelines, assign tasks with due dates, embed and comment on files, tables, checklists, code snippets, and rich media—all in real-time. We designed Paper to be simple and beautiful so users can focus on the most important ideas and tasks at hand. Doc scanner .
We believe we compete favorably across these factors, however, some of our competitors may have greater name recognition, longer operating histories, more varied services, the ability to bundle a broader range of products and services, larger marketing budgets, established marketing relationships, access to larger user bases, major distribution agreements with hardware manufacturers and resellers, and greater financial, technical, and other resources. 12 Table of Contents Intellectual Property We believe that our intellectual property rights are valuable and important to our business.
We believe we compete favorably across these factors, however, some of our competitors may have greater name recognition, longer operating histories, more varied services, the ability to bundle a broader range of products and services, larger marketing budgets, established marketing relationships, access to larger user bases, major distribution agreements with hardware manufacturers and resellers, and greater financial, technical, and other resources.
We complement our self-serve strategy with a focused outbound sales effort targeted at organizations with existing organic adoption of Dropbox. Once prospects are identified, our sales team works to broaden adoption of our platform into wider-scale deployments. We also acquire some users through paid marketing and distribution partnerships in which hardware manufacturers pre-install our software on their devices.
We complement our self-serve strategy with targeted outbound sales to pursue organizations best suited to our product. Once prospects are identified, our sales team works to broaden adoption of our platform into wider-scale deployments. We also acquire some users through paid marketing and distribution partnerships in which hardware manufacturers pre-install our software on their devices.
In addition, as a default, redundant copies of content are stored independently in at least two separate geographic regions and replicated reliably within each region. We make investments in technology both to improve our existing products and services and to develop new ones. We have made, and intend to continue making, investments in developing products that will incorporate AI.
In addition, as a default, redundant copies of content are stored independently in at least two separate geographic regions and replicated reliably within each region. We make investments in technology both to improve our existing products and services and to develop new ones.
For example, email apps can plug into Dropbox to send attachments or shared links, video-conferencing apps allow users to start meetings and share content natively from Dropbox, and eSignature apps give users the ability to manage and maintain contract workflows all from within Dropbox.
Developers can build applications that connect to Dropbox through our DBX Developer Platform. For example, email apps can plug into Dropbox to send attachments or shared links, video-conferencing apps allow users to start meetings and share content natively from Dropbox, and eSignature apps give users the ability to manage and maintain contract workflows all from within Dropbox.
We offer multiple layers of protection, including secure file data transfer, encryption, network configuration, and application-level controls. For Dropbox Business teams, our tools also empower administrators with control and visibility features that allow them to customize our platform to their organizations’ needs.
Security Our sophisticated infrastructure is designed to protect our users’ content while it is transferred, stored, and processed. We offer multiple layers of protection, including secure file data transfer, encryption, network configuration, and application-level controls. For Dropbox Business teams, our tools also empower administrators with control and visibility features that allow them to customize our platform to their organizations’ needs.
Products like Dropbox Passwords, Vault, Computer Backup, Dropbox Sign, DocSend, Dropbox Capture, and FormSwift and deep integrations with companies like Microsoft, Zoom, Atlassian, Slack, and BetterCloud help us provide our users with the functionality they need to do their best work. Machine learning further improves the user experience by enabling more intelligent search, better organization, and utility of information.
("Reclaim") and deep integrations with companies like Microsoft, Zoom, Atlassian, Slack (now part of Salesforce), and BetterCloud help us provide our users with the functionality they need to do their best work. Machine learning further improves the user experience by enabling more intelligent search, better organization, and utility of information.
What Sets Us Apart From our founding, we’ve focused on simplifying the lives of our users. In a world where business software can be frustrating to use, challenging to integrate, and expensive to sell, we take a different approach.
We’ve built a thriving global business with 18.22 million paying users as of December 31, 2024. What Sets Us Apart From our founding, we’ve focused on simplifying the lives of our users. In a world where business software can be frustrating to use, challenging to integrate, and expensive to sell, we take a different approach.
These laws and regulations impose increasingly numerous, complex obligations on us. To comply with and manage our obligations under such privacy laws and regulations, we operate a robust privacy program and have appointed a Data Protection Officer. Our privacy policy details how we process our users’ personal data as well as the steps we take to protect it.
To address our obligations under such privacy laws and regulations, we operate a robust privacy program and have appointed a Data Protection Officer. Our privacy policy details how we process our users’ personal data as well as the steps we take to protect it.
We sign business associate agreements with our customers who require them in order to comply with the Health Insurance Portability and Accountability Act, or HIPAA, and the Health Information Technology for Economic and Clinical Health Act, or HITECH.
We sign business associate agreements with our customers who require them in order to comply with the Health Insurance Portability and Accountability Act, or HIPAA, and the Health Information Technology for Economic and Clinical Health Act, or HITECH. We also offer a HIPAA assessment report performed by an independent third party.
This network allows us to gather insights and feedback that help us create new product experiences. And with our scale, we can instantly put these innovations in the hands of millions. This, in turn, helps attract more users and content, which further propels the flywheel.
As users create and share more content with more people, they expand our global sharing network. This network allows us to gather insights and feedback that help us create new product experiences. And with our scale, we can instantly put these innovations in the hands of millions.
The recipient can view the file with a rich preview or see all the files in a shared folder. Dropbox Professional subscribers and Dropbox Business teams can set passwords and expiration dates and specify whether recipients can comment on or download the files. Transfer.
Once created, the link can be sent through email, text, Meta, X, instant message, or other channels. The recipient can view the file with a rich preview or see all the files in a shared folder. Dropbox Professional subscribers and Dropbox Business teams can set passwords and expiration dates and specify whether recipients can comment on or download the files.
As paying users work on files, our servers keep snapshots of all their changes. Users can see a file’s complete version history so they can reference and retrieve older versions, depending on the users’ subscription. Version histories are kept up to 365 days for paying users, depending on the users’ subscription. Third-party ecosystem .
Users can see a file’s complete version history so they can reference and retrieve older versions, depending on the users’ subscription. Version histories are kept up to 365 days for paying users, depending on the users’ subscription. Third-party ecosystem . Our open and thriving ecosystem fosters deeper relationships with our users and developers.
FormSwift is a cloud-based service that gives individuals and businesses a simple solution to create, complete, edit, and save critical business forms and agreements. Secure Security protections. We employ strong protections for all of the data on our platform. • Encryption . Dropbox file data at rest is encrypted using 256-bit Advanced Encryption Standard, or AES.
Once documents are signed, copies automatically sync to the user's Dropbox account. FormSwift. FormSwift is a cloud-based service that gives individuals and businesses a simple solution to create, complete, edit, and save critical business forms and agreements. Secure Security protections. We employ strong protections for all of the data on our platform. • Encryption .
The insights we glean from our community of users and our deep integrations with best-of-breed companies lead us to develop or acquire new product experiences and extend the capabilities of our platform.
The insights we glean from our community of users and our deep integrations with best-of-breed companies lead us to develop or acquire new product experiences and extend the capabilities of our platform. Products like Dropbox Passwords, Dropbox Backup, Dropbox Sign, DocSend, Dropbox Dash for Business ("Dash"), Dropbox Replay, Dropbox Transfer, and Reclaim.ai, Inc.
A team folder, which is only available for Dropbox Business teams, is a central, administrator-managed hub where they can store and collaborate on content. Shared links . Users can share files and folders with anyone, including non-Dropbox users, by creating a Dropbox link. Once created, the link can be sent through email, text, Facebook, X, instant message, or other channels.
A shared folder allows users to quickly and easily start a project space for group collaboration. A team folder, which is only available for Dropbox Business teams, is a central, administrator-managed hub where they can store and collaborate on content. Shared links . Users can share files and folders with anyone, including non-Dropbox users, by creating a Dropbox link.
We rely on patents, patent applications, trademarks, copyrights, trade secrets, know-how license agreements, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements, and other contractual rights to establish and protect our proprietary rights. In addition, from time to time we’ve purchased patents, inbound licenses, trademarks, domain names, and patent applications from third parties.
Intellectual Property We believe that our intellectual property rights are valuable and important to our business. We rely on patents, patent applications, trademarks, copyrights, trade secrets, know-how license agreements, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements, and other contractual rights to establish and protect our proprietary rights.
We also offer a HIPAA assessment report performed by an independent third party. 11 Table of Contents Privacy We are committed to keeping user data private, and are subject to a number of privacy laws and regulations such as the European Union's General Data Protection Regulation ("GDPR") and the California Consumer Privacy Act ("CCPA") in the U.S.
Privacy We are committed to keeping user data private, and are subject to a number of privacy laws and regulations such as the European Union's General Data Protection Regulation ("GDPR") and the California Consumer Privacy Act ("CCPA") in the U.S. These laws and regulations impose increasingly numerous, complex obligations on us.
Our Capabilities Dropbox is a single organized place where individuals and teams can create content, access it from anywhere, and share it with collaborators. The power of our platform lies in the breadth of our capabilities and the diverse ways our users make Dropbox work for them. We monetize through a range of subscription plans.
The power of our platform lies in the breadth of our capabilities and the diverse ways our users make Dropbox work for them. We monetize through a range of subscription plans. Our platform capabilities are described below: Create Paper .
None of our employees are represented by a labor union, except to the extent certain employees outside the United States are represented by national trade unions or local works councils. We have not experienced any work stoppages, and we believe that our employee relations are strong.
Of our full-time employees, 1,755 were located in the United States and 449 were employees located outside of the United States. None of our employees are represented by a labor union, except to the extent certain employees outside the United States are represented by national trade unions or local works councils.
We have over 1,750 issued patents and more than 250 pending patent applications in the United States and abroad. These patents and patent applications seek to protect our proprietary inventions relevant to our business. In addition, we license a number of key third-party patents in the file collaboration, storage, syncing, and sharing markets.
In addition, from time to time we’ve purchased patents, inbound licenses, trademarks, domain names, and patent applications from third parties. We have over 1,800 issued patents and more than 250 pending patent applications in the United States and abroad. These patents and patent applications seek to protect our proprietary inventions relevant to our business.
In a world where using technology at work can be fragmented and distracting, Dropbox makes it easy to focus on the work that matters. The popularity of our platform promotes viral growth, which has allowed us to scale rapidly and efficiently. We’ve built a thriving global business with 18.12 million paying users as of December 31, 2023.
In a world where using technology at work can be fragmented and distracting, Dropbox makes it easy to focus on the work that matters. By solving these universal problems, we’ve become invaluable to our users. The popularity of our platform allows us to scale efficiently.
We have also made investments in developing products that will incorporate artificial intelligence ("AI") technologies in the future. This ongoing innovation broadens the value of our platform and deepens user engagement. These elements reinforce one another to produce a powerful flywheel effect. As users create and share more content with more people, they expand our global sharing network.
We have also made investments in developing products that will incorporate artificial intelligence ("AI") technologies, further expanding the value of our platform and deepening user engagement. Additionally, our strategic partnerships with AI-focused companies strengthen our ability to drive AI-powered innovation and reimagine digital collaboration. These elements reinforce one another to produce a powerful flywheel effect.
Virtual First In October 2020, we announced our Virtual First work model pursuant to which remote work has become the primary experience for all of our employees.
We provided employees impacted by this reduction in workforce with severance packages and job placement support. Virtual First In October 2020, we announced our Virtual First work model pursuant to which remote work has become the primary experience for all of our employees. As a result, we have seen our workforce become more distributed over time.
We support previews of over 300 file types, and Dropbox users currently preview files tens of millions of times every day. 7 Table of Contents Smart Sync . With Smart Sync, users can access all of their content natively on their computers without taking up storage space on their local hard drives.
We support previews of over 300 file types, and Dropbox users currently preview files tens of millions of times every day. 7 Table of Contents Version history . As paying users work on files, our servers keep snapshots of all their changes.
Our Commitment to Security, Privacy and Legal Compliance Trust is the foundation of our relationship with our users, and we take significant measures every day to protect their privacy and security. Security Our sophisticated infrastructure is designed to protect our users’ content while it is transferred, stored, and processed.
We have made, and intend to continue making, investments in developing products that will incorporate AI, such as Dash. Our Commitment to Security, Privacy and Legal Compliance Trust is the foundation of our relationship with our users, and we take significant measures every day to protect their privacy and security.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged.
Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged. In addition, the laws of various foreign countries where our products are distributed may not protect our intellectual property rights to the same extent as laws in the United States.
In addition, the laws of various foreign countries where our products are distributed may not protect our intellectual property rights to the same extent as laws in the United States. Human Capital At Dropbox, we believe that the world can work better. But that starts with us: building a team that emphasizes the kindness and collaboration needed to grow.
Human Capital At Dropbox, we believe that the world can work better. But that starts with us: building a team that emphasizes the kindness and collaboration needed to grow. We believe the strength of our workforce is one of the most significant contributors to our success. As of December 31, 2024, we had 2,204 full-time employees.
We have trademark rights in our name, our logo, and other brand indicia, and have trademark registrations for select marks in the United States and many other jurisdictions around the world. We also have registered domain names for websites that we use in our business, such as www.dropbox.com, and similar variations.
We also have registered domain names for websites that we use in our business, such as www.dropbox.com, and similar variations. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective.
Sensitive data can be added and viewed from Windows and the Dropbox mobile app. Share Folders . There are three types of folders in Dropbox: private, shared, and team folders. A private folder allows an individual to sync files between devices. A shared folder allows users to quickly and easily start a project space for group collaboration.
Reclaim is an AI-powered scheduling tool that helps companies prioritize tasks and coordinate schedules with a calendar app. Share Folders . There are three types of folders in Dropbox: private, shared, and team folders. A private folder allows an individual to sync files between devices.
On April 27, 2023, we announced a reduction of our global workforce by approximately 16% to streamline our team structure in support of our long-term growth and profitability objectives. We provided employees impacted by this reduction in force with severance packages and job placement support.
We have not experienced any work stoppages, and we believe that our employee relations are strong. In October 2024, we announced a reduction of our global workforce by approximately 20% to streamline our team structure to better align with our long-term growth and profitability objectives.
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We intelligently sync files to a user’s computer as they need them, and users can control which files or folders are always synced locally.
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This, in turn, helps attract more users and content, which further propels the flywheel. Our Capabilities Dropbox is a single organized place where individuals and teams can create content, access it from anywhere, and share it with collaborators.
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With Smart Sync, files that are only stored in the cloud appear in the local file system and can be opened directly from Windows File Explorer or Mac Finder, instead of having to navigate to our web interface. Smart Sync is available to Dropbox Plus, Professional, and Business users. Version history .
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The app can autofill usernames and passwords for instant access anywhere within applications available for Windows, Mac, iOS, and Android. Dash . Dropbox Dash is an AI powered, universal search tool, which makes it easy for teams to search, organize, share, and protect content from across their connected apps, all in one place. Reclaim .
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Our open and thriving ecosystem fosters deeper relationships with our users and developers. Developers can build applications that connect to Dropbox through our DBX Developer Platform.
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Dropbox file data at rest is encrypted using 256-bit Advanced Encryption Standard, or AES.
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The app can autofill usernames and passwords for instant access anywhere within applications available for Windows, Mac, iOS, and Android. Vault. Dropbox Vault helps secure and organize sensitive information in the cloud. Vault, which is only available for Dropbox Plus, Professional, and Family plans, is a PIN-protected folder in Dropbox that a user can access any time.
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In addition, we license a number of key third-party patents in the file collaboration, storage, syncing, and sharing markets. 12 Table of Contents We have trademark rights in our name, our logo, and other brand indicia, and have trademark registrations for select marks in the United States and many other jurisdictions around the world.
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Once documents are signed, copies automatically sync to the user's Dropbox account. Capture. Dropbox Capture is an all-in-one visual communication tool that helps team members share their work and idea asynchronously. Dropbox Capture allows users to visually present their work through easy-to-take screen recordings, GIFs, and screenshots. FormSwift.
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We believe the strength of our workforce is one of the most significant contributors to our success. As of December 31, 2023, we had 2,693 full-time employees. Of our full-time employees, 2,226 were located in the United States and 467 were employees located outside of the United States.
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As a result, we expect that our workforce will continue to become more distributed over time, although we are continuing to offer our employees opportunities for in-person collaboration in all locations where we currently have offices either through our existing real-estate that were repurposed into collaborative spaces called “Dropbox Studios” or new, flexible spaces known as “On-Demand Spaces”.
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A critical feature of the success of Virtual First has been empowering our employees to adopt flexible working arrangements and providing tools for efficient remote collaboration and continuing to provide opportunities for in-person collaboration at our “Dropbox Studios” or “On-Demand Spaces” locations.
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Diversity and Inclusion We believe that an equitable and inclusive environment comprised of diverse teams produces more creative solutions, results in better and more innovative products, and is crucial to our efforts to attract and retain key talent. We are focused on building an inclusive culture and sustaining a diverse workforce through a variety of company initiatives.
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As part of that effort we have a number of executive-sponsored Employee Resource Groups, or ERGs, that provide support for our workforce by fostering an inclusive environment and providing community-building opportunities.
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In addition, we provide resources and training to employees at all levels to ensure that we are cultivating diverse and inclusive teams, as well as sponsor a number of professional development opportunities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

146 edited+27 added−21 removed279 unchanged
Biggest changeOur results of operations, which are reported in U.S. dollars, could be adversely affected if currency exchange rates fluctuate substantially in the future. We conduct our business across approximately 180 countries around the world. As we continue to expand our international operations, we will become more exposed to the effects of fluctuations in currency exchange rates.
Biggest changeWe may not attain sufficient revenue to maintain positive cash flow from operations or achieve profitability in any given period . 31 Table of Contents Our results of operations, which are reported in U.S. dollars, could be adversely affected if currency exchange rates fluctuate substantially in the future .
Some of our competitors may make acquisitions or enter into strategic relationships or alliances to offer a broader range of products and services than we do. These combinations make it increasingly difficult for us to compete effectively. We expect these trends to continue as competitors continue to strengthen or maintain their market positions.
Some of our competitors may make acquisitions or enter into strategic relationships or alliances to offer a broader range of products and services than we do. These combinations may make it increasingly difficult for us to compete effectively. We expect these trends to continue as competitors strengthen or maintain their market positions.
If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve the anticipated benefits from such acquisitions, due to a number of factors, including: • acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated; • difficulty utilizing or integrating the acquired intellectual property, technology infrastructure, and operations; • difficulty integrating and retaining key employees of acquired businesses and related challenges motivating and retaining our key employees after such acquisition; • ineffective or inadequate, controls, procedures, or policies at an acquired business; • inability to effectively offer, price, and support multiple product lines or services offerings of acquired businesses; • potential unknown liabilities or risks associated with an acquired business, including those arising from existing contractual obligations, security vulnerabilities, cybersecurity incidents, or litigation matters; • inability to maintain relationships with key customers, suppliers, and partners of an acquired business; • failure to accurately forecast the financial impact of an acquisition transaction, including accounting charges; • challenges integrating accounting, finance and forecasting practices of acquired business within our business; • lack of experience in new markets, products or technologies; • inability to effectively integrate brand identity of acquired businesses within those of our business; 27 Table of Contents • diversion of management's attention from other business concerns; and • use of resources that are needed in other parts of our business.
If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve the anticipated benefits from such acquisitions, due to a number of factors, including: • acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated; • difficulty utilizing or integrating the acquired intellectual property, technology infrastructure, and operations; • difficulty integrating and retaining key employees of acquired businesses and related challenges motivating and retaining our key employees after such acquisition; • ineffective or inadequate, controls, procedures, or policies at an acquired business; • inability to effectively offer, price, and support multiple product lines or services offerings of acquired businesses; • potential unknown liabilities or risks associated with an acquired business, including those arising from existing contractual obligations, security vulnerabilities, cybersecurity incidents, or litigation matters; • inability to maintain relationships with key customers, suppliers, and partners of an acquired business; • failure to accurately forecast the financial impact of an acquisition transaction, including accounting charges; 27 Table of Contents • challenges integrating accounting, finance and forecasting practices of acquired business within our business; • lack of experience in new markets, products or technologies; • inability to effectively integrate brand identity of acquired businesses within those of our business; • diversion of management's attention from other business concerns; and • use of resources that are needed in other parts of our business.
Expanding and operating internationally subjects us to regulatory, economic, geographic, social, and political risks and may increase risks that we currently face, including risks associated with: • compliance with applicable international laws, regulations, and standards including laws and regulations with respect to labor and employment, privacy, data protection, cybersecurity, consumer protection, tax, export control and sanctions, and unsolicited email, and the risk of penalties to our users and individual members of management or employees if our practices are deemed to be out of compliance; • recruiting and retaining talented and capable employees in locations outside the United States, and maintaining our company culture across all of our locations, including in light of our Virtual First work model and an increasingly distributed workforce; • providing our platform and operating our business across a significant distance, in different languages and among different cultures, including the potential need to modify our platform and features to ensure that they are culturally appropriate and relevant in different countries; • management of an employee base in jurisdictions that may not give us the same employment and retention flexibility as the United States; 24 Table of Contents • operating in jurisdictions that do not protect intellectual property rights in the same manner or to the same extent as the United States; • compliance by us and our business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions, and other regulatory limitations on our ability to provide our platform in certain international markets; • foreign exchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent us from repatriating cash earned outside the United States; • political, social, and economic instability, conflicts, and wars, and their regional and global ramifications; • changes in diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export requirements, trade embargoes and other trade barriers; • double taxation of our international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; • higher costs of doing business internationally, including increased accounting, travel, infrastructure, and legal compliance costs; and • the impact of natural disasters and public health epidemics on employees, travel and the global economy.
Expanding and operating internationally subjects us to regulatory, economic, geographic, social, and political risks and may increase risks that we currently face, including risks associated with: • compliance with applicable international laws, regulations, and standards including laws and regulations with respect to labor and employment, privacy, data protection, cybersecurity, AI, consumer protection, tax, export control and sanctions, and unsolicited email, and the risk of penalties to our users and individual members of management or employees if our practices are deemed to be out of compliance; 24 Table of Contents • recruiting and retaining talented and capable employees in locations outside the United States, and maintaining our company culture across all of our locations, including in light of our Virtual First work model and an increasingly distributed workforce; • providing our platform and operating our business across a significant distance, in different languages and among different cultures, including the potential need to modify our platform and features to ensure that they are culturally appropriate and relevant in different countries; • management of an employee base in jurisdictions that may not give us the same employment and retention flexibility as the United States; • operating in jurisdictions that do not protect intellectual property rights in the same manner or to the same extent as the United States; • compliance by us and our business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions, and other regulatory limitations on our ability to provide our platform in certain international markets; • foreign exchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent us from repatriating cash earned outside the United States; • political, social, and economic instability, conflicts, and wars, and their regional and global ramifications; • changes in diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export requirements, trade embargoes and other trade barriers; • double taxation of our international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; • higher costs of doing business internationally, including increased accounting, travel, infrastructure, and legal compliance costs; and • the impact of natural disasters and public health epidemics on employees, travel and the global economy.
In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class; • our multi-class common stock structure, which provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock, Class B common stock, and Class C common stock; • when the outstanding shares of Class B common stock represent less than a majority of the total combined voting power of our Class A and Class B common stock, or the Voting Threshold Date, our Board of Directors will be classified into three classes of directors with staggered three-year terms, and directors will only be able to be removed from office for cause; 39 Table of Contents • until the Class B common stock, as a class, converts to Class A common stock, any amendments to our restated certificate of incorporation will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A common stock and Class B common stock; and following the conversion of our Class B common stock, as a class, to Class A common stock, certain amendments to our amended and restated certificate of incorporation will require the approval of two-thirds of our then outstanding voting power; • our amended and restated bylaws will provide that approval of stockholders holding two-thirds of our outstanding voting power voting as a single class is required for stockholders to amend or adopt any provision of our bylaws; • after the Voting Threshold Date our stockholders will only be able to take action at a meeting of stockholders, and will not be able to take action by written consent for any matter; • until the Voting Threshold Date, our stockholders will be able to act by written consent only if the action is first recommended or approved by the Board of Directors; • vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • only the chairman of our Board of Directors, our chief executive officer, a majority of our Board of Directors, or, until the Class B common stock, as a class, converts to Class A common stock, a stockholder holding thirty percent of the combined voting power of our Class A and Class B common stock are authorized to call a special meeting of stockholders; • certain litigation against us may be required to be brought in Delaware; • our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of Class A common stock; and • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class; • our multi-class common stock structure, which provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock, Class B common stock, and Class C common stock; • when the outstanding shares of Class B common stock represent less than a majority of the total combined voting power of our Class A and Class B common stock, or the Voting Threshold Date, our Board of Directors will be classified into three classes of directors with staggered three-year terms, and directors will only be able to be removed from office for cause; • until the Class B common stock, as a class, converts to Class A common stock, any amendments to our restated certificate of incorporation will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A common stock and Class B common stock; and following the conversion of our Class B common stock, as a class, to Class A common stock, certain amendments to our amended and restated certificate of incorporation will require the approval of two-thirds of our then outstanding voting power; • our amended and restated bylaws will provide that approval of stockholders holding two-thirds of our outstanding voting power voting as a single class is required for stockholders to amend or adopt any provision of our bylaws; • after the Voting Threshold Date our stockholders will only be able to take action at a meeting of stockholders, and will not be able to take action by written consent for any matter; • until the Voting Threshold Date, our stockholders will be able to act by written consent only if the action is first recommended or approved by the Board of Directors; • vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • only the chairman of our Board of Directors, our chief executive officer, a majority of our Board of Directors, or, until the Class B common stock, as a class, converts to Class A common stock, a stockholder holding thirty percent of the combined voting power of our Class A and Class B common stock are authorized to call a special meeting of stockholders; • certain litigation against us may be required to be brought in Delaware; 40 Table of Contents • our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of Class A common stock; and • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
For example, in the recent past an error in our use of a trusted third party to provide anti-malware and phishing services resulted in URLs embedded within content shared on Dropbox or uploaded to DocSend being made available to other paid subscribers and partners of that third party.
For example, in the past an error in our use of a trusted third party to provide anti-malware and phishing services resulted in URLs embedded within content shared on Dropbox or uploaded to DocSend being made available to other paid subscribers and partners of that third party.
Our ability to forecast our future results of operations is subject to a number of risks and uncertainties, including our ability to effectively plan for and model future growth, and we have not always and we may not in the future receive our expected return on investments that we make in our business in the time we expect or at all.
Our ability to forecast our future results of operations and future growth is subject to a number of risks and uncertainties, including our ability to effectively plan for and model future growth, and we have not always and we may not in the future receive the return we expect on investments that we make in our business in the time we expect or at all.
Emerging and evolving cybersecurity threats pose unique challenges and involve sophisticated threat actors. Computer malware, ransomware, cyber viruses, social engineering (phishing attacks), denial of service or other attacks, employee theft or misuse and increasingly sophisticated network attacks have become more prevalent, particularly against cloud services.
Emerging and evolving cybersecurity threats pose unique challenges and involve sophisticated threat actors. Computer malware, ransomware, viruses, social engineering (phishing attacks), denial of service or other attacks, employee theft or misuse and increasingly sophisticated network attacks have become more prevalent, particularly against cloud services.
Demand for our platform is also sensitive to price, and our pricing and packaging has in the past and could in the future negatively impact our top of funnel and conversion rates. Many factors, including our marketing, user acquisition and technology costs, and our current and future competitors’ pricing and marketing strategies, can significantly affect our pricing strategies.
Demand for our platform is sensitive to price, and our pricing and packaging has in the past and could in the future negatively impact our top of funnel and conversion rates. Many factors, including our marketing, user acquisition and technology costs, and our current and future competitors’ pricing and marketing strategies, can significantly affect our pricing strategies.
The vast majority of user content is stored at our own custom-built infrastructure in co-location facilities that we directly lease and operate. As we continue to add, enhance and modify our infrastructure to meet our business needs, we may move or transfer additional content accordingly.
The vast majority of user content is stored in our own custom-built infrastructure in co-location facilities that we directly lease and operate. As we continue to add, enhance and modify our infrastructure to meet our business needs, we may move or transfer additional content accordingly.
Because we conduct business in currencies other than U.S. dollars, but report our results of operations in U.S. dollars, we also face translation exposure to fluctuations in currency exchange rates, which could hinder our ability to predict our future results and earnings and could materially impact our results of operations.
Because we conduct business in currencies other than U.S. dollars, but report our results of operations in U.S. dollars, we also face translation exposure due to fluctuations in currency exchange rates, which could hinder our ability to predict our future results and earnings and could materially impact our results of operations.
In addition, such current and future indebtedness could: • make it more difficult for us to satisfy our debt obligations, including the 2026 Notes and the 2028 Notes; • increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict our current and future operations, make it more difficult to successfully execute our business strategy, or restrict us from exploiting business opportunities; • place us at a competitive disadvantage compared to our competitors that have less indebtedness or are not subject to restrictive covenants; • restrict or otherwise impact the pace and timing of repurchases under our stock repurchase program; and 28 Table of Contents • limit our availability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy, or other general purposes.
In addition, such current and future indebtedness could: • make it more difficult for us to satisfy our debt obligations, including our term loan facility, the 2026 Notes and the 2028 Notes; • increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes; 28 Table of Contents • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict our current and future operations, make it more difficult to successfully execute our business strategy, or restrict us from exploiting business opportunities; • place us at a competitive disadvantage compared to our competitors that have less indebtedness or are not subject to restrictive covenants; • restrict or otherwise impact the pace and timing of repurchases under our stock repurchase program; and • limit our availability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy, or other general purposes.
We expect to continue to expand our international operations, which may include employees working in new jurisdictions and providing our platform in additional languages. Any new markets or countries into which we attempt to sell subscriptions to our platform may not be receptive.
We expect to continue to expand our international operations, which may include employees working in new jurisdictions and providing our products in additional languages. Any new markets or countries into which we attempt to sell subscriptions to our platform may not be receptive.
Factors that may cause fluctuations in our quarterly results of operations include, without limitation, those listed below: • our ability to retain and upgrade paying users; • our ability to attract new paying users and convert registered to paying users; • the timing of expenses and recognition of revenue; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure, as well as entry into or exit of operating and finance leases; 30 Table of Contents • the timing of expenses related to acquisitions; • any large indemnification payments to our users or other third parties; • changes in our pricing policies or those of our competitors; • the timing and success of new product feature and service introductions by us or our competitors; • network outages or actual or perceived security breaches; • changes in the competitive dynamics of our industry, including consolidation among competitors; • changes in laws and regulations that impact our business; • general economic and market conditions; • fluctuations in foreign currency exchange rates; • catastrophic events, including earthquakes, fires, floods, tsunamis, or other weather events, power loss, telecommunications failures, software or hardware malfunctions, cyber-attack, war, or terrorist attacks, and pandemics; • changes in reserves or other non-cash credits or charges, such as the impairment charges as a result of changes in the corporate real estate market which impacted our subleasing strategy in conjunction with our Virtual First model, and releases of deferred tax asset valuation allowances; and • any other impacts of shifting our operations to a Virtual First work model.
Factors that may cause fluctuations in our quarterly results of operations include, without limitation, those listed below : • our ability to retain and upgrade paying users; • our ability to attract new paying users and convert registered to paying users; • the timing of expenses and recognition of revenue; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure, as well as entry into or exit of operating and finance leases; • the timing of expenses related to acquisitions; • any large indemnification payments to our users or other third parties; • changes in our pricing policies or those of our competitors; • the timing and success of new product feature and service introductions by us or our competitors; • network outages or actual or perceived security breaches; • changes in the competitive dynamics of our industry, including consolidation among competitors; • changes in laws and regulations that impact our business; • general economic and market conditions; • fluctuations in foreign currency exchange rates; • catastrophic events, including earthquakes, fires, floods, tsunamis, or other weather events, power loss, telecommunications failures, software or hardware malfunctions, cyber-attack, war, or terrorist attacks, and pandemics; • changes in reserves or other non-cash credits or charges, such as the impairment charges as a result of changes in the corporate real estate market which impacted our subleasing strategy in conjunction with our Virtual First model, and releases of deferred tax asset valuation allowances; and • any other impacts from our Virtual First work model.
For example, the Organization for Economic Cooperation and Development (“OECD”) and many countries have proposed to reallocate some portion of profits of large multinational companies with global revenues exceeding EUR20 billion to markets where sales arise (“Pillar One”), as well as enact a global minimum tax rate of at least 15% for multinationals with global revenue exceeding EUR750 million (“Pillar Two”), and many countries are considering or intend to adopt these proposals.
For example, the Organization for Economic Cooperation and Development (“OECD”) and many countries have proposed to reallocate some portion of profits of large multinational companies with global revenues exceeding EUR20 billion to markets where sales arise (“Pillar One”), as well as enact a global minimum tax rate of at least 15% for multinationals with global revenue exceeding EUR750 million (“Pillar Two”), and many countries are considering or have begun to adopt these proposals.
We have incurred impairment charges related to our facilities and may incur additional or unanticipated expense related to subleasing our facilities, including lower than anticipated sublease income that may result in additional or higher impairment charges than we have currently estimated, particularly if we are unable to sublease our unused office space on favorable terms or at all or if our subtenants fail to make lease payments to us in connection with our shift to a Virtual First model.
We have incurred impairment charges related to our facilities and may incur additional or unanticipated expense related to subleasing our facilities, including lower than anticipated sublease income that may result in additional or higher impairment charges than we have currently estimated, particularly if we are unable to sublease our unused office space on favorable terms or at all or if our subtenants fail to make lease payments to us in connection with our Virtual First model.
Many factors may contribute to declines in our growth rates, including higher market penetration, increased competition, particularly from the availability of less expensive and bundled competitive products, slowing demand for our platform and declines in our rate of growth in paying users, a decrease in the growth of the overall content collaboration market, resource allocation across our business, including investments in new technologies or products that may not drive growth in the short term, a failure by us to continue capitalizing on growth opportunities, the impact of changing economic conditions, including as a result of catastrophic events, on our current and prospective paying users, fluctuations in foreign currency exchange rates, and the maturation of our business, among others.
Many factors may contribute to declines in our growth rates, including higher market penetration, increased competition, particularly from the availability of less expensive and bundled competitive products, slowing demand for our platform and declines in our rate of growth in paying users, a decrease in the growth of the overall content collaboration market, resource allocation across our business, including 29 Table of Contents investments in new technologies or products that may not drive growth in the short term, a failure by us to continue capitalizing on growth opportunities, the impact of changing economic conditions, including as a result of catastrophic events, on our current and prospective paying users, fluctuations in foreign currency exchange rates, and the maturation of our business, among others.
Any defects in, or unavailability of, our third-party software, services, or hardware that cause interruptions to the availability of our services, loss of data, or performance issues could, among other things: • cause a reduction in revenue or delay in market acceptance of our platform; 26 Table of Contents • require us to issue refunds to our users or expose us to claims for damages; • cause us to lose existing users and make it more difficult to attract new users; • divert our development resources or require us to make extensive changes to our platform, which would increase our expenses; • increase our technical support costs; and • harm our reputation and brand.
Any defects in, or unavailability of, our third-party software, services, or hardware that cause interruptions to the availability of our services, loss of data, or performance issues could, among other things: • cause a reduction in revenue or delay in market acceptance of our platform; • require us to issue refunds to our users or expose us to claims for damages; • cause us to lose existing users and make it more difficult to attract new users; • divert our development resources or require us to make extensive changes to our platform, which would increase our expenses; • increase our technical support costs; and • harm our reputation and brand.
Our shift to a Virtual First work model could make it increasingly difficult to oversee our increasingly distributed workforce and manage our business, potentially resulting in harm to our company culture, increased employee attrition, and the loss of key personnel, as well as potentially negatively impacting product research and development and the growth of our business.
Our Virtual First work model could make it increasingly difficult to oversee our increasingly distributed workforce and manage our business, potentially resulting in harm to our company culture, increased employee attrition, and the loss of key personnel, as well as potentially negatively impacting product research and development and the growth of our business.
On July 16, 2020, the Court of Justice of the European Union (“CJEU”) imposed additional obligations on companies relying on standard contractual clauses approved by the European Commission (“SCCs”) to transfer personal data. A recent decision by the Irish Data Protection Commission (“IDPC”) found the additional measures employed by Meta Platforms, Inc.
On July 16, 2020, the Court of Justice of the European Union (“CJEU”) imposed additional obligations on companies relying on standard contractual clauses approved by the European Commission (“SCCs”) to transfer personal data. A 2023 decision by the Irish Data Protection Commission (“IDPC”) found the additional measures employed by Meta Platforms, Inc.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to users or other third parties, or any of our other legal obligations relating to privacy, data protection, or information security may result in governmental investigations, enforcement actions or other proceedings, litigation, claims, or public statements against us by consumer advocacy groups or others, and could result in significant liability or cause our users to lose trust in us, which could have an adverse effect on our reputation and business.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to users or other third parties, or any of our other legal obligations 35 Table of Contents relating to privacy, data protection, or information security may result in governmental investigations, enforcement actions or other proceedings, litigation, claims, or public statements against us by consumer advocacy groups or others, and could result in significant liability or cause our users to lose trust in us, which could have an adverse effect on our reputation and business.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the 2026 Notes and 2028 Notes, or to make cash payments in connection with any conversion of the 2026 Notes, 2028 Notes or upon any fundamental change if holders of the applicable series of Notes require us to repurchase their Notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including our term loan facility, the 2026 Notes and 2028 Notes, or to make cash payments in connection with any conversion of the 2026 Notes, 2028 Notes or upon any fundamental change if holders of the applicable series of Notes require us to repurchase their Notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems, and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems, and resources. 42 Table of Contents The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
Furthermore, events that financially impact our registered users and other prospective paying users, such as macroeconomic factors, layoffs, inflation, increased interest rates, or catastrophic events, have in the past caused and may cause in future periods these users to delay or reduce technology spending, which impacted, and may continue to impact our ability to convert registered users or otherwise attract new paying users, restricting our ability to grow our revenue.
Furthermore, events or conditions that financially impact our registered users and other prospective paying users, such as macroeconomic factors, layoffs, inflation, fluctuating interest rates, or catastrophic events, have in the past caused and may cause in future periods these users to delay or reduce technology spending, which impacted, and may continue to impact our ability to convert registered users or otherwise attract new paying users, restricting our ability to grow our revenue.
We cannot assure you that additional financing will be available to us on favorable terms when required, or at all and, in light of macroeconomic challenges, inflation and increased interest rates, financing terms have become less favorable.
We cannot assure you that additional financing will be available to us on favorable terms when required, or at all and, in light of macroeconomic challenges, inflation and fluctuating interest rates, financing terms have become less favorable.
As we continue to operate in a Virtual First model, our recent hires and planned hires may not become as productive as we expect, and we may be unable to hire, integrate, or retain sufficient numbers of qualified individuals. Many of the companies with which we compete for experienced personnel have greater resources than we have.
As we 22 Table of Contents continue to operate in a Virtual First model, our recent hires and planned hires may not become as productive as we expect, and we may be unable to hire, integrate, or retain sufficient numbers of qualified individuals. Many of the companies with which we compete for experienced personnel have greater resources than we have.
Factors that could cause fluctuations in the trading price of our Class A common stock include the following: • price and volume fluctuations in the overall stock market from time-to-time; • volatility in the trading prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales of shares of our Class A common stock by us or our stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; • announcements by us or our competitors of new products, features, or services; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; 37 Table of Contents • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated changes in our key metrics; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • actual or perceived breaches of, or failures related to, privacy, data protection or data security; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, products, services, or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any significant change in our management; • the inclusion, exclusion, or deletion of our stock from any trading indices, including the S&P 400 Index, to which we were recently added; and • general economic conditions and slow or negative growth of our markets and catastrophic events, including earthquakes, fires, floods, tsunamis, or other weather events, power loss, telecommunications failures, software or hardware malfunctions, cyber-attack, war, or other armed conflict, or terrorist attacks, and pandemics.
Factors that could cause fluctuations in the trading price of our Class A common stock include, but are not limited to, the following: • price and volume fluctuations in the overall stock market from time-to-time; • volatility in the trading prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales of shares of our Class A common stock by us or our stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; • announcements by us or our competitors of new products, features, or services; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated changes in our key metrics; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • actual or perceived breaches of, or failures related to, privacy, data protection or data security; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed transactions, which may include acquisitions of businesses, products, services, or technologies, financing arrangements, or joint ventures or partnerships by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any significant change in our management; • the inclusion, exclusion, or deletion of our stock from any trading indices, including the S&P 400 Index, to which we were recently added; and 38 Table of Contents • general economic conditions and slow or negative growth of our markets and catastrophic events, including earthquakes, fires, floods, tsunamis, or other weather events, power loss, telecommunications failures, software or hardware malfunctions, cyber-attack, war, or other armed conflict, or terrorist attacks, and pandemics.
If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price and trading volume of our Class A common stock to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If few securities analysts maintain coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which could cause the price and trading volume of our Class A common stock to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, although we anticipate that our shift to a Virtual First work model will have a long-term positive impact on our financial results and business operations, the impact remains uncertain.
In addition, although we anticipate that our Virtual First work model will have a long-term positive impact on our financial results and business operations, the impact remains uncertain.
Although we have taken corrective actions in response to past incidents, and have developed systems and processes that are designed to protect the personal data of users and their organizations, protect our systems, prevent data loss, 16 Table of Contents and prevent other security breaches and security incidents, these security measures have not fully protected our systems in the past and cannot guarantee security in the future.
Although we have taken corrective actions in response to past incidents, and have developed systems and processes that are designed to protect the personal data of users and their organizations, protect our systems, prevent data loss, and prevent other security breaches and security incidents, these security measures have not fully protected our systems in the past and cannot guarantee security in the future.
It is difficult to 42 Table of Contents predict the impact of future changes to accounting principles or our accounting policies, any of which could negatively affect our results of operations. We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all.
It is difficult to predict the impact of future changes to accounting principles or our accounting policies, any of which could negatively affect our results of operations. We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all.
Concerns about inflation, rising interest rates, unemployment trends, geopolitical issues, including wars and other armed conflicts, global health epidemics and other highly communicable diseases, bank insolvency and related uncertainty and volatility in the financial services industry, or a widespread economic slowdown or recession (in the United States or internationally) have led to, and could continue to lead to, increased market volatility and economic uncertainty, which could cause current and prospective paying users to delay, decrease, or cancel purchases of our products and services, or delay or default on their payment obligations.
Concerns about inflation, fluctuating or uncertain interest rates, unemployment trends, geopolitical issues, including wars and other armed conflicts, global health epidemics and other highly communicable diseases, bank insolvencies and related uncertainty and volatility in the financial services industry, or a widespread economic slowdown or recession (in the United States or internationally) have led to, and could continue to lead to, increased market volatility and economic uncertainty, which could cause current and prospective paying users to delay, decrease, or cancel purchases of our products and services, or delay or default on their payment obligations.
For example, in response to the COVID-19 pandemic, we transitioned to a Virtual First work model, which may lead to disruptions and decreased productivity that could result in delays in our product development process. The risk of such disruptions and decreased productivity may persist as our workforce operates under a Virtual First model.
For example, in response to the COVID-19 pandemic, we transitioned to a Virtual First work model, which may lead to disruptions and decreased productivity that could result in delays in our product development process as compared to a fully in-office model. The risk of such disruptions and decreased productivity may persist as our workforce operates under a Virtual First model.
As of December 31, 2023, we had federal, state, and foreign net operating loss carryforwards and federal and state research credit carryforwards available to reduce our future taxable income and/or tax liabilities.
As of December 31, 2024 , we had federal, state, and foreign net operating loss carryforwards and federal and state research credit carryforwards available to reduce our future taxable income and/or tax liabilities.
These laws and regulations could, in addition to limiting internet neutrality, involve taxation, tariffs, privacy, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, and the characteristics and quality of services, any of which could decrease the demand for, or the usage of, our platform.
These laws and regulations could, in addition to limiting internet 36 Table of Contents neutrality, involve taxation, tariffs, privacy, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, and the characteristics and quality of services, any of which could decrease the demand for, or the usage of, our platform.
In addition, each outstanding share of Class B common stock held by a stockholder who is a natural person, or held by the permitted entities or permitted transferees of such stockholder (as described in our amended and restated certificate of incorporation), will convert 38 Table of Contents automatically into one share of Class A common stock upon the death of such natural person.
In addition, each outstanding share of Class B common stock held by a stockholder who is a natural person, or held by the permitted entities or permitted transferees of such stockholder (as described in our amended and restated certificate of incorporation), will convert automatically into one share of Class A common stock upon the death of such natural person.
Problems faced by datacenters, with our third-party datacenter service providers, with the telecommunications network providers with whom we or they contract, or with the systems by which our telecommunications providers allocate capacity among their users, including us, could adversely affect the experience of our users or result in unexpected increases in our costs.
Problems faced by datacenters, with our third-party datacenter service providers, with 25 Table of Contents the telecommunications network providers with whom we or they contract, or with the systems by which our telecommunications providers allocate capacity among their users, including us, could adversely affect the experience of our users or result in unexpected increases in our costs.
Any of these events could materially and adversely affect our business, results of operations, and financial condition. Risks Related to Ownership of Our Class A Common Stock The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
Any of these events could materially and adversely affect our business, results of operations, and financial condition. 37 Table of Contents Risks Related to Ownership of Our Class A Common Stock The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
Any changes in third-party service levels at datacenters or any real or 25 Table of Contents perceived errors, defects, disruptions, or other performance problems with our platform could harm our reputation and may result in damage to, or loss or compromise of, our users’ content.
Any changes in third-party service levels at datacenters or any real or perceived errors, defects, disruptions, or other performance problems with our platform could harm our reputation and may result in damage to, or loss or compromise of, our users’ content.
In addition, as we continue our shift to Virtual First, we will need less office space than we are currently contractually committed to leasing and as a result, we have recorded and may in the future record impairment charges related to the office spaces we no longer expect to need, which impacted and may in the future impact our ability to achieve or maintain GAAP profitability.
In addition, as we continue to operate with our Virtual First model, we will need less office space than we are currently contractually committed to leasing and, as a result, we have recorded and may in the future record impairment charges related to the office spaces we no longer expect to need, which impacted and may in the future impact our ability to achieve or maintain GAAP profitability.
As a result, stockholders must rely on sales of their Class A common stock after price appreciation as the only way to realize any future gains on their investment. In addition, our revolving credit facility contains restrictions on our ability to pay dividends. General Risk Factors Our business could be disrupted by catastrophic events.
As a result, stockholders must rely on sales of their Class A common stock after price appreciation as the only way to realize any future gains on their investment. In addition, our term loan facility contains restrictions on our ability to pay dividends. General Risk Factors Our business could be disrupted by catastrophic events.
We finance a significant portion of our expenditures through leasing arrangements, and we may enter into additional similar arrangements in the future. As of December 31, 2023, we had an aggregate of $1,173.6 million of commitments to settle contractual obligations. In particular, we utilize both finance and operating leases to finance some of our equipment, datacenters and offices.
We finance a significant portion of our expenditures through leasing arrangements, and we may enter into additional similar arrangements in the future. As of December 31, 2024, we had an aggregate of $1,088.6 million of commitments to settle contractual obligations. In particular, we utilize both finance and operating leases to finance some of our equipment, datacenters and offices.
In particular, if the debt under our revolving credit facility were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately materially and adversely affect our business, cash flows, results of operations, and financial condition.
In particular, if the debt under our term loan facility were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately materially and adversely affect our business, cash flows, results of operations, and financial condition.
Some of these potential factors include: • awareness of the content collaboration category generally; 21 Table of Contents • availability of products and services that compete with ours; • the impact, scale, and duration, of trends towards or away from remote or distributed work; • ease of adoption and use; • features and platform experience; • performance; • brand; • security and privacy; • customer support; • pricing • investments in AI; and • macroeconomic trends.
Some of these potential factors include: • awareness of the content collaboration category generally; • availability of products and services that compete with ours; • the impact, scale, and duration, of trends towards or away from remote or distributed work; • ease of adoption and use; • features and platform experience; • performance; • brand recognition and trust; • security and privacy; • customer support; • pricing; • investments in AI; and • macroeconomic trends.
We strive to demonstrate the value of our platform to our registered users, thereby encouraging them to convert to paying users through in-product prompts and notifications, and time-limited trials of paid subscription plans. As of December 31, 2023, we served over 700 million registered users but only 18.12 million paying users.
We strive to demonstrate the value of our platform to our registered users, thereby encouraging them to convert to paying users through in-product prompts and notifications, and time-limited trials of paid subscription plans. As of December 31, 2024, we served over 700 million registered users but only 18.22 million paying users.
In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data, or similar requirements, that could increase the cost and complexity of delivering our services.
Some countries are also considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data, or similar requirements, that could increase the cost and complexity of delivering our services.
In the United States and abroad, we have over 1,750 issued patents and more than 250 pending patent applications.
In the United States and abroad, we have over 1,800 issued patents and more than 250 pending patent applications.
Historically, we have funded our operations and capital expenditures primarily through equity issuances, cash generated from our operations, and debt financing for capital purchases.
Historically, we have funded our operations and capital expenditures primarily through equity issuances, cash generated from our operations, and debt financing.
As of December 31, 2023, Dropbox was receiving over 75 billion API calls per month, and just under 1,000,000 developers had registered and built applications on our platform.
As of December 31, 2024, Dropbox was receiving over 75 billion API calls per month, and just over 1,000,000 developers had registered and built applications on our platform.
If the content collaboration market fails to grow or grows more slowly than we currently anticipate, or if there are changes in trends with regard to remote or distributed work, demand for our platform could be negatively affected.
If the content collaboration market fails to grow or grows more slowly than we currently anticipate, 21 Table of Contents or if there are changes in trends with regard to remote or distributed work, demand for our platform could be negatively affected.
We have made, and intend to continue making, significant investments in developing products that will incorporate AI, and while we are optimistic that such new products will drive future growth of our business, the development of such new features will incur significant costs, we expect to face increasing competition, and there is no guarantee that such new product offerings will ultimately be successful.
We have made, and intend to continue making, significant investments in developing products that will incorporate AI, and while we are optimistic that such new products have the potential to drive future growth of our business, the development of such new features will incur significant costs and there is no guarantee that such new product offerings will ultimately be successful.
The use of AI technologies and the accelerated product development lifecycle for AI products may create additional or increase existing cybersecurity risks and may result in security or privacy incidents. Further, cybersecurity attacks may use AI technologies and increase the risk of security incidents.
The use of AI technologies and the accelerated product development lifecycle for AI products may create additional or increase existing cybersecurity risks and may result in security or privacy incidents.
Our quarterly results of operations may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business.
Our quarterly results of operations may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying 30 Table of Contents performance of our business.
Although we currently anticipate that our existing cash, cash equivalents and short-term investments, amounts available under our existing credit facilities, and cash flow from operations will be sufficient to meet our cash needs for the foreseeable future, we may require additional financing.
Although we currently anticipate that our existing cash, cash equivalents and short-term investments, amounts available under our existing term loan facility, and cash flow from operations will be sufficient to meet our cash needs for the foreseeable future, we may require additional financing.
The CJEU and IDPC decisions may result in data protection regulators applying differing standards for, and requiring additional measures in connection with, transfers of personal data from the EEA and 34 Table of Contents Switzerland to the United States. The European Commission issued revised SCCs in June 2021 that are required to be implemented.
The CJEU and IDPC decisions and related developments may result in data protection regulators applying differing standards for, and requiring additional measures in connection with, transfers of personal data from the EEA and Switzerland to the United States. The European Commission issued revised SCCs in June 2021 that are required to be implemented.
We have in the past experienced delays in our internally planned release dates of new features and capabilities, and there can be no assurance that new product experiences, features, or capabilities will be released according to schedule.
We have also in the past experienced delays in our internally planned release dates of new features and capabilities, and there can be no assurance that new product experiences, features, or 20 Table of Contents capabilities will be released according to schedule.
Our current and future indebtedness may limit our operating flexibility or otherwise affect our business. Our current indebtedness, including our 2026 Notes, 2028 Notes and our revolving credit facility, place significant restrictions on our business and could have important consequences to our stockholders and effects on our business, as could any future indebtedness.
Our current and future indebtedness may limit our operating flexibility or otherwise affect our business. Our current indebtedness, including our 2026 Notes, 2028 Notes and our term loan facility, place significant restrictions on our business and could have important consequences to our stockholders and effects on our business, as could any future indebtedness.
Servicing our 2026 Notes and 2028 Notes may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under the 2026 Notes or 2028 Notes.
Servicing our indebtedness under our term loan facility, 2026 Notes, and 2028 Notes may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under our term loan facility, 2026 Notes, or 2028 Notes.
If these third parties or developers fail to adopt or adhere to adequate data security practices, or in the event of a breach or other compromise of their networks or systems, our data or our users' data may be improperly accessed, used, or disclosed.
If these third parties or developers fail to adopt or adhere to adequate data security practices or the Dropbox Developer Terms and Conditions, or in the event of a breach or other compromise of their networks or systems, our data or our users' data may be improperly accessed, used, or disclosed.
Additions of executive-level management, significant numbers of new and remote employees, our workforce reduction, and higher employee turnover could significantly and adversely impact our culture, as could our Virtual First model. We have a limited history of operating with a Virtual First workforce and the long-term impact on our financial results and business operations remains uncertain.
Additions of executive-level management, significant numbers of new and remote employees, our workforce reduction, and higher employee turnover could significantly and adversely impact our culture, as could our Virtual First model. We operate with a Virtual First workforce and the long-term impact of this model on our financial results and business operations remains uncertain .
In connection with the pricing of the 2026 Notes and 2028 Notes, we entered into convertible note hedge transactions with certain financial institutions or affiliates of financial institutions, which we refer to as the “option counterparties,” and we will be subject to the risk that one or more of such option counterparties may default under the convertible note hedge transactions.
In connection with the pricing of the 2026 Notes and 2028 Notes, we entered into convertible note hedge transactions with certain financial institutions or affiliates of financial institutions, which we refer to as the “option counterparties,” and we are subject to the risk that one or more of such option counterparties may default on their obligations under the convertible note hedge transactions.
We do not currently maintain a program to hedge exposures to non-U.S. dollar currencies. 31 Table of Contents We are subject to counterparty risk with respect to the convertible note hedge transactions.
We do not currently maintain a program to hedge exposures to non-U.S. dollar currencies. We are subject to counterparty risk with respect to the convertible note hedge transactions.
In addition, these challenges may be heightened in connection with our Virtual First work model, as we focus on integrating, developing, and motivating an increasingly distributed employee base in various countries around the world, as well as aligning our resources to create a more nimble and streamlined organization.
In addition, our challenges may be heightened in connection with our Virtual First work model, as we engage an increasingly distributed employee base in countries around the world, as well as our focus on aligning our resources to create a more nimble and streamlined organization.
Delaware law and provisions in our restated certificate of incorporation and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.
Delaware law and provisions in our restated certificate of incorporation and restated bylaws, and after our proposed reincorporation, Nevada law and provisions in our articles of incorporation and bylaws, could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.
If our systems were to fail or be negatively impacted as a result of a natural disaster or other event, our ability to deliver products to our users would be impaired, we could lose critical data and we may be subject to increased costs.
Even with our disaster recovery arrangements, our service could be interrupted. If our systems were to fail or be negatively impacted as a result of a natural disaster or other event, our ability to deliver products to our users would be impaired, we could lose critical data and we may be subject to increased costs.
Loss of paying users due to non-renewal of contracts that cover a large number of seat licenses could negatively impact our number of paying users, causing the number of net new paying users to decline or be negative.
In addition, certain of our enterprise licenses have a large number of seat licenses. Loss of paying users due to non-renewal of contracts that cover a large number of seat licenses could negatively impact our number of paying users, causing the number of net new paying users to decline or be negative.
We have acquired, and may in the future acquire, other businesses and technologies, which could require significant management attention, disrupt our business operations, cause us to incur debt or dilute stockholder value.
We have acquired or invested in, and may in the future acquire or invest in, other businesses, assets, and technologies, which could require significant management attention, disrupt our business operations, cause us to incur debt or dilute stockholder value, and may not be successful.
On July 10, 2023, the European Commission adopted an adequacy decision relating to the transfer of personal data from the European Economic Area (“EEA”) to the U.S. that takes place under the EU-U.S. Data Privacy Framework (“DPF”). The DPF is the successor to the EU-U.S. Privacy Shield (“Privacy Shield”) and allows participating entities to transfer personal data to the U.S.
On July 10, 2023, the European Commission adopted an adequacy decision relating to the transfer of personal data from the European Economic Area (“EEA”) to the U.S. that takes place under the EU-U.S. Data Privacy Framework (“DPF”). The DPF is the successor to the EU-U.S.
As a standard practice, we complied with our notification obligations to applicable regulatory authorities. While we believe we have adequate systems in place to detect and prevent integration of software and services that may compromise personal information, we can provide no assurances those systems will be effective in every case. Our rate of growth has declined in past periods.
As a standard practice, we complied with our notification obligations to applicable regulatory authorities. While we believe we have adequate systems in place to detect 17 Table of Contents and prevent integration of software and services that may compromise personal information, we can provide no assurances those systems will be effective in every case.
Any significant change to applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of our users’ content, or regarding the manner in which the express or implied consent of users for the collection, use, retention, or disclosure of such content is obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services and features. 35 Table of Contents Our business could be adversely impacted by changes in internet access for our users or laws specifically governing the internet.
Any significant change to applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of our users’ content, or regarding the manner in which the express or implied consent of users for the collection, use, retention, or disclosure of such content is obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services and features.
Should any of our competitors modify their products or standards in a manner that degrades the functionality of our platform or gives preferential treatment to competitive products or services, whether to enhance their competitive position or for any other reason, the interoperability of our platform with these products could decrease and our business, results of operations, and financial condition could be harmed. 20 Table of Contents Our business could be harmed by any significant disruption of service on our platform or loss of content.
Should any of our competitors modify their products or standards in a manner that degrades the functionality of our platform or gives preferential treatment to competitive products or services, whether to enhance their competitive position or for any other reason, the interoperability of our platform with these products could decrease and our business, results of operations, and financial condition could be harmed.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, which would materially and adversely impact our business, financial condition and operating results. Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, which would materially and adversely impact our business, financial condition and operating results .
If the 2026 Notes or the 2028 Notes are converted by holders of such series, we are required under the applicable indenture to pay cash up to the aggregate principal amount converted and pay or deliver, as the case may be, cash, Class A common stock, or any combination of cash or Class A common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregated principal amount of such Notes converted.
Transactions relating to our 2026 Notes and 2028 Notes may dilute the ownership interest of stockholders, or may otherwise depress the price of our common stock. 39 Table of Contents If the 2026 Notes or the 2028 Notes are converted by holders of such series, we are required under the applicable indenture to pay cash up to the aggregate principal amount converted and pay or deliver, as the case may be, cash, Class A common stock, or any combination of cash or Class A common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregated principal amount of such Notes converted.
We currently intend to retain any future earnings to finance the operation and expansion of our business and fund our stock repurchase program, and we do not expect to declare or pay any dividends in the foreseeable future.
We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business and fund our stock repurchase program, and we do not expect to declare or pay any dividends in the foreseeable future.
We believe the principal competitive factors in our markets include the following: • user-centric design; • ease of adoption and use; • scale of user network; • features and platform experience; 18 Table of Contents • performance; • brand; • security and privacy; • accessibility across several devices, operating systems, and applications; • third-party integration; • customer support; • continued innovation; • pricing; • investments in AI; and • macroeconomic trends.
We believe the principal competitive factors in our markets include the following: • user-centric design; • ease of adoption and use; • scale of user network; • features and platform experience; • performance; • brand recognition and trust; • security and privacy; • accessibility across several devices, operating systems, and applications; • third-party integration; • customer support; • continued innovation; • pricing; • investments in AI; and • macroeconomic trends. 19 Table of Contents With the introduction of new technologies and market entrants, we expect competition to intensify.
In addition, while we believe trends towards remote or distributed work will prove to be significant and long lasting, and that these trends will open up increased market opportunities for us, such as our work on new AI-driven products, such trends 19 Table of Contents or opportunities may not materialize or, if they do, we may not be able to develop new features or products, or enhance our existing offerings, sufficiently to take advantage of them.
In addition, while we believe remote or distributed work will continue to have a significant and long lasting impact on the workforce, and will open up increased market opportunities for us, such as our work on new AI-driven products, such opportunities may not materialize or, if they do, we may not be able to develop new features or products, or enhance our existing offerings, sufficiently to take advantage of them.
In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights, or develop similar technologies and processes.
In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights.
If our limited outbound sales force and lack of experience selling and marketing to large organizations prevents us from reaching larger organizations and growing our revenue, and if we are unable to hire, develop, and retain talented sales personnel in the future, our business, results of operations, and financial condition could be adversely affected.
If our limited outbound sales force and lack of significant experience selling and marketing to large organizations prevents us from reaching larger organizations and growing our revenue, and if we are unable to hire, develop, and retain talented sales personnel in the future, our business, results of operations, and financial condition could be adversely affected . 23 Table of Contents We may expand sales to large organizations, which could lengthen sales cycles and result in greater deployment challenges.
In December 2022, the Council of the European Union (“EU”) formally adopted the EU Minimum Tax Directive, which would require member states to adopt Pillar Two into their domestic law. The directive requires the rules to initially become effective for fiscal years starting on or after December 31, 2023.
In December 2022, the Council of the European Union (“EU”) formally adopted the EU Minimum Tax Directive, which would require member states to adopt Pillar Two into their domestic law, effective for fiscal years starting on or after December 31, 2023. The majority of the jurisdictions in which we operate have enacted legislation to implement Pillar Two.
As of December 31, 2023, our directors and executive officers, and their respective affiliates, held in the aggregate 75.2% of the voting power of our capital stock, with Mr. Houston holding approximately 75.1% of the voting power of our capital stock.
As of December 31, 2024, our directors and executive officers, and their respective affiliates, held in the aggregate 77.5% of the voting power of our capital stock, with Mr. Houston holding approximately 77.4% of the voting power of our capital stock.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “Our business could be damaged, and we could be subject to liability, if there is any unauthorized access to our data or our users’ content, including through privacy and data security breaches or incidents,” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K.
Biggest changeWe describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “We have in the past and may continue to experience privacy and data security breaches or incidents” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K. 44 Table of Contents Governance Our Board of Directors is actively involved in overseeing cybersecurity risk management.
We also maintain an incident response program to prepare for, detect, respond to, and recover from cybersecurity incidents, which include processes to triage, assess severity of, escalate, contain, investigate, and remediate identified incidents, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.
We also maintain an incident response program to prepare for, detect, respond to, and recover from cybersecurity incidents, which include processes to triage, assess the severity of, escalate, contain, investigate, and remediate identified incidents, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.
As part of this process appropriate disclosure personnel will collaborate with subject matter specialists, as necessary, to gather insights for identifying and assessing material cybersecurity threat risks, their severity, and potential mitigations.
As part of our Cybersecurity Process appropriate disclosure personnel will collaborate with subject matter specialists, as necessary, to gather insights for identifying and assessing material cybersecurity threat risks, their severity, and potential mitigations.
These processes vary in maturity across the business and are processes we work to continually improve. Our process for identifying and assessing material risks from cybersecurity threats operates alongside our broader overall risk assessment process, covering all company risks.
These processes vary in maturity across the business and are processes we work to continually improve. Our process for identifying and assessing material risks from cybersecurity threats (our “Cybersecurity Process”) operates alongside our broader overall risk assessment process, covering other risks facing the company.
Our risk management approach is supplemented by external and internal enterprise risk management audits, including SOC-2 and ISO 27001, which are designed to test the effectiveness of our security controls.
Our cybersecurity risk management approach is supplemented by external and internal management audits against commonly accepted frameworks, including SOC-2 and ISO 27001, which are designed to test the effectiveness of our security controls.
Further, we conduct regular tabletop exercises to test and fortify the controls of our cyber incident response program. The incident response team assesses the severity and priority of incidents on a rolling basis, with escalations of cybersecurity incidents provided to our 43 Table of Contents management team.
Further, we conduct periodic tabletop exercises to test and fortify the controls of our cyber incident response program. The incident response team assesses the severity and priority of incidents, with escalations of cybersecurity incidents provided to our management team.
We conduct penetration testing on a periodic basis and have established an external bug bounty program to allow security researchers to help identify vulnerabilities in our systems before they mature into real-world cybersecurity threats. We also maintain a vendor risk management program designed to identify and mitigate risks associated with third-party suppliers and business partners.
We conduct penetration testing on a periodic basis and have established an external bug bounty program through which security researchers can help identify vulnerabilities in our systems before threat actors do. We also maintain a vendor risk management program designed to identify and mitigate risks associated with third-party suppliers and business partners.
Governance Our Board of Directors is actively involved in overseeing cybersecurity risk management. At least once a year, the Board of Directors discusses our programs and policies related to cybersecurity and risk initiatives and considers them closely both from a risk management perspective and as part of Dropbox’s business strategy.
At least once a year, the Board of Directors discusses our programs and policies related to cybersecurity and risk initiatives and considers them closely both from a risk management perspective and as part of Dropbox’s business strategy. Additionally, our Audit Committee oversees programs and policies related to cybersecurity risks and initiatives.
Our Chief Privacy Officer has held various roles advising Dropbox and two other large publicly-traded technology companies on a variety of privacy, regulatory, and product counseling issues since 2010.
Our Chief Privacy Officer has held various roles advising Dropbox and two other large publicly-traded technology companies on a variety of privacy, regulatory, and product counseling issues since 2010. Our VP, Security joined Dropbox in 2022 and has held roles in cybersecurity, engineering, and operations, including leadership positions, with a variety of companies for over 20 years.
We have also established a cross-functional leadership team to oversee our information security and privacy programs and practices, as well as to assess, identify, manage and mitigate security and privacy risks. Members of this team also report periodically to the board of directors, audit committee, and members of our senior leadership team.
Our Audit Committee is comprised entirely of independent directors who evaluate these issues at least quarterly. We have also established a cross-functional leadership team to oversee our information security and privacy programs and practices, as well as to assess, identify, manage, and mitigate security and privacy risks.
This team includes senior leaders from our legal, privacy, information security, information technology, infrastructure, and compliance teams, including our Chief Privacy Officer, our VP, Business Foundations, our Head of Security, and our Chief Legal Officer.
Members of this team also report periodically to the Board of Directors, Audit Committee, and members of our senior leadership team. This team includes senior leaders from our legal, privacy, information security, information technology, infrastructure, and compliance teams, including our Chief Privacy Officer, our VP, Security, and our Chief Legal Officer.
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Additionally, our audit committee oversees programs and policies related to cybersecurity risks and initiatives. Our audit committee is comprised entirely of independent directors who evaluate these issues at least quarterly.
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Our VP, Business Foundations has been with us since 2020, and has worked in the technology industry for over 20 years, working in product development, engineering, and security leadership and risk management roles over that time.
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Our Head of Security joined Dropbox in 2022 and has held roles in cybersecurity, engineering, and operations, including leadership positions, with a variety of companies for over 20 years.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our corporate headquarters are located in San Francisco, California, pursuant to operating leases that expire in 2033. We lease additional offices in San Francisco and around the world, including in Seattle, Washington and Dublin, Ireland. We have datacenter co-location facilities in California, Oregon, Texas, and Virginia.
Biggest changeITEM 2. PROPERTIES Our corporate headquarters are located in San Francisco, California, pursuant to an operating lease that expires in 2033. We lease additional offices in San Francisco and around the world, including in Seattle, Washington and Dublin, Ireland. We have datacenter co-location facilities in Oregon, Texas, and Virginia.
We believe that these facilities are generally suitable to meet our needs. 44 Table of Contents
We believe that these facilities are generally suitable to meet our needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe parties have filed their opening supplemental briefs and responses are due February 20, 2024. Before trial, Motion Offense filed a third patent infringement suit against Dropbox out of the same family of patents as the prior two suits. This suit was not consolidated into the trial. Decisions on the parties' Motions to Dismiss are currently pending.
Biggest changeBefore trial, Motion Offense filed a third patent infringement suit against Dropbox out of the same family of patents as the prior two suits. This suit was not consolidated into the trial. The case is currently stayed pending final resolution of the Inter Partes Review of the asserted patent.
At the trial in May 2023, the jury found in favor of Dropbox on all counts including non-infringement and invalidity of the patents and awarded no damages to Motion Offense. Dropbox filed a Motion for Entry of Judgment on August 28, 2023 and is currently awaiting entry of judgment by the district court.
At the trial in May 2023, the jury found in favor of Dropbox on all counts including non-infringement and invalidity of the patents and awarded no damages to Motion Offense. Dropbox filed a Motion for Entry of Judgment on August 28, 2023 and on September 27, 2023, Motion Offense filed a Motion for a New Trial.
The final judgment may be appealed to the Federal Circuit. On September 27, 2023, Motion Offense filed a Motion for a New Trial. At a hearing on January 3, 2024, the Court denied Motion Offense’s Motion for a New Trial. On January 8, 2024, the court ordered supplemental briefing relating to the Motion for Entry of Judgment.
At a hearing on January 3, 2024, the Court denied Motion Offense’s Motion for a New Trial. On January 8, 2024, the court ordered supplemental briefing relating to the Motion for Entry of Judgment and briefing.
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On August 29, 2024, the court entered judgement in line with the May 2023 jury verdict. 45 Table of Contents On September 27, 2024, Motion Offense filed a Motion for Judgment as a Matter of Law and a renewed Motion for a New Trial. Briefing is complete and Dropbox has requested a hearing on the Motions.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, the terms of our revolving credit facility place certain limitations on the amount of cash dividends we can pay, even if no amounts are currently outstanding. Issuer Purchases of Equity Securities The following table presents information with respect to our repurchases of Class A common stock during the quarter ended December 31, 2023.
Biggest changeIssuer Purchases of Equity Securities The following table presents information with respect to our repurchases of Class A common stock during the quarter ended December 31, 2024.
The following graph compares (i) the cumulative total stockholder return on our Class A common stock from March 23, 2018 (the date our Class A common stock commenced trading on the Nasdaq Global Select Market) through December 31, 2023 with (ii) the cumulative total return of the Standard & Poor's 500 Index and the Nasdaq Computer Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on March 23, 2018 and the reinvestment of dividends.
The following graph compares (i) the cumulative total stockholder return on our Class A common stock from March 23, 2018 (the date our Class A common stock commenced trading on the Nasdaq Global Select Market) through December 31, 2024 with (ii) the cumulative total return of the Standard & Poor's 500 Index and the Nasdaq Computer Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on March 23, 2018 and the reinvestment of dividends.
(3) Includes 46,759 shares of restricted common stock withheld by the Company upon vesting of restricted stock awards to satisfy tax withholding requirements. 46 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, or the SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act.
(3) Includes 34,264 shares of restricted common stock withheld by the Company upon vesting of restricted stock awards to satisfy tax withholding requirements. 47 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, or the SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act.
On July 26, 2023, we announced that our Board of Directors further authorized the repurchase of an additional $1.2 billion of the outstanding shares of our Class A common stock.
On December 11, 2024, we announced that our Board of Directors further authorized the repurchase of up to an additional $1.2 billion of the outstanding shares of our Class A common stock.
Holders of Record As of February 12, 2024, we had 730 holders of record of our Class A and Class B common stock, respectively, and no holders of our Class C common stock.
Holders of Record As of February 18, 2025, we had 496 holders of record of our Class A common stock, 82 holders of record of our Class B common stock, and no holders of record of our Class C common stock.
See Note 12 "Stockholders' (Deficit) Equity" to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information related to share repurchases. (2) Average price paid per share includes costs associated with the repurchases, excluding the 1% excise tax imposed as part of the Inflation Reduction Act.
See Note 12 "Stockholders' Deficit" for additional information. (2) Average price paid per share includes costs associated with the repurchases, excluding the 1% excise tax imposed as part of the Inflation Reduction Act.
Period Total Number of Shares Purchased (in millions) (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Programs (in millions) (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Programs (in millions) (1) October 1 - 31 1.38 $ 27.17 1.38 $ 1,476.65 November 1 - 30 1.41 (3) $ 26.99 1.36 $ 1,439.80 December 1 - 31 1.10 $ 29.04 1.10 $ 1,407.80 Total 3.89 $ 27.64 3.84 (1) On February 17, 2022, we announced that our Board of Directors authorized the repurchase of $1.2 billion of the outstanding shares of our Class A common stock.
Period Total Number of Shares Purchased (in millions) (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Programs (in millions) (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Programs (in millions) (1) October 1 - 31 4.73 $ 25.84 4.73 $ 397.31 November 1 - 30 2.28 (3) $ 27.03 2.25 $ 336.61 December 1 - 31 5.51 $ 30.38 5.51 $ 1,369.14 Total 12.52 $ 28.06 12.49 (1) On February 17, 2022, we announced that our Board of Directors authorized the repurchase of $1.2 billion of the outstanding shares of our Class A common stock.
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On July 26, 2023, we announced that our Board of Directors further authorized the repurchase of an additional $1.2 billion of the outstanding shares of our Class A common stock. We completed the February 2022 authorization of $1.2 billion during the three months ended March 31, 2024, and continued stock repurchases under the July 2023 authorization.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet (gain) loss on real estate assets Year Ended December 31, 2023 2022 $ Change % Change (In millions) Net (gain) loss on real estate assets $ (155.2) $ 175.2 $ (330.4) (189) % Net (gain) loss on real estate assets was $(155.2) million and $175.2 million during the years ended December 31, 2023 and 2022, respectively, primarily due to a gain of $158.8 million as a result of the partial termination of our lease for our San Francisco, California corporate headquarters, offset by $3.6 million of impairment charges during the year ended December 31, 2023 as compared to $175.2 million of impairment charges for the year ended December 31, 2022 due to changes in the corporate real estate market, which impacted our subleasing strategy in conjunction with our Virtual First model .
Biggest changeNet gain on real estate assets was $155.2 million during the year ended December 31, 2023 primarily due to a gain of $158.8 million as a result of the partial termination of our lease for our San Francisco, California corporate headquarters, offset by $3.6 million of impairment charges.
Our sales and marketing expenses relate to both self-serve and outbound sales activities, and consist primarily of employee-related costs, expenses related to our reduction in workforce such as severance, benefits and other related items, advertising costs, brand marketing costs, lead generation costs, sponsorships and allocated overhead.
Sales and marketing . Our sales and marketing expenses relate to both self-serve and outbound sales activities, and consist primarily of employee-related costs, expenses related to our reduction in workforce such as severance, benefits and other related items, advertising costs, brand marketing costs, lead generation costs, sponsorships and allocated overhead.
Other (loss) income, net Other (loss) income, net consists of other non-operating gains or losses, including those related to gains or losses on sale of assets, foreign currency transaction gains and losses, lease arrangements, which include sublease income, and realized gains and losses related to our short-term investments.
Other income (loss), net Other income (loss), net consists of other non-operating gains or losses, including those related to gains or losses on sale of assets, foreign currency transaction gains and losses, lease arrangements, which include sublease income, and realized gains and losses related to our short-term investments.
See Note 1, "Description of the Business and Summary of Significant Accounting Policies - Reduction in Workforce" for additional information.
See Note 1, "Description of the Business and Summary of Significant Accounting Policies - Reduction in Workforce" for additional information.
Included in the cost of treasury stock acquired pursuant to common share repurchases is the 1% excise tax imposed as part of the Inflation Reduction Act. The pace of our share repurchases may fluctuate due to various circumstances, including market conditions and our stock price.
The 1% excise tax imposed as part of the Inflation Reduction Act is included in the cost of treasury stock acquired pursuant to common share repurchases. The pace of our share repurchases may fluctuate due to various circumstances, including market conditions and our stock price.
In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition could be materially and adversely affected.
In the event that additional financing is required or desired from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition could be materially and adversely affected.
Our research and development expenses consist primarily of employee-related costs for our engineering, product, and design teams, expenses related to our reduction in workforce such as severance, benefits and other related items, compensation expenses related to key personnel from acquisitions and allocated overhead.
Operating expenses Research and development . Our research and development expenses consist primarily of employee-related costs for our engineering, product, and design teams, expenses related to our reduction in workforce such as severance, benefits and other related items, compensation expenses related to key personnel from acquisitions and allocated overhead.
We first include paying users related to acquired companies among our paying users in the period of the acquisition. For FormSwift and DocSend, we define paying users as the number of users who have active paid licenses for access to our platform as of the end of the period.
We first include paying users related to acquired companies among our paying users in the period of the acquisition. For DocSend, FormSwift and Reclaim, we define paying users as the number of users who have active paid licenses for access to our platform as of the end of the period.
In February 2022, our Board of Directors authorized the repurchase of up to $ 1.2 billion of the outstanding shares of our Class A common stock. In July 2023, our Board of Directors authorized the repurchase of up to an additional $ 1.2 billion of the outstanding shares of our Class A common stock.
In February 2022, our Board of Directors authorized the repurchase of up to $ 1.2 billion of the outstanding shares of our Class A common stock. In July 2023, our Board of Directors further authorized the repurchase of up to an additional $1.2 billion of the outstanding shares of our Class A common stock.
The popularity of our platform allows us to scale efficiently. We’ve built a thriving global business with 18.12 million paying users. Our Subscription Plans We generate revenue from individuals, families, teams, and organizations by selling subscriptions to our platform, which serve the varying needs of our diverse customer base.
The popularity of our platform allows us to scale efficiently. We’ve built a thriving global business with 18.22 million paying users. Our Subscription Plans We generate revenue from individuals, families, teams, and organizations by selling subscriptions to our platform, which serve the varying needs of our diverse customer base.
Total ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items. Our ARR fluctuates and may decline in some periods as compared to prior periods.
Total ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items. Our ARR fluctuates and may decrease in some periods as compared to prior periods.
Similar to Dropbox plans, pricing of DocSend's plans is based on the number of licenses purchased. Customers can choose between an annual or monthly plan, with a small number of large organizations on multi-year plans. We typically bill 48 Table of Contents DocSend customers at the beginning of their respective terms and recognize revenue ratably over the subscription period.
Similar to Dropbox plans, pricing of DocSend's plans is based on the number of licenses purchased. Customers can choose between an annual or monthly plan, with a small number of large organizations on multi-year plans. We typically bill DocSend customers at the beginning of their respective terms and recognize revenue ratably over the subscription period.
FormSwift primarily sells within the United States, and the majority of its sales are in U.S. dollars. We also offer DocSend as our secure document sharing and analytics solution. DocSend offers paid subscription plans, including a personal plan designed for individuals and Standard, Advanced, and Enterprise plans designed for business users and teams.
FormSwift primarily sells within the United States, and the majority of its sales are in U.S. dollars. We also offer DocSend as our secure document sharing and analytics solution. DocSend offers paid subscription plans, including a personal plan designed for individuals and Standard, Advanced, and Enterprise plans designed for business users 49 Table of Contents and teams.
Our future capital requirements will depend on many factors including our revenue growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support further infrastructure development and research and development efforts, the timing and extent of additional capital expenditures to invest in collaboration spaces, our ability to sublease space at office locations where we have unused spaces, the satisfaction of tax withholding obligations for the release of restricted stock units and awards, the expansion of sales and marketing and international operation activities, the introduction of new product capabilities and enhancement of our platform, the continuing market acceptance of our platform, and the volume and timing of our share repurchases.
Our future capital requirements will depend on many factors including our revenue growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support further infrastructure development and research and development efforts, the timing and extent of additional capital expenditures to invest in infrastructure equipment to support our user base, our ability to sublease space at office locations where we have unused spaces, the satisfaction of tax withholding obligations for the release of restricted stock units and awards, the expansion of sales and marketing and international operation activities, the introduction of new product capabilities and enhancement of our platform, the continuing market acceptance of our platform, and the volume, timing, and amount of our share repurchases.
The below tables set forth our Total ARR using the exchange rates set at the beginning of the applicable year, as well as on a constant currency basis relative to the exchange rates used in 2023.
The below tables set forth our Total ARR using the exchange rates set at the beginning of the applicable year, as well as on a constant currency basis relative to the exchange rates used in 2024.
When the projected undiscounted 63 Table of Contents cash flows estimated to be generated by those assets are less than their carrying amounts, the assets are adjusted to their estimated fair value and an impairment loss is recorded as a component of operating income.
When the projected undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts, the assets are adjusted to their estimated fair value and an impairment loss is recorded as a component of operating income.
For a comparison of our results of operations for the fiscal years ended December 31, 2022 and 2021 see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 22, 2023.
For a comparison of our results of operations for the fiscal years ended December 31, 2023 and 2022 see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 16, 2024.
The Co-Founder Grant is comprised of nine tranches that are eligible to vest based on the achievement of stock price goals, each of which are referred to as a Stock Price Target, measured over a consecutive thirty-day trading period during the Performance Period.
The Co-Founder Grant is comprised of nine tranches that are eligible to vest based on the achievement of stock price goals, each of which are referred to as a Stock Price Target, measured over a consecutive thirty-day trading period during the Performance Period. The Performance Period began on January 1, 2019.
For a 49 Table of Contents further discussion of the potential impacts of the macroeconomic environment on our business, see “Risk Factors” included in Part I, Item 1A. of this report.
For a further discussion of the potential impacts of the macroeconomic environment on our business, see “Risk Factors” included in Part I, Item 1A. of this report.
In February 2021, we issued approximately $1.4 billion in aggregate principal amount of convertible senior notes (the “Notes”), comprised of $695.8 million in aggregate principal amount of 2026 Notes and $693.3 million in aggregate principal amount of 2028 Notes.
In February 2021, we issued approximately $1.4 billion in aggregate principal amount of the Notes, comprised of $695.8 million in aggregate principal amount of 2026 Notes and $693.3 million in aggregate principal amount of 2028 Notes.
As a result, we expect that our workforce will continue to become more distributed over time, although we are continuing to offer our employees opportunities for in-person collaboration in all locations we currently have offices, either through our existing real-estate that were repurposed into collaborative spaces called “Dropbox Studios” or new, flexible spaces known as “On-Demand Spaces”.
As a result, we have seen our workforce become more distributed over time, although we are continuing to offer our employees opportunities for in-person collaboration in all locations we currently have offices, either through our existing real-estate that were repurposed into collaborative spaces called “Dropbox Studios” or flexible workspaces known as “On-Demand Spaces”.
The below table sets forth our ARPU for the years ended December 31, 2023 and 2022.
The below table sets forth our ARPU for the years ended December 31, 2024 and 2023.
(3) Includes a one-time gain of $158.8 million related to the partial termination of our lease for our San Francisco, California corporate headquarters for the year ended December 31, 2023 and impairment charges related to real estate assets for the years ended December 31, 2023 and 2022.
(3) Includes a one-time gain of $158.8 million related to the partial termination of the Company's lease for its San Francisco, California corporate headquarters for the year ended December 31, 2023 and impairment charges related to real estate assets for the years ended December 31, 2024 and 2023.
(3) Includes a one-time gain of $158.8 million related to the partial termination of our lease for our San Francisco, California corporate headquarters for the year ended December 31, 2023 and impairment charges related to real estate assets for the years ended December 31, 2023 and 2022.
(3) Includes a one-time gain of $158.8 million related to the partial termination of the Company's lease for its San Francisco, California corporate headquarters for the year ended December 31, 2023 and impairment charges related to real estate assets for the years ended December 31, 2024 and 2023.
Refer to Note 9, "Leases", for more information. Income Taxes Deferred income tax balances reflect the effects of temporary differences between the financial reporting and tax bases of our assets and liabilities using enacted tax rates expected to apply when taxes are actually paid or recovered. In addition, deferred tax assets are recorded for net operating loss and credit carryforwards.
Income Taxes Deferred income tax balances reflect the effects of temporary differences between the financial reporting and tax bases of our assets and liabilities using enacted tax rates expected to apply when taxes are actually paid or recovered. In addition, deferred tax assets are recorded for net operating loss and credit carryforwards.
The outflow from operating assets and liabilities was primarily due to the payment of our corporate bonus, payments for our reduction in workforce, payment for the termination fee for the partial termination of our lease for our San Francisco, California corporate headquarters, and key employee holdback payments related to acquisitions, offset by an increase in deferred revenue from increased subscription sales, as a majority of our paying users are invoiced in advance.
The outflow from operating assets and liabilities was primarily due to the payment of our corporate bonus, payments for our reduction in workforce, and the payment for the second tranche termination fee for the partial termination of our lease for our San Francisco, California corporate headquarters, offset by an increase in deferred revenue from increased subscription sales, as a majority of our paying users are invoiced in advance.
Our cash, cash equivalents, and short-term investments consist primarily of cash, money market funds, corporate notes and obligations, U.S. Treasury securities, certificates of deposit, asset-backed securities, commercial paper, foreign government securities, U.S. agency obligations, supranational securities, and municipal securities. As of December 31, 2023, $362.7 million of our cash and cash equivalents was held by our foreign subsidiaries.
Our cash, cash equivalents, and short-term investments consist primarily of cash, money market funds, corporate notes and obligations, U.S. Treasury securities, certificates of deposit, asset-backed securities, commercial paper, foreign government securities, U.S. agency obligations, supranational securities, and municipal securities. As of December 31, 2024, $410.3 million of our cash and cash equivalents was held by our foreign subsidiaries.
In our business model, some of our registered users convert to paying users over time, and consequently there is a lag between initial investment in infrastructure assets and cash received from some of our users. We also have a $500.0 million credit facility for additional working capital flexibility, as described below.
In our business model, some of our registered users convert to paying users over time, and consequently there is a lag between initial investment in infrastructure assets and cash received from some of our users. We also have a term loan facility for additional working capital flexibility, as described below.
The timing of our operating expenses as described below, may result in FCF to vary from period to period as a percentage of revenue.
The timing of our operating expenses as described below, may cause FCF to vary from period to period as a percentage of revenue.
Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period based on the timing of additional capital expenditures and the related depreciation expense, or other increases in our infrastructure costs, as well as revenue fluctuations.
Our gross margin may fluctuate from period to period based on the timing of additional capital expenditures and the related depreciation expense, or other increases in our infrastructure costs, as well as revenue fluctuations.
In 2023, ARR was negatively impacted by the foreign currency exchange rates used to calculate ARR compared to 2022, as we update exchange rates annually at the beginning of the year.
In 2024, ARR was positively impacted by the foreign currency exchange rates used to calculate ARR compared to 2023, as we update exchange rates annually at the beginning of the year.
As of December 31, 2023 2022 (In millions) Paying users 18.12 17.77 Average revenue per paying user We define average revenue per paying user, or ARPU, as our revenue for the period presented divided by the average paying users during the same period.
As of December 31, 2024 2023 (In millions) Paying users 18.22 18.12 Average revenue per paying user We define average revenue per paying user, or ARPU, as our revenue for the period presented divided by the average paying users during the same period.
As of December 31, 2023, we are entitled to non-cancelable rent payments from our subtenants of $72.5 million, which will be collected over the next 10 years. Our finance lease arrangements primarily consist of leases for our infrastructure with terms of 4 years or less.
As of December 31, 2024, we are entitled to non-cancelable rent payments from our subtenants of $59.9 million, which will be collected over the next 9 years. Our finance lease arrangements primarily consist of leases for our infrastructure with terms of 4 years or less.
Year Ended December 31, 2023 2022 ARPU $ 139.38 $ 134.51 52 Table of Contents Non-GAAP Financial Measure In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe that free cash flow, or FCF, a non-GAAP financial measure, is useful in evaluating our liquidity.
Year Ended December 31, 2024 2023 ARPU $ 140.23 $ 139.38 53 Table of Contents Non-GAAP Financial Measure In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe that free cash flow, or FCF, a non-GAAP financial measure, is useful in evaluating our liquidity.
As of December 31, 2023 2022 (In millions) Total ARR $ 2,523 $ 2,514 As of December 31, Constant Currency 2023 2022 (In millions) Total ARR $ 2,523 $ 2,430 Revaluing our ending Total ARR for fiscal 2023 using exchange rates set at the beginning of fiscal 2024, Total ARR at the end of fiscal 2023 would be $2,540 million.
As of December 31, 2024 2023 (In millions) Total ARR $ 2,574 $ 2,523 As of December 31, Constant Currency 2024 2023 (In millions) Total ARR $ 2,574 $ 2,540 Revaluing our ending Total ARR for fiscal 2024 using exchange rates set at the beginning of fiscal 2025, Total ARR at the end of fiscal 2024 would be $2,567 million.
Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023. 56 Table of Contents The following table sets forth our results of operations for each of the periods presented as a percentage of revenue: Year Ended December 31, 2023 2022 (As a % of revenue)* Revenue 100 % 100 % Cost of revenue (1)(2) 19 19 Gross profit 81 81 Operating expenses (1)(2) : Research and development 37 38 Sales and marketing 19 18 General and administrative 9 10 Net (gain) loss on real estate assets (3) (6) 8 Total operating expenses 59 73 Income from operations 22 8 Interest income (expense), net 1 — Other (loss) income, net — — Income before income taxes 22 8 (Provision for) benefit from income taxes (4) (4) 16 Net income 18 % 24 % (1) Includes stock-based compensation as a percentage of revenue as follows: Year Ended December 31, 2023 2022 (As a % of revenue)* Cost of revenue 1 % 1 % Research and development (5) 9 10 Sales and marketing 1 1 General and administrative 2 2 Total stock-based compensation 14 % 14 % (2) Includes expenses related to our reduction in workforce such as severance, benefits and other related items during the year ended December 31, 2023.
Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023. 57 Table of Contents The following table sets forth our results of operations for each of the periods presented as a percentage of revenue: Year Ended December 31, 2024 2023 (As a % of revenue)* Revenue 100 % 100 % Cost of revenue (1)(2) 17 19 Gross profit 83 81 Operating expenses: Research and development (1)(2) 36 37 Sales and marketing (1)(2) 18 19 General and administrative (1)(2) 9 9 Net loss (gain) on real estate assets (3) — (6) Total operating expenses 63 59 Income from operations 19 22 Interest income, net 1 1 Other income (loss), net — — Income before income taxes 20 22 Provision for income taxes (2) (4) Net income 18 % 18 % (1) Includes stock-based compensation as a percentage of revenue as follows: Year Ended December 31, 2024 2023 (As a % of revenue)* Cost of revenue 1 % 1 % Research and development (4) 10 9 Sales and marketing 1 1 General and administrative 2 2 Total stock-based compensation 14 % 14 % (2) Includes expenses related to the Company's reduction in workforce such as severance, benefits and other related items during the years ended December 31, 2024 and 2023.
We expect that general and administrative expenses will fluctuate in absolute dollars in future periods and remain relatively constant in both the near term and the long term as a percentage of revenue.
We expect to incur additional general and administrative expenses to support the growth of the Company. We expect that general and administrative expenses will fluctuate in absolute dollars in future periods and remain relatively constant in both the near term and the long term as a percentage of revenue.
We have historically financed our operations primarily through cash generated from our operations, the issuance of the Notes, equity issuances, and finance leases to finance infrastructure-related assets in co-location facilities that we directly lease and operate.
We have historically financed our operations primarily through cash generated from our operations, the convertible senior notes (the "Notes") issuance, borrowings from our term loan facility, equity issuances, and finance leases to finance infrastructure-related assets in co-location facilities that we directly lease and operate.
To the extent sufficient positive evidence becomes available, we may release all or a portion of our valuation allowance in one or more future periods. During the years ended December 31, 2023, and 2022, we evaluated the realizability of our deferred tax assets, which resulted in releasing part of our historical valuation allowance during the year ended December 31, 2022.
To the extent sufficient positive evidence becomes available, we may release all or a portion of our valuation allowance in one or more future periods. During the years ended December 31, 2024, and 2023, we evaluated the realizability of our deferred tax assets, which did not result in the release of any part of our historical valuation allowance.
The program does not obligate us to repurchase any specific number of shares and has no specified time limit; it may be discontinued at any time. During the year ended December 31, 2023, we repurchased and subsequently retired 22.7 million shares of our Class A common stock for an aggregate amount of $542.8 million.
The program does not obligate us to repurchase any specific number of shares and has no specified time limit; it may be discontinued at any time. During the year ended December 31, 2024, we repurchased and subsequently retired 49.5 million shares of our Class A common stock for an aggregate amount of $1.2 billion.
The following is a reconciliation of FCF to the most comparable GAAP measure, net cash provided by operating activities: Year Ended December 31, 2023 2022 (In millions) Net cash provided by operating activities 783.7 797.3 Capital expenditures (24.3) (33.8) Free cash flow $ 759.4 $ 763.5 53 Table of Contents Components of Our Results of Operations Revenue We generate revenue from sales of subscriptions to our platform.
The following is a reconciliation of FCF to the most comparable GAAP measure, net cash provided by operating activities: Year Ended December 31, 2024 2023 (In millions) Net cash provided by operating activities 894.1 783.7 Capital expenditures (22.5) (24.3) Free cash flow $ 871.6 $ 759.4 54 Table of Contents Components of Our Results of Operations Revenue We generate revenue from sales of subscriptions to our platform.
As of December 31, 2023, future non-cancelable minimum rental payments under finance leases were $307.2 million. Refer to Note 9, "Leases", for more information.
As of December 31, 2024, future non-cancelable minimum rental payments under finance leases were $355.7 million. Refer to Note 9, "Leases", for more information.
Our cash flow activities were as follows for the periods presented: Year Ended December 31, 2023 2022 (In millions) Net cash provided by operating activities $ 783.7 $ 797.3 Net cash provided by (used in) investing activities 395.2 (48.5) Net cash used in financing activities (799.2) (1,041.8) Effect of exchange rate changes on cash and cash equivalents 2.4 (7.2) Net increase (decrease) in cash and cash equivalents $ 382.1 $ (300.2) 61 Table of Contents Operating activities Our largest source of operating cash is cash collections from our paying users for subscriptions to our platform.
Our cash flow activities were as follows for the periods presented: Year Ended December 31, 2024 2023 (In millions) Net cash provided by operating activities $ 894.1 $ 783.7 Net cash provided by investing activities 443.8 395.2 Net cash used in financing activities (586.6) (799.2) Effect of exchange rate changes on cash and cash equivalents (5.7) 2.4 Net increase (decrease) in cash and cash equivalents $ 745.6 $ 382.1 Operating activities Our largest source of operating cash is cash collections from our paying users for subscriptions to our platform.
For the year ended December 31, 2023, net cash provided by investing activities was $395.2 million, which primarily related to $395.9 million in net investment activity inflows, driven by the sales and maturities of short-term investments, net of purchases.
For the year ended December 31, 2024, net cash provided by investing activities was $443.8 million, which primarily related to $493.1 million in net investment activity inflows, driven by the sales and maturities of short-term investments, net of purchases.
Financing activities Net cash used in financing activities is primarily impacted by cash used for repurchases of common stock, tax withholding obligations for the release of restricted stock units ("RSUs") and restricted stock awards ("RSAs"), and principal payments on finance lease obligations for our infrastructure equipment.
Financing activities Net cash used in financing activities is primarily impacted by cash used for repurchases of common stock, tax withholding obligations for the release of restricted stock units ("RSUs") and restricted stock awards ("RSAs"), principal payments on finance lease obligations for our infrastructure equipment, and payments of acquisition-related indemnity holdback amounts, offset by proceeds from the term loan facility.
Net (gain) loss on real estate assets Net (gain) loss on real estate assets consists primarily of a gain due to the partial termination of our lease for our San Francisco, California corporate headquarters in 2023 and impairment charges related to certain right-of-use assets and other lease related assets in 2023 and 2022. See Note 9, "Leases" for additional information.
Net loss (gain) on real estate assets Net loss (gain) on real estate assets consists of impairment charges related to certain right-of-use assets and other lease related property and equipment assets in 2024 and 2023 and a gain due to the partial termination of our lease for our San Francisco, California corporate headquarters in 2023.
See Note 9, "Leases" for additional information. Key Business Metrics We review a number of operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
See Note 1 "Description of the Business and Summary of Significant Accounting Policies - Reduction in Workforce" for additional information. Key Business Metrics We review a number of operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
We have and may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing.
In addition, we have and may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. In light of all these circumstances, we may be required to seek additional equity or debt financing, or we may decide to do so opportunistically.
The Co-Founder Grant is excluded from Class A common stock issued and outstanding until the satisfaction of these vesting conditions. The Co-Founder Grant also provides the holder with certain stockholder rights, such as the right to vote the shares with the other holders of Class A common stock and a right to cumulative declared dividends.
The Co-Founder Grant also provides the holder with certain stockholder rights, such as the right to vote the shares with the other holders of Class A common stock and a right to cumulative declared dividends.
For the year ended December 31, 2023, net cash used in financing activities was $799.2 million, which primarily consisted of $539.9 million for the repurchase of our common stock, $135.1 million for the satisfaction of tax withholding obligations for the release of restricted stock units and awards, and $126.6 million in principal payments on finance lease obligations.
For the year ended December 31, 2024, net cash used in financing activities was $586.6 million, which primarily consisted of $1,241.6 million for the repurchase of our common stock, $148.7 million for the satisfaction of tax withholding obligations for the release of restricted stock units and awards, and $129.4 million in principal payments on finance lease obligations.
As of December 31, 2023, we have utilized a significant portion of our U.S. federal, state and foreign net operating losses. Future utilization of remaining net operating loss and research credit carryforwards are subject to statutory limits. Accordingly, we expect our cash tax obligations will increase in the foreseeable future.
As of December 31, 2024, we have utilized a significant portion of our U.S. federal, state and foreign net operating losses. Future utilization of remaining net operating loss and research credit carryforwards are subject to statutory limits.
Investing activities Net cash provided by (used in) investing activities is primarily impacted by net investment activity, which includes sales, maturities, and purchases of short-term investments, cash paid for acquisitions, and for purchasing infrastructure equipment in co-location facilities that we directly lease and operate.
Additionally, there was a decrease of $35.3 million in cash outflows from changes in operating assets and liabilities. Investing activities Net cash provided by investing activities is primarily impacted by net investment activity, which includes sales, maturities, and purchases of short-term investments, cash paid for acquisitions, and for purchasing infrastructure equipment in co-location facilities that we directly lease and operate.
International customers can pay in U.S. dollars or a select number of foreign currencies. Our premium subscription plans, such as Professional and Advanced, provide more functionality than other subscription plans and have higher per user prices.
We typically bill our customers at the beginning of their respective terms and recognize revenue ratably over the term of the subscription period. International customers can pay in U.S. dollars or a select number of foreign currencies. Our premium subscription plans, such as Professional and Advanced, provide more functionality than our other subscription plans and have higher per user prices.
Reduction in Workforce On April 27, 2023, we announced a reduction of our global workforce by approximately 16% to streamline our team structure in support of our long-term growth and profitability objectives. During the year ended December 31, 2023, we incurred $39.3 million of expenses related to severance, benefits, and other related items.
Reduction in Workforce In October 2024, we announced a reduction of our global workforce by approximately 20% to streamline our team structure to better align with our long-term growth and profitability objectives. During the year ended December 31, 2024, we incurred $47.2 million of expenses related to severance, benefits, and other related items.
We experienced growth in the number of paying users for the periods presented largely from our self-serve channels as well as from FormSwift. However, our overall paying user growth rate has declined and may decline in the future. The total number of paying users fluctuates and may decline in some periods as compared to prior periods.
However, our overall paying user growth rate has declined and may decline in the future. The total number of paying users fluctuates and may decrease in some periods as compared to prior periods.
While our significant accounting policies are more fully described in Note 1 “Description of the Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the accounting policies described below involve a greater degree of judgment and estimation uncertainty.
While our significant accounting policies are more fully described in Note 1 “Description of the Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the accounting policies described below involve a greater degree of judgment and estimation uncertainty. 64 Table of Contents Net loss (gain) on real estate assets We assess any changes to lease agreements in accordance with ASC 842, Leases (“ASC 842”).
For 2022, the difference between the U.S. statutory rate and our effective tax rate is primarily due to changes to the valuation allowance on deferred tax assets, research credits and the impact of capitalization of research and experimental expenditures. 55 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented: Year Ended December 31, 2023 2022 (In millions) Revenue $ 2,501.6 $ 2,324.9 Cost of revenue (1)(2) 478.5 444.2 Gross profit 2,023.1 1,880.7 Operating expenses: (1)(2) Research and development 936.5 891.9 Sales and marketing 466.0 409.4 General and administrative 237.1 222.9 Net (gain) loss on real estate assets (3) (155.2) 175.2 Total operating expenses 1,484.4 1,699.4 Income from operations 538.7 181.3 Interest income (expense), net 19.4 3.3 Other (loss) income, net (3.7) 8.1 Income before income taxes 554.4 192.7 (Provision for) benefit from income taxes (4) (100.8) 360.5 Net income $ 453.6 $ 553.2 (1) Includes stock-based compensation as follows: Year Ended December 31, 2023 2022 (In millions) Cost of revenue $ 23.3 $ 24.7 Research and development (5) 237.6 232.3 Sales and marketing 22.0 22.4 General and administrative 55.1 51.3 Total stock-based compensation $ 338.0 $ 330.7 (2) Includes expenses related to our reduction in workforce such as severance, benefits and other related items during the year ended December 31, 2023.
For 2024 and 2023, the difference between the U.S. statutory rate and our effective tax rate is primarily due to jurisdictional mix of earnings, tax credits, state income taxes, and changes to our unrecognized tax benefits. 56 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented: Year Ended December 31, 2024 2023 (In millions) Revenue $ 2,548.2 $ 2,501.6 Cost of revenue (1)(2) 445.1 478.5 Gross profit 2,103.1 2,023.1 Operating expenses: Research and development (1)(2) 914.9 936.5 Sales and marketing (1)(2) 460.7 466.0 General and administrative (1)(2) 241.2 237.1 Net loss (gain) on real estate assets (3) 0.1 (155.2) Total operating expenses 1,616.9 1,484.4 Income from operations 486.2 538.7 Interest income, net 13.9 19.4 Other income (loss), net 9.7 (3.7) Income before income taxes 509.8 554.4 Provision for income taxes (57.5) (100.8) Net income $ 452.3 $ 453.6 (1) Includes stock-based compensation as follows: Year Ended December 31, 2024 2023 (In millions) Cost of revenue $ 22.9 $ 23.3 Research and development (4) 247.6 237.6 Sales and marketing 23.7 22.0 General and administrative 52.3 55.1 Total stock-based compensation $ 346.5 $ 338.0 (2) Includes expenses related to the Company's reduction in workforce such as severance, benefits and other related items during the years ended December 31, 2024 and 2023.
Interest income (expense), net Interest income (expense), net consists primarily of interest income earned on our money market funds classified as cash and cash equivalents and short-term investments as well as interest expense related to our finance lease obligations for infrastructure and amortization of debt issuance costs.
See Note 9, "Leases" for additional information. Interest income, net Interest income, net consists primarily of interest income earned on our investments classified as cash and cash equivalents, and short-term investments, offset by interest expense related to our term loan facility, finance lease obligations for infrastructure and amortization of debt issuance costs.
Our cash commitments due to known contractual obligations primarily relate to operating and finance lease arrangements. As of December 31, 2023, we additionally had $191.7 million of commitments with third-party vendors for services related to our infrastructure, infrastructure warranty contracts, and asset retirement obligations for office modifications, with terms of 13 years or less.
As of December 31, 2024, we additionally had $154.1 million of commitments with third-party vendors for services related to our infrastructure, infrastructure warranty contracts, and asset retirement obligations for office modifications, with terms of 12 years or less. Our operating lease arrangements consist of leases for our offices and datacenters with terms of 12 years or less.
Net cash provided by operating activities is impacted by our net income adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization expenses, and net (gain) loss on real estate assets, as well as the effect of changes in operating assets and liabilities.
Our primary uses of cash from operating activities are for employee-related expenditures, infrastructure-related costs, and marketing expenses. Net cash provided by operating activities is impacted by our net income adjusted for certain non-cash items, 62 Table of Contents including stock-based compensation, depreciation and amortization expenses, as well as the effect of changes in operating assets and liabilities.
Conversely, we have seen and may continue to see cost savings from the shift to remote and distributed work for all of our employees in areas including events, travel, utilities, and other benefits.
We have seen and may continue to see cost savings from our Virtual First work model in areas including events, travel, utilities, and other benefits.
General and administrative Year Ended December 31, 2023 2022 $ Change % Change (In millions) General and administrative $ 237.1 $ 222.9 $ 14.2 6.4 % General and administrative expenses increased $14.2 million or 6.4% during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to increases of $18.3 million in employee-related costs, $4.4 million in allocated overhead, and $2.4 million in outside services.
General and administrative Year Ended December 31, 2024 2023 $ Change % Change (In millions) General and administrative $ 241.2 $ 237.1 $ 4.1 1.7 % General and administrative expenses increased $4.1 million or 1.7% during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to increases of $3.0 million in non-income based taxes and $2.7 million in outside services.
We expect that cost of revenue will decrease in absolute dollars in the near term due to the useful lives of certain infrastructure server and component assets increasing from four to five years and increase in absolute dollars in the long term. The expected change in useful lives is described in Item 7. "Change in Accounting Estimate". Gross margin.
We expect that cost of revenue will decrease slightly in absolute dollars in the near term due to a one-time benefit of increasing the useful lives of certain infrastructure server and component assets from four to five years and increase in absolute dollars in the long term as the benefit lapses. See Note 1.
Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023. * Percentages may not foot due to rounding. 57 Table of Contents Comparison of the years ended December 31, 2023 and 2022 Revenue Year Ended December 31, 2023 2022 $ Change % Change (In millions) Revenue $ 2,501.6 $ 2,324.9 $ 176.7 7.6 % Revenue increased $176.7 million or 7.6% during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase of $215.7 million from additional paying users, and the acquisition of FormSwift in the fourth quarter of 2022.
Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023. * Percentages may not foot due to rounding. 58 Table of Contents Comparison of the years ended December 31, 2024 and 2023 Revenue Year Ended December 31, 2024 2023 $ Change % Change (In millions) Revenue $ 2,548.2 $ 2,501.6 $ 46.6 1.9 % Revenue increased $46.6 million or 1.9% during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to an increase of $43.4 million from additional paying users, an increased mix of sales towards our higher priced plans, as well as a shift to monthly subscription plans, which have a higher price point than our annual plans.
Our operating lease arrangements consist of leases for our offices and datacenters with terms of 13 years or less. As of December 31, 2023, future non-cancelable minimum rental payments related to operating leases were $674.7 million, which includes $228.3 million of future contractual rent payments allocated to non-lease components, and excludes rent payments from our subtenants and variable operating expenses.
As of December 31, 2024, future non-cancelable minimum rental payments related to operating leases were $578.8 million, which includes $200.1 million of future contractual rent payments allocated to non-lease components, and excludes rent payments from our subtenants and variable operating expenses.
Our gross margin remained flat during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a 7.6% increase in revenue during the period, which was offset by an increase in our cost of revenue described above.
Our gross margin increased during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to a 1.9% increase in revenue during the period and a 7.0% decrease in our cost of revenue as described above.
We believe our existing cash and cash equivalents, together with our short-term investments, cash provided by operations and amounts available under the revolving credit facility, will be sufficient to meet our needs for the foreseeable future. In addition to the convertible notes discussed above, as of December 31, 2023, we have cash commitments due to additional known contractual obligations.
We believe our existing cash and cash equivalents, together with our short-term investments, cash provided by operations and amounts available under the term loan facility, will be sufficient to meet our needs for the foreseeable future.
Our general and administrative expenses consist primarily of employee-related costs for our legal, finance, human resources, and other administrative teams, as well as certain executives. In addition, general and administrative expenses include expenses related to our reduction in workforce such as severance, benefits and other related items, allocated overhead, outside legal, accounting and other professional fees, and non income-based taxes.
In addition, general and administrative expenses include expenses related to our reduction in workforce such as severance, benefits and other related items, allocated overhead, outside legal, accounting and other professional fees, non income-based taxes, and the recognition of stock-based compensation expense related to the grant of restricted stock made to our co-founder.
Additionally, sales and marketing expenses include non-employee costs related to app store fees, fees payable to third-party sales representatives and amortization of acquired customer relationships. We expect that sales and marketing expenses will fluctuate in absolute dollars and as a percentage of revenue in both the near term and long term.
Additionally, sales and marketing expenses include non-employee costs related to app store fees, fees payable to third-party sales representatives and amortization of acquired customer relationships.
For the year ended December 31, 2023, net cash provided by operating activities was $783.7 million, which primarily consisted of our net income of $453.6 million, adjusted for stock-based compensation expense of $338.0 million, depreciation and amortization expenses of $170.0 million, net gain on real estate assets of $155.2 million, and net cash outflow of $146.8 million from operating assets and liabilities.
For the year ended December 31, 2024, net cash provided by operating activities was $894.1 million, which primarily consisted of our net income of $452.3 million, adjusted for stock-based compensation expense of $346.5 million, depreciation and amortization expenses of $137.3 million, and net cash outflow of $111.5 million from operating assets and liabilities.
In October 2023, we executed a partial termination of our lease for our San Francisco, California corporate headquarters and subsequently recorded a gain on real estate assets of $158.8 million during the year ended December 31, 2023. The gain represents the reduction to our future lease payments in excess of the sublease income we previously anticipated collecting for this space.
We may incur additional impairment charges depending on the state of the corporate real estate market or shifts in our Virtual First strategy. In October 2023, we executed a partial termination of our lease for our San Francisco, California corporate headquarters and subsequently recorded a gain on real estate assets of $158.8 million during the year ended December 31, 2023.
We calculate Total ARR as the number of users who have active paid licenses for access to our platform as of the end of the period, multiplied by their annualized subscription price. We first include ARR related to acquired companies in our total ARR in the 50 Table of Contents period of the acquisition.
Total ARR consists of contributions from all of our revenue streams, including subscriptions and add-ons. We calculate Total ARR as the number of users who have active paid licenses for access to our platform as of the end of the period, multiplied by their annualized subscription price.
In the fourth quarter of 2020, as a result of our Virtual First strategy, we reassessed our asset groupings and evaluated the recoverability of our right-of-use and related lease assets, including leasehold improvements, furniture and fixtures, and computer equipment.
As a result of our Virtual First strategy, we reassess our asset groupings and evaluate the recoverability of our right-of-use and related lease assets, including leasehold improvements, furniture and fixtures, and computer equipment. We monitor ongoing changes in the corporate real estate market that may impact our subleasing strategy in conjunction with our Virtual First model.
Sales and marketing Year Ended December 31, 2023 2022 $ Change % Change (In millions) Sales and marketing $ 466.0 $ 409.4 $ 56.6 13.8 % 58 Table of Contents Sales and marketing expenses increased $56.6 million or 13.8% during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to increases of $36.9 million related to advertising and other marketing related expenses, $8.1 million in amortization of intangible assets, $6.3 million in employee-related costs, and $5.5 million in app store fees due to increased sales.
Sales and marketing Year Ended December 31, 2024 2023 $ Change % Change (In millions) Sales and marketing $ 460.7 $ 466.0 $ (5.3) (1.1) % 59 Table of Contents Sales and marketing expenses decreased $5.3 million or 1.1% during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to decreases of $17.3 million in employee related costs and $4.1 million in overhead.
Research and development Year Ended December 31, 2023 2022 $ Change % Change (In millions) Research and development $ 936.5 $ 891.9 $ 44.6 5.0 % Research and development expenses increased $44.6 million or 5.0% during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase of $29.7 million in employee-related costs driven by costs attributable to our reduction in workforce, including severance.
Research and development Year Ended December 31, 2024 2023 $ Change % Change (In millions) Research and development $ 914.9 $ 936.5 $ (21.6) (2.3) % Research and development expenses decreased $21.6 million or 2.3% during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to decreases of $12.3 million in allocated overhead and $7.6 million in employee related costs.
(Provision for) benefit from income taxes (Provision for) benefit from income taxes increased $461.3 million during the year ended December 31, 2023 , as compared to the year ended December 31, 2022 , primarily due to $420.2 million of tax benefits from the release of the valuation allowance on the U.S. federal and certain state deferred tax assets in the year ended December 31, 2022, and an increase in income before income taxes in the year ended December 31, 2023. 59 Table of Contents Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of $614.9 million and short-term investments of $741.1 million, which were held for working capital purposes.
Provision for income taxes Provision for income taxes decreased $43.3 million during the year ended December 31, 2024 , as compared to the year ended December 31, 2023 , primarily due to the impact of the 2023 lease amendment on prior year income before income taxes, an increase in tax credits, and reductions to our unrecognized tax benefits due to an effective settlement with a foreign taxing authority. 60 Table of Contents Liquidity and Capital Resources As of December 31, 2024, we had cash and cash equivalents of $1.3 billion and short-term investments of $265.9 million, which were held for working capital purposes.
As a result of an increased mix of sales towards our higher-priced subscription plans, and our acquisition of FormSwift in the fourth quarter of 2022, offset by Family Plan growth as it carries a lower price per user, and the impact of unfavorable foreign exchange rates across multiple currencies, we experienced an increase in our average revenue per paying user for the year ended December 31, 2023, compared to the year ended December 31, 2022, respectively.
As a result of an increased mix of sales towards our higher priced plans, as well as a shift to monthly subscription plans, which have a higher price point than our annual plans, we experienced an increase in our average revenue per paying user for the year ended December 31, 2024, compared to the year ended December 31, 2023, respectively.
Recent Accounting Pronouncements See Note 1, “Description of the Business and Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements as of the date of this Annual Report on Form 10-K. 64 Table of Contents
This change in useful lives was effective beginning in fiscal year 2024, and had a favorable impact for the full fiscal year 2024 to cost of revenue and operating income of $30.5 million based on assets that were included in “Property and equipment, net” as of December 31, 2023. 65 Table of Contents Recent Accounting Pronouncements See Note 1, “Description of the Business and Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements as of the date of this Annual Report on Form 10-K. 66 Table of Contents
Other (loss) income, net Other (loss) income, net decreased by $11.8 million during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to a $6.2 million reduction in other income from sales of retired infrastructure assets and a $5.1 million decrease in gains on equity investments.
Other income (loss), net Other income (loss), net increased by $13.4 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to a $6.0 million gain on real estate assets as a result of a one-time payment from a subtenant and $4.2 million increase in foreign currency transaction gains.
Cost of revenue, gross profit, and gross margin Year Ended December 31, 2023 2022 $ Change % Change (In millions) Cost of revenue $ 478.5 $ 444.2 $ 34.3 7.7 % Gross profit 2,023.1 1,880.7 142.4 7.6 % Gross margin 81 % 81 % Cost of revenue increased $34.3 million or 7.7% during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to increases of $13.4 million in infrastructure costs, $7.2 million in credit card fees, $6.3 million in amortization of intangible assets, $5.0 million in outside services, and $2.7 million in employee-related costs.
Cost of revenue, gross profit, and gross margin Year Ended December 31, 2024 2023 $ Change % Change (In millions) Cost of revenue $ 445.1 $ 478.5 $ (33.4) (7.0) % Gross profit 2,103.1 2,023.1 80.0 4.0 % Gross margin 83 % 81 % Cost of revenue decreased $33.4 million or 7.0% during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to a decrease of $26.2 million in infrastructure costs, as a result of the $30.5 million benefit due to the change in useful lives from 4 to 5 years for certain infrastructure and component assets during the year ended December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAny borrowings under the revolving credit facility bear interest at a variable rate tied to SOFR or an alternative base rate. As of December 31, 2023, we had no amounts outstanding under the revolving credit facility. We do not have any other long-term debt or financial liabilities with floating interest rates that would subject us to interest rate fluctuations.
Biggest changeAs of December 31, 2024, we had $1.0 billion outstanding under the term loan facility. We do not have any other long-term debt or financial liabilities with floating interest rates that would subject us to interest rate fluctuations.
Volatile market conditions, including those arising from macroeconomic events, such as the volatility and uncertainty in the banking and financial services sector, increased interest rates, tightening of credit markets, as well as geopolitical events have and may in the future result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar has and may in the future negatively affect our revenue expressed in U.S. dollars.
Volatile market conditions, including those arising from macroeconomic events, such as the volatility and uncertainty in the banking and financial services sector, fluctuating interest rates, tightening of credit markets, as well as geopolitical events have and may in the future result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar has and may in the future negatively affect our revenue expressed in U.S. dollars.
To date, we have not engaged in any hedging activities. As our international operations grow, we will continue to reassess our approach to managing risks relating to fluctuations in currency rates. 65 Table of Contents
To date, we have not engaged in any hedging activities. As our international operations grow, we will continue to reassess our approach to managing risks relating to fluctuations in currency rates. 67 Table of Contents
During the year ended December 31, 2023, 27% of our sales were denominated in currencies other than U.S. dollars. Our expenses, by contrast, are primarily denominated in U.S. dollars. As a result, any increase in the value of the U.S. dollar against these foreign currencies could cause our revenue to decline relative to our costs, thereby decreasing our margins.
During the year ended December 31, 2024, 26% of our sales were denominated in currencies other than U.S. dollars. Our expenses, by contrast, are primarily denominated in U.S. dollars. As a result, any increase in the value of the U.S. dollar against these foreign currencies could cause our revenue to decline relative to our costs, thereby decreasing our margins.
We recorded net foreign currency transaction losses of $3.2 million and net foreign currency transaction gains of $0.2 million during the years ended December 31, 2023 and 2022, respectively. A hypothetical 10% change in foreign currency rates would not have resulted in material gains or losses for the years ended December 31, 2023 and 2022.
Net foreign currency transaction gains and losses were immaterial during the year ended December 31, 2024 and we recorded net foreign currency transaction losses of $3.2 million during the year ended December 31, 2023. A hypothetical 10% change in foreign currency rates would not have resulted in material gains or losses for the years ended December 31, 2024 and 2023.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest rate risk We had cash and cash equivalents of $614.9 million and short-term investments of $741.1 million as of December 31, 2023. We hold our cash and cash equivalents and short-term investments for working capital purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest rate risk We had cash and cash equivalents of $1.3 billion and short-term investments of $265.9 million as of December 31, 2024. We hold our cash and cash equivalents and short-term investments for working capital purposes.
As of December 31, 2023, a hypothetical increase in interest rates by 100 basis points would have resulted in a $7.9 million reduction in the market value of our investment portfolio. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
As of December 31, 2024, a hypothetical increase in interest rates by 100 basis points would have had an immaterial impact on the market value of our investment portfolio. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
Added
Any borrowings under the term loan facility bear interest, at our option, at either (a) an alternate base rate, which is defined as a fluctuating rate per annum equal to the greatest of (i) the prime rate then in effect, (ii) the federal funds rate then in effect, plus 0.50% per annum, and (iii) a term SOFR rate determined on the basis of a one-month interest period plus 1.00% per annum, in each case, plus a margin of 2.75%, or (b) an overnight or term SOFR rate (based on one, three or six month interest periods), plus a margin of 3.75%.
Added
As of December 31, 2024, a hypothetical increase or decrease in interest rates by 100 basis points would have had an immaterial impact on our interest expense related to the term loan facility.

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