DROPBOX, INC. (DBX) FY 2023 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Overview
Our modern economy runs on knowledge. Today, knowledge lives in the cloud as digital content, and Dropbox is where businesses and individuals can create, access, and share this content globally. We serve more than 700 million registered users across approximately 180 countries.
Since our founding in 2007, our market opportunity grew as we’ve expanded from keeping files in sync to keeping teams in sync. 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’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. Subscribers can purchase individual licenses through our Plus, Professional or Essentials plan, or purchase multiple licenses through our Family plan or our Standard, Advanced, Business, Business Plus and Enterprise team plans. Each team or family represents a separately billed deployment that is managed through a single administrative dashboard. Teams must have a minimum of three users, but can also have more than tens of thousands of users. Families can have up to six users. Customers can choose between an annual or monthly plan, with a small number of large organizations on multi-year plans. A majority of our customers opt for our annual plans, although we have seen and may continue to see an increase in customers opting for our monthly plans. 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 other subscription plans and have higher per user prices. Our Standard and Advanced subscription plans offer robust capabilities for businesses, and the vast majority of Dropbox Business teams purchase our Standard or Advanced subscription plans. While our Enterprise subscription plan offers more opportunities for customization, companies can subscribe to any of these team plans for their business needs.
Our bundle subscription plans, such as Dropbox Essentials for solo professionals, Dropbox Business for small teams, and Dropbox Business Plus for larger teams, provide professionals and teams the ability to consolidate multiple offerings such as PDF editing, eSignature capabilities, document analytics, video collaboration tools, and advanced security functionality into a single place to manage their content.
We offer FormSwift, our cloud-based service that gives individuals and businesses a simple solution to create, complete, edit, and save critical business forms and agreements. Customers can choose between annual or monthly subscriptions based on their individual or business needs. We typically bill FormSwift 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. 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
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DocSend customers at the beginning of their respective terms and recognize revenue ratably over the subscription period. DocSend primarily sells within the United States, and the majority of sales are in U.S. dollars.
We also offer Dropbox Sign, as our e-signature solution. Dropbox Sign has several product lines, and the pricing and revenue generated from each product line varies. Product lines are primarily priced based on the number of licenses purchased (similar to Dropbox plans), while some are priced based on a customer’s transaction volume. Depending on the product purchased, teams must have a minimum number of licenses, but can also have hundreds of users. Customers can choose between an annual or monthly plan, with a small number of large organizations on multi-year plans. We typically bill Dropbox Sign customers at the beginning of their respective terms and recognize revenue ratably over the subscription period. We sell Dropbox Sign products globally and sell primarily in U.S. dollars.
Our Business Model
Drive new signups
We acquire users efficiently and at relatively low costs through word-of-mouth referrals, direct in-product referrals, and sharing of content. Anyone can create a Dropbox account for free through our website or app and be up and running in minutes. These users often share and collaborate with other non-registered users, attracting new signups into our network.
Increase conversion of registered users to our paid subscription plans
We generate over 90% of our revenue from self-serve channels—users who purchase a subscription through our app or website. To grow our recurring revenue base, we actively encourage our registered users to convert to one of our paid plans based on the functionality that best suits their needs. We do this via in-product prompts and notifications, time-limited free trials of paid subscription plans, email campaigns, and lifecycle marketing. We use these tactics in combination with the goal of generating increased recurring revenues from our existing user base.
Upgrade and expand existing customers
We offer a range of paid subscription plans, from Plus, Professional, Essentials and Family for individuals to Standard, Advanced, Business, Business Plus and Enterprise for teams. We analyze usage patterns within our network and run hundreds of targeted marketing campaigns to encourage paying users to upgrade their plans. We prompt individual subscribers who collaborate with others on Dropbox to purchase our Standard, Advanced or Business, and Business Plus plans for a better team experience, and we also encourage existing Dropbox Business teams to purchase additional licenses or to upgrade to premium subscription plans. We also aim to offer additional products that expand our content collaboration capabilities, such as through our acquisitions of Dropbox Sign, DocSend and FormSwift.
Recent Developments
Impact of Macroeconomic Factors on our Business
Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior. Worsening economic conditions, including the U.S. Federal Reserve raising interest rates, volatility and uncertainty in the banking and financial services sector, tightening of credit markets, changes in the corporate real estate market, and fluctuations in currency exchange rates impacted our results of operations during the year ended December 31, 2023.
During the year ended December 31, 2023, we saw strength within our Individuals plans, but macro headwinds weighed on our Teams plans as well as on FormSwift, DocSend and Dropbox Sign, as customers are being more prudent with their spend and exhibiting higher levels of price sensitivity.
Our results of operations and cash flows are also subject to fluctuations due to changes in foreign currency exchange rates relative to U.S. dollars, our reporting currency, as well as changes in interest rates. Volatile market conditions, directly or indirectly related to macroeconomic or geopolitical events, have, at times, and may in the future negatively impact our results of operations and cash flows. 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. Due to our subscription-based business model, any impact of the current macroeconomic environment on our business, particularly as a result of changes in our customer behavior, may not be fully reflected in our results of operations until future periods, if at all. For a
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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.
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. See Note 1 "Description of the Business and Summary of Significant Accounting Policies - Reduction in Workforce" in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
Virtual First
The effects of the COVID-19 pandemic led us to reimagine the way we work, resulting in our announcement in October 2020 of our shift to a Virtual First work model pursuant to which remote work has become the primary experience for all of our employees. 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”. Consistent with this strategy, we have retained a portion of our office space while the remainder is being or will be subleased.
We recorded impairment charges to net (gain) loss on real estate assets of $3.6 million and $175.2 million during the years ended December 31, 2023 and 2022, respectively, related to real estate assets as a result of changes in the corporate real estate market which impacted the Company's subleasing strategy in conjunction with our Virtual First model. See Note 9, "Leases" for additional information. We may incur additional impairment charges depending on the state of the corporate real estate market or shifts in our Virtual First strategy. In addition to generating sublease income, we expect that as a result of our Virtual First model, we will continue to see savings in certain areas, including reductions in facilities related costs and depreciation expense due to these impairment charges.
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. 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.
Total annual recurring revenue
We primarily focus on total annual recurring revenue (“Total ARR”) as the key indicator of the trajectory of our business performance. Total ARR represents the amount of revenue that we expect to recur annually, enables measurement of the progress of our business initiatives, and serves as an indicator of future growth. In addition, Total ARR is less subject to variations in short-term trends that may not appropriately reflect the health of our business; however, the changes in ARR throughout the year could be subject to seasonality. 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. For example, ARR declined in the fourth quarter of 2023 as compared to the third quarter of 2023 as a result of factors including our decision to deprecate our previous "as much space as you need" policy for Advanced plans which resulted in incremental churn and reduced top-of funnel interest, as well as a challenging macro environment, and seasonality within our business. We expect to drive ARR growth, however the pace of our future growth may be lower relative to prior periods.
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. We first include ARR related to acquired companies in our total ARR in the
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period of the acquisition. We adjust the exchange rates used to calculate Total ARR on an annual basis at the beginning of each fiscal year.
We experienced an increase in Total ARR for the period ended December 31, 2023, compared to the period ended December 31, 2022 as a result of an increased mix of sales from our higher-priced subscription plans. 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.
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.
| 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.
Paying users
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. One person would count as multiple paying users if the person had more than one active license. For example, a 50-person Dropbox Enterprise team would count as 50 paying users, and an individual Dropbox Plus user would count as one paying user. If that individual Dropbox Plus user was also part of the 50-person Dropbox Enterprise team, we would count the individual as two paying users. 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.
Dropbox Sign has several product lines and the pricing and revenue generated from each product line varies, with some product lines priced based on the number of licenses purchased (similar to Dropbox plans), while others are priced based on a customer’s transaction volume. For purposes of Dropbox Sign results, we include as paying users either (i) the number of users who have active paid licenses for access to the Dropbox Sign platform as of the period end for those products that are priced based on the number of licenses purchased (which is the same method we use to evaluate existing Dropbox plans) or (ii) the number of customers for those products that are priced based on transaction volumes.
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. For example, paying users declined in the fourth quarter of 2023 as compared to the third quarter of 2023 primarily as a result of our decision to reduce the prominence of our Family plan on our Plans pages as well as expected seasonality within our business. We expect to drive paying user growth, however the pace of our future growth may be lower relative to prior periods.
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The below table sets forth the number of paying users as of December 31, 2023 and 2022.
| 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. For interim periods, we use annualized revenue, which is calculated by dividing the revenue for the particular period by the number of days in that period and multiplying this value by 365 days. Average paying users are calculated based on adding the number of paying users as of the beginning of the period to the number of paying users as of the end of the period, and then dividing by two.
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.
The below table sets forth our ARPU for the years ended December 31, 2023 and 2022.
| Year Ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||||
| ARPU | $ | 139.38 | $ | 134.51 |
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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.
Free cash flow
We define FCF as GAAP net cash provided by operating activities less capital expenditures. We believe that FCF is a liquidity measure and that it provides useful information regarding cash provided by operating activities and cash used for investments in property and equipment required to maintain and grow our business. FCF is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. FCF has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of FCF are that FCF does not reflect our future contractual commitments, excludes investments made to acquire assets under finance leases, includes capital expenditures, and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.
Our FCF decreased for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to payments related to our reduction in workforce during the year ended December 31, 2023.
We expect our FCF to generally increase in future periods as we increase subscription sales and drive operating efficiencies. We expect to continue to purchase infrastructure equipment to support our user base and anticipate that our capital expenditures will generally remain consistent in future periods as we continue to invest in our internal infrastructure, network and security. 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 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 |
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Components of Our Results of Operations
Revenue
We generate revenue from sales of subscriptions to our platform.
Revenue is recognized ratably over the related contractual term generally beginning on the date that our platform is made available to a customer. Our subscription agreements typically have monthly or annual contractual terms, although a small percentage have multi-year contractual terms. Our agreements are generally non-cancelable. We typically bill in advance for monthly contracts and annually in advance for contracts with terms of one year or longer. Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized.
Our revenue is driven primarily by conversions and upsells to our paid plans. We also generate revenue from transaction based products and fees from the referral of users to our partners. We generate over 90% of our revenue from self-serve channels. No customer represented more than 1% of our revenue in the periods presented.
Our revenue growth is impacted by our number of paying users, as well as our ability to increase the average revenue per paying user. Our overall paying user growth rate has declined and we expect growth in paying users to fluctuate from period to period in the future. Accordingly, if we do not increase the average revenue per paying user, for example through pricing and packaging changes or increased sales of our higher priced subscription plans, to offset slower growth or decline in paying users, our revenue and revenue growth rate will decline.
Cost of revenue and gross margin
Cost of revenue. Our cost of revenue consists primarily of expenses associated with the storage, delivery, and distribution of our platform for both paying users and free users. These costs, which we refer to as infrastructure costs, include depreciation of our servers located in co-location facilities that we lease and operate, rent and facilities expense for those datacenters, network and bandwidth costs, support and maintenance costs for our infrastructure equipment, and payments to third-party datacenter service providers. Cost of revenue also includes salaries, bonuses, employer payroll taxes and benefits, travel-related expenses, expenses related to our reduction in workforce such as severance, benefits and other related items, and stock-based compensation, which we refer to as employee-related costs, for employees whose primary responsibilities relate to supporting our infrastructure and delivering user support. Other non-employee costs included in cost of revenue include credit card fees related to processing customer transactions, and allocated overhead, such as facilities, including rent, utilities, depreciation on leasehold improvements and other equipment shared by all departments, and shared information technology costs. In addition, cost of revenue includes amortization of developed technologies, professional fees related to user support initiatives, and property taxes related to the datacenters.
We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support user growth and increased use of our platform. 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. 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. We generally expect our gross margin to remain relatively constant in both the near term and the long term.
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. These groups are responsible for the design, development, testing, delivery of new technologies and features, and support of our self-serve platform. We continue to focus our product development efforts on adding new features and enhancing the functionality and ease of use of our offerings. Additionally, research and development expenses include internal development-related third-party hosting fees. We have expensed almost all of our research and development costs as they were incurred.
We expect that research and development costs will decrease in absolute dollars and as a percentage of revenue in the near term and fluctuate in absolute dollars and decrease as a percentage of revenue in the long term as we reinvest some savings
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from our reduction in workforce that occurred in the second quarter of 2023 into future growth initiatives. We plan to continue to hire employees for our engineering, product, and design teams in roles critical to those initiatives.
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. Sales commissions earned by our outbound sales team and the related payroll taxes, as well as commissions earned by third-party resellers that we consider to be incremental and recoverable costs of obtaining a contract with a customer, are deferred and are typically amortized over an estimated period of benefit of five years. 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. We plan to continue to invest in sales and marketing, long term, to grow our user base and increase our brand awareness. The trend and timing of sales and marketing expenses will depend in part on the timing of marketing campaigns.
General and administrative. 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.
We expect to incur additional general and administrative expenses to support the growth of the Company. General and administrative expenses include the recognition of stock-based compensation expense related to the grant of restricted stock made to our co-founder. 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.
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.
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.
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.
(Provision for) benefit from income taxes
(Provision for) benefit from income taxes consists primarily of U.S. federal, state and foreign jurisdiction income taxes. For 2023, the difference between the U.S. statutory rate and our effective tax rate is primarily due to jurisdictional mix of earnings, tax credits and state income taxes. 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.
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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. See Note 1, "Description of the Business and Summary of Significant Accounting Policies - Reduction in Workforce" for additional information.
(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.
(4) Results of Operations for the year ended December 31, 2022 includes a one-time benefit from income taxes of $420.2 million due to the release of a valuation allowance on the U.S. federal and certain state deferred tax assets.
(5) On March 15, 2023, our President resigned, resulting in the reversal of $6.7 million in stock-based compensation expense. Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023.
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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. See Note 1, "Description of the Business and Summary of Significant Accounting Policies - Reduction in Workforce" for additional information.
(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.
(4) Results of Operations for the year ended December 31, 2022 includes a one-time benefit from income taxes of $420.2 million due to the release of a valuation allowance on the U.S. federal and certain state deferred tax assets.
(5) On March 15, 2023, our President resigned, resulting in the reversal of $6.7 million in stock-based compensation expense. Of the total amount reversed, $4.4 million related to expense recognized prior to January 1, 2023.
*Percentages may not foot due to rounding.
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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. These increases were offset by a $39.0 million unfavorable impact from changes in foreign exchange rates across multiple currencies.
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.
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.
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. Additionally, there was an increase of $18.0 million in third-party hosting and software fees. These increases were offset by a decrease of $4.9 million in allocated overhead.
Sales and marketing
| Year Ended December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | $ Change | % Change | |||||||||||
| (In millions) | ||||||||||||||
| Sales and marketing | $ | 466.0 | $ | 409.4 | $ | 56.6 | 13.8 | % |
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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.
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. These increases were offset by a decrease of $9.0 million in non-income based taxes.
Net (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 .
Interest income (expense), net
Interest income (expense), net increased by $16.1 million during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to higher interest income as a result of interest rate increases.
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.
(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.
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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. 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. We do not expect to incur material taxes in the event we repatriate any of these amounts. Our cash is held at several large financial institutions and our investments are focused on the preservation of capital, fulfillment of our liquidity needs, and maximization of investment performance within the parameters set forth in our investment policy and subject to market conditions. The investment policy sets forth credit rating minimums, permissible allocations, and limits our exposure to specific investment types. We believe these policies mitigate our exposure to risk concentrations.
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 enter into finance leases in part to better match the timing of payments for infrastructure-related assets with that of cash received from our paying users. 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 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. The net proceeds from the issuance of the 2026 Notes and 2028 Notes were $684.8 million, net of debt issuance costs, and $682.3 million, net of debt issuance costs, respectively. The 2026 Notes mature on March 1, 2026 and the 2028 Notes mature on March 1, 2028. The Notes of each series do not bear regular interest and the principal does not accrete. The Notes of each series may bear special interest as the remedy relating to our failure to comply with certain of our reporting obligations. These Notes can be converted or repurchased prior to maturity if certain conditions are met.
Our principal uses of cash in recent periods have been funding our operations, repurchases of our Class A common stock, purchases of short-term investments, the satisfaction of tax withholding obligations in connection with the settlement of restricted stock units and awards, making principal payments on our finance lease obligations, and capital expenditures. 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. Share repurchases will be made from time-to-time in private transactions or open market purchases as permitted by securities laws and other legal requirements and will be subject to a review of the circumstances in place at that time, including prevailing market prices. 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. 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.
In April 2017, we entered into a $600.0 million credit facility with a syndicate of financial institutions, which we subsequently amended in February 2018, February 2021, and March 2023. Pursuant to the terms of the revolving credit facility, we may issue letters of credit under the revolving credit facility, which reduce the total amount available for borrowing under such facility. In February 2018, we amended our revolving credit facility to, among other things, permit us to make certain investments, enter into an unsecured standby letter of credit facility, and increase our standby letter of credit sublimit to $187.5 million. We also increased our borrowing capacity under the revolving credit facility from $600.0 million to $725.0 million. In February 2021, we amended our revolving credit facility to decrease our borrowing capacity from $725.0 million to $500.0 million and the letter of credit sublimit from $187.5 million to $65.0 million. We may from time-to-time request increases in the borrowing capacity under the revolving credit facility of up to $250.0 million, provided no event of default has occurred or is continuing or would result from such increase. In March 2023, we amended the revolving credit facility to update our borrowing benchmark from LIBOR to SOFR. The revolving credit facility terminates on February 23, 2026.
Interest on borrowings under the revolving credit facility accrues at a variable rate tied to SOFR or an alternative base rate, at our election. Interest is payable quarterly in arrears. Pursuant to the terms of the revolving credit facility, we are required to pay an annual commitment fee that accrues at a rate of 0.20% per annum on the unused portion of the borrowing commitments under the revolving credit facility. In addition, we are required to pay a fee in connection with letters of credit issued under the revolving credit facility that accrues at a rate of 1.375% per annum on the amount of such letters of credit
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outstanding. There is an additional fronting fee of 0.125% per annum multiplied by the average aggregate daily maximum amount available under all letters of credit.
The revolving credit facility contains customary conditions to borrowing, events of default, and covenants, including covenants that restrict our ability to incur indebtedness, grant liens, make distributions to our holders or our subsidiaries’ equity interests, make investments, or engage in transactions with our affiliates. In addition, the revolving credit facility contains financial covenants, including a consolidated leverage ratio incurrence covenant and a minimum liquidity balance. We were in compliance with all covenants under the revolving credit facility as of December 31, 2023.
As of December 31, 2023, we had no amounts outstanding under the revolving credit facility and an aggregate of $31.7 million in letters of credit issued under the revolving credit facility. Our total available borrowing capacity under the revolving credit facility was $468.3 million as of December 31, 2023.
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.
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.
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.
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, 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, 2023, future non-cancelable minimum rental payments under finance leases were $307.2 million. Refer to Note 9, "Leases", for more information.
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. 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 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.
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) |
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Operating activities
Our largest source of operating cash is cash collections from our paying users for subscriptions to our platform. 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, 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.
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. 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.
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.
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. The increase was partially offset by cash paid for capital expenditures of $24.3 million related to purchases of infrastructure assets at our datacenters.
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.
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.
Significant Impacts of Stock-Based Compensation
Co-Founder Grant
In December 2017, the Board of Directors approved the grant to Drew Houston, the Company's Co-Founder and Chief Executive Officer, of 10.3 million shares of Class A common stock in the form of RSAs (the "Co-Founder Grant"). This Co-Founder Grant has service-based, market-based, and performance-based vesting conditions. 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 is eligible to vest over the ten-year period following the date the Company’s shares of Class A common stock commenced trading on the Nasdaq Global Select Market in connection with the Company’s IPO. 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.
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| Company Stock Price Target | Shares Eligible to Vest for Mr. Houston | |
|---|---|---|
| $30.00 | 2,066,667 | |
| $37.50 | 1,033,334 | |
| $45.00 | 1,033,334 | |
| $52.50 | 1,033,333 | |
| $60.00 | 1,033,333 | |
| $67.50 | 1,033,333 | |
| $75.00 | 1,033,333 | |
| $82.50 | 1,033,333 | |
| $90.00 | 1,033,333 |
The Performance Vesting Condition for the Co-Founder Grant was satisfied on the date the Company’s shares of Class A common stock commenced trading on the Nasdaq Global Select Market in connection with the Company’s IPO, which was March 23, 2018.
The first tranche of the Co-Founder Grant, or 2.1 million shares of Class A common stock, vested in the fourth quarter of 2021. The stock-based compensation expense for the Co-Founder Grant is recognized utilizing the accelerated attribution method over the requisite service period identified as the derived service period over which the market conditions are expected to be achieved, and is not reversed if the market conditions are not satisfied.
Critical Accounting Estimates
Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with generally accepted accounting principles, or GAAP, in the United States. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
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.
Net (gain) loss on real estate assets
We assess any changes to lease agreements in accordance with ASC 842, Leases (“ASC 842”). When amendments to existing lease agreements occur, we remeasure and reallocate the remaining consideration to the lease and non-lease components in the contract using a relative standalone price allocation, as well as reassess the classification of the lease at the effective date of the modification.
In the fourth quarter of 2023, we executed an amendment to the lease ("the lease amendment") for our San Francisco, California corporate headquarters. As a result of the lease amendment, we remeasured the related lease liability and right-of-use asset using the estimated incremental borrowing rate as of the modification date and using a relative standalone price reallocation of total contract consideration between the lease and non-lease components of the contract. The non-lease components include common area maintenance costs, which are significant in relation to the overall agreement. The determination of the standalone price of the lease and non-lease components involved judgment and was based on assumptions including future market rent rates, free rent periods and anticipated increases to common area maintenance costs. As a result of the lease amendment, we recognized a one-time gain of $158.8 million in the fourth quarter of 2023 from the corresponding remeasurement of the lease liability and adjustment to the right-of-use asset (which was previously impaired), partially offset by an increase in the liability for unrecoverable common area maintenance costs. Refer to Note 9, "Leases", for more information.
In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), we evaluate our long-lived assets for impairment whenever events and circumstances indicate that the assets might be impaired. When the projected undiscounted
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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.
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. We monitor ongoing changes in the corporate real estate market that may impact our subleasing strategy in conjunction with our Virtual First model. We recorded impairment charges related to real estate assets of $3.6 million during the year ended December 31, 2023. Estimating the fair value of our real estate assets can require the application of significant judgment. 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.
A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized based on all available positive and negative evidence. Such evidence, which requires management's judgment, includes, but is not limited to, recent cumulative earnings or losses, expectations of future taxable income by taxing jurisdiction, and the carry-forward periods available for the utilization of deferred tax assets. 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. Future releases of the remaining valuation allowance, if any, would result in the recognition of certain deferred tax assets which may include a material income tax benefit for the period in which such release is recorded. Refer to Note 14, “Income Taxes” to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for more information.
Change in Accounting Estimate
In the first quarter of 2024, we determined that the useful lives of certain infrastructure server and component assets, which are included in “Property and equipment, net”, should be increased from four to five years, as we plan to extend the economic life of these assets in light of recent technological advancements. This change in useful lives will be effective beginning in fiscal year 2024, and is expected to have an estimated favorable impact for the full fiscal year 2024 to cost of revenue and operating income of approximately $30.5 million based on assets that were included in “Property and equipment, net” as of December 31, 2023.
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.
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