Dropbox, Inc. (NASDAQ:DBX) Q3 2024 Earnings Call Transcript

Dropbox, Inc. (NASDAQ:DBX) Q3 2024 Earnings Call Transcript November 7, 2024

Dropbox, Inc. beats earnings expectations. Reported EPS is $0.6, expectations were $0.53.

Operator: Good afternoon, ladies and gentlemen, thank you for joining Dropbox Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Dropbox’s website following this call. I will now turn it over to Peter Stabler, Head of Investor Relations.

Peter Stabler: Thank you. Good afternoon, and welcome to Dropbox’s third quarter 2024 earnings call. Before we get started, I’d like to remind you that our remarks today will include forward-looking statements such as our financial guidance and expectations, including our long-term objectives and forecast for our fourth quarter, fiscal year 2024, fiscal year 2025 and our expectations regarding our revenue growth, profitability, operating margin and free cash flow, as well as our expectations regarding our business, assets, products, strategies, technology, employees, users, demand and the macroeconomic environment. These statements are subject to risks and uncertainties that could cause actual results to differ materially. They are also based on assumptions as of today, and we undertake no obligation to update them as a result of new information or future events.

Factors and risks that could cause our actual results to differ materially from these forward-looking statements are set forth in today’s earnings release and in our quarterly report on Form 10-Q filed with the SEC. We’ll also discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of GAAP and non-GAAP results is provided in our earnings release and on our website at investors.dropbox.com. I will now turn the call over to Dropbox’s Co-Founder and CEO, Drew Houston.

Drew Houston: Thanks, Peter, and good afternoon, everyone. Welcome to our Q3 2024 earnings call, and I’m here with Tim Regan, our CFO. I’ll cover our recent business updates and strategy, and then Tim will walk through our Q3 results and our outlook. Last week, we announced a 20% reduction in our workforce. This was an incredibly difficult decision, and I want to acknowledge all the folks at Dropbox who were impacted, but it was a necessary step to position for our next chapter. As we’ve discussed over the last year, we’re at an inflection point as a company. Our core FSS business has matured and we’ve been investing in new products to solve new problems and drive growth. But given the challenging environment for our core business, we needed to better align our investments with the opportunities ahead.

Beyond the headcount reduction, we also simplified our org structure. We’ve become too complex and layered over time, which was slowing us down and hurting our execution. So, we designed a flatter and more balanced organization, reducing the number of layers while better aligning our teams around our key priorities. Now, let’s talk about where we’re headed. Over our first 17 years, we built a large and profitable business, helping hundreds of millions of users secure, organize and share their files, but today’s workplace has evolved dramatically. Content is now scattered across dozens of cloud tools and browser tabs, not just files and folders. We’re all struggling with the same core problem I started Dropbox to solve, which is spending too much time searching for stuff and trying to stay on top of our work.

And the challenges go beyond just finding things. There’s no persistent way to organize your cloud content, because when you close your browser, your workspace and all your tabs disappear. There’s no common way to collect and share different kinds of cloud content across platforms. And for IT teams, the shift to distributed work and the resulting proliferation of tools has created even bigger headaches around security and around governance. The good news is that AI gives us powerful new tools to address these universal problems. That’s why we’ve been hard at work on Dropbox Dash, our AI-powered universal search product. After launching an initial version for individuals last year, we just released Dash for Business in October. The business version of Dash combines AI-powered universal search and organization with universal content access controls and governance for IT.

We’re focusing our initial sales efforts on our over 500,000 FSS Teams’ customers who already trust us with their content. It’s early days, but the initial feedback has been really encouraging, both among our existing Dropbox FSS customers and prospects that are new to Dropbox. Dash helps you instantly find anything across all your work tools from a single search box, it uses AI to summarize and answer questions about your company’s content, and it gives you a personalized start page that connects your meetings, your docs and your projects. But what’s really resonating with IT leaders is Dash’s unique governance capabilities, which we call Protect and Control. For the first time, admins get real-time visibility into everything that’s shared in the company across every major content platform from one dashboard with powerful controls to protect sensitive content.

Most companies we talk to are doing this manually today, so they’ve told us they see huge value in automating this and extending these capabilities. And overall, we know this market is attracting significant attention and investment, which both validates the opportunity we’ve been pursuing while also underscoring the importance of moving quickly to capture it. So, as we reposition the company around Dash, we’re evolving our FSS business to maintain its strengths while accelerating Dash’s adoption. And rather than trying to re-inflict FSS growth, we’re shifting our focus to product quality, to retention and efficiency, and serving as a springboard for Dash. This means doubling down on our strengths, being the simple and reliable and platform-agnostic solution that our customers love.

And Teams remain a priority given the higher ARPU, lifetime value, retention profile and strong cross-sell potential for Dash. And given that our FSS users also have unmet needs around finding and organizing their cloud content, we see a significant opportunity to bring some of Dash’s capabilities to our core FSS product, while also turning our massive FSS user base into a natural growth engine for Dash. We’re also reassessing our document workflow investments. We’ll continue developing DocSend features like virtual data rooms, while focusing Sign on retention. But FormSwift, which we acquired to expand our capabilities, requires significant investment that we now believe is better spend on Dash. So, we’re exploring strategic options there, including a potential sale.

Looking ahead, we’re still in the early days of AI transforming work. While we’re focused on Dash near term, we’re also exploring adjacent opportunities too, like our recent acquisition of Reclaim, which brings AI-powered calendar and time optimization capabilities. And over-time, we see potential for a broad suite of AI tools that make knowledge work more productive and will leverage our massive user base, our trusted brand and our technical infrastructure to accelerate adoption. But to fully capture this opportunity, we have to stay focused and prioritize. Our core business gives us a powerful foundation to build on. And while it will take time to change our growth trajectory, our conviction continues to grow as we solve real customer problems.

Evolving from syncing your files to organizing and securing all your cloud content is a natural evolution for Dropbox and we’re well-positioned to win in this new market. I’ll now hand it over to Tim to cover our results and outlook.

Tim Regan: Thank you, Drew. I’ll cover our financial highlights from Q3, provide guidance for Q4, and offer some initial thoughts on our outlook for 2025. Starting with our results for the third quarter. Total revenue for Q3 increased 0.9% year-over-year to $639 million, including approximately $800,000 of contribution from our Nira and Reclaim acquisitions. As expected, foreign exchange rates did not materially impact our revenue for the quarter. Total ARR grew to a total of $2.579 billion, up 2.1% year-over-year. On a constant currency basis, growth was 1.4% year-over-year. Our growth in ARR was largely driven by our individual plans across both our Plus and Essentials SKUs. While we continue to strategically prioritize our Teams SKUs and we are seeing progress on Teams engagement, activation and top of funnel metrics, we also continue to face headwinds, including pricing sensitivity that are pressuring our team expansion and down-sell trends.

We exited the quarter with 18.24 million paying users, adding approximately 19,000 net new paying users on a sequential basis. I’d note that our paying user count for the quarter includes approximately 23,000 paying users we added in the quarter through our acquisition of Reclaim, which we closed in late July. Nira, a data access governance platform we acquired in May, did not have a material impact on our paying user count for either Q2 or Q3 as we sell just one license per company. Across our FSS and document workflow businesses, we saw sequential additions of paying users for our individual plans led by our Plus and Essentials SKUs. However, these gains were more than offset by down-sell pressure across our Teams plans and FormSwift, consistent with the commentary we offered on last quarter’s call.

Average revenue per paying user was $139.05 comparing to $138.71 in the year-ago period. On a year-over-year basis, ARPU benefited from a shift to higher-priced plans and a modest benefit from a mix-shift from annual to monthly plans. This quarter’s sequential decline was driven primarily by the rollback in late March pricing increases associated with our bundled products that we introduced last year. Before we continue with further discussion of our P&L, I would like to note that unless otherwise indicated, all income statement figures mentioned are non-GAAP and exclude stock-based compensation, amortization of purchased intangibles, certain acquisition-related expenses and workforce reduction expenses. Our non-GAAP net income also includes the income tax effect of the aforementioned adjustments.

With that, let’s continue with the third quarter P&L. Gross margin was 84% for the quarter. As mentioned in previous quarters, the primary driver of the year-over-year increase in gross margin was the increase in the youthful life of our servers from four to five years effective January 1st of this year. This change resulted in approximately $7 million of benefit to gross profit in the third quarter. The impact of this change was weighted towards the first half of this year. For the full year, we expect a benefit to gross profit of approximately $30 million. Operating margin was 36.2%, ahead of our guidance of 32% and up 20 basis points from the year-ago period. Compared to our guidance, operating margin benefited from lower-than-anticipated marketing spend, reduced outside services spend and lower workforce expenses.

Net income for the third quarter was $190 million, down 2% year-over-year, driven by higher taxes. Diluted EPS for the third quarter was $0.60 based on 316 million diluted weighted average shares outstanding, compared to $0.56 in the year-ago quarter, representing a 7% year-over-year increase. Moving on to our cash balance and cash flow. We ended the quarter with cash and short-term investments of $891 million. Cash flow from operations was $274 million, an increase of 7% versus the year-ago period. Capital expenditures in the quarter totaled $4 million. This resulted in quarterly free cash flow of $270 million compared to $247 million in Q3 2023. Free cash flow per share for the quarter was $0.85, representing a 20% year-over-year increase.

In the quarter, we also added $58 million to our finance leases for data center equipment. In Q3, we repurchased approximately 15 million shares, spending approximately $349 million. As of the end of the third quarter, we had approximately $519 million remaining under our current repurchase authorization. We remain committed to our repurchase program, which aims to reduce share count over time and return capital to our shareholders. Regarding our balance sheet, as a reminder, we currently have three instruments in place, $1.4 billion of 0% coupon convertible notes split equally across two tranches maturing in March of 2026 and 2028 and a $500 million revolving credit facility that terminates in February 2026. We are mindful, of course, of our maturity calendar and have confidence in our ability to successfully access the capital markets.

We have nothing specific to share at this time, but we’ll keep investors updated on our plans as they solidify. I’ll now offer our updated outlook for Q4 and the full year. I’ll then share some context on this guidance and provide some preliminary thoughts on 2025. For the fourth quarter of 2024, we expect revenue to be in the range of $637 million to $640 million. We are expecting a currency tailwind of approximately $3 million and thus on a constant currency revenue basis, we expect revenue to be in the range of $634 million to $637 million. We expect our non-GAAP operating margin to be approximately 36%. This includes a partial quarter’s benefit from the reduction-in-force action announced last week and excludes approximately $50 million of expenses related to our workforce reduction.

Finally, we expect diluted weighted average shares outstanding to be in the range of 307 million to 312 million shares based on our 30-day trailing average share price. For the full year 2024, we expect revenue to be in the range of $2.542 billion to $2.545 billion. On a constant currency basis, we expect revenue of $2.538 billion to $2.541 billion. We expect gross margin to be approximately 84%, up from our prior guidance range of 83% to 83.5%. We expect non-GAAP operating margin to be approximately 36%, up from our previous guidance range of 33.5% to 34%. I’d note that this margin guidance excludes the aforementioned severance and benefits we expect to pay in Q4. We are reducing our free cash flow range from $910 million to $950 million to $860 million to $875 million.

This accounts for our severance expectations where we ultimately expect to pay approximately $65 million in severance and benefits as related to our workforce reduction with roughly $55 million expected to be paid in 2024 and the remainder to be paid in 2025. As it relates to capital expenditures, we now expect CapEx to be between $20 million to $25 million for the full year, down from our prior guidance of $20 million to $30 million. We continue to expect additions to finance lease lines to be approximately 7% of revenue. Finally, we are reducing our 2024 diluted weighted average shares outstanding guidance range by 1 million shares to 322 million to 327 million shares. I’ll now share some additional perspective on this updated guidance for 2024.

First, some additional thoughts on our workforce reduction where our intent was to identify and address areas of inefficient spend, while reallocating resourcing to areas of higher future potential growth. The reductions were thus largely targeted towards R&D and sales and marketing teams supporting our mature file, sync and share category, as well as some reductions in our document workflow businesses as we aim to operate these collective areas with the intention of driving higher levels of free cash flow. While we expect that these decisions will lead to operating margin and free cash flow expansion, we also expect a corresponding modest headwind to revenue growth given the reduced levels of investment behind these areas. With this context and consistent with our historical approach, our revenue guidance reflects what we have a high degree of visibility into today.

We continue to face a challenging operating environment, particularly for our Teams product, where the progress we’ve made on some engagement and top of funnel metrics has yet to translate into ARR gains given the offsetting pressure we are seeing on upsell and down-sell trends. Given the latest trends as well as the anticipated headwind to revenue as a result of our RIF, we are adjusting our full year revenue guidance range to be $2.542 billion to $2.545 billion. With respect to paying users, as we mentioned last quarter, we continue to face near-term down-sell risk associated with some of our larger Teams’ accounts, as well as some seasonal pressure from FormSwift that we expect to negatively impact our paying user count in Q4. We expect this pressure to more than offset growth in individual plans, yielding a modest sequential contraction in our paying user count for Q4.

As it relates to operating margins, we have increased our operating margin expectations from 33.5% to 34% to approximately 36%. This increase reflects the savings we expect from our reduction in force. As it relates to free cash flow, we have reduced our expectations to $860 million to $875 million. This reduction is largely due to the severance payments associated with our reduction in force, as well as additional impacts from our reduced expectations on billings and lower interest income given our increased levels of share repurchase activity. I’ll now share some early thinking on 2025, though we will provide official guidance during our February 2025 earnings call. Please note that the following commentary does not account for the result of any strategic decisions we may make for FormSwift, given that the result of that assessment is not known at this time.

For revenue, our growth expectations exiting Q4 of ’24 are indicative of our current trajectory across our core and document workflow businesses. While we’re optimistic that the improvements we’ve made and are continuing to make to the Teams’ product will yield better operating performance in the future, it’s difficult to predict when our efforts will begin to bear measurable fruit. In addition, we may face additional headwinds in these areas subsequent to our RIF given a reduced level of resourcing and marketing investment. Lastly, though we are seeing customer enthusiasm for Dash for Business, it will take time before Dash will meaningfully impact our revenue growth rate. Therefore, given the nascent state of Dash and the current outlook for our file, sync and share business, our early view for 2025 is for roughly flat constant currency revenue relative to 2024.

This preliminary outlook may dip slightly negative if we see a prolonged continuation of the challenging Teams expansion and down-sell trends across our Teams SKUs. We could also show positive growth if we were able to reverse these Teams trends or have success driving the adoption of Dash. Moving to operating margins. In 2025, we expect to see a benefit to margins stemming from our reduction in force. This benefit, however, will be partially offset by a few factors. First, 2024 benefited from a $30 million tailwind through the extension of the useful life of our data center hardware, where we will not see this tailwind next year. Second, in addition to our annual merit increases for our workforce, we will also be investing across both R&D and sales and marketing to scale Dash, as well as backfilling select positions subsequent to our RIF.

Thus, while we are not offering precise guidance at this point, we expect 2025 non-GAAP operating margin expansion of approximately 150 basis points relative to 2024. We also expect free cash flow to be at or above $950 million, given the aforementioned revenue and operating margin commentary. I’d note that this preliminary figure includes a $36 million headwind related to the third and final tranche of our San Francisco lease buyout that we executed last year, as well as additional cash taxes. In summary, we are making changes to our core file, sync and share and document workflow businesses designed to improve their efficiency levels and yield higher levels of free cash flow per share. Concurrently, we continue to invest in areas where we see the largest opportunities for future growth and are making progress on that dimension given our recent launch of Dash for Business.

While it will take time for our collective investments to translate to revenue growth, we are confident in our ability to drive sustainable levels of free cash flow in the years ahead. Ultimately, we believe that our efforts will culminate in creating long-term value for our shareholders. With that, operator, please open the line for questions.

Q&A Session

Operator: Thank you. [Operator Instructions] And our first question comes from Brent Thill of Jefferies. Your line is open.

Luv Sodha: Thank you. This is Luv Sodha on for Brent Thill. Thank you, Drew, and thank you, Tim, for taking my question. Maybe, Drew, to start out with you, I just wanted to ask, it’s great to see the Dash for Business announcement. Could you maybe talk a little bit about how Dash is differentiated from some of the other offerings in the market? I know you noted that it’s a competitive market out there. So, just talk a little bit about how Dash is different?

Drew Houston: Sure. So, versus other folks in the space, a bunch of advantages. So, one is just product differentiation and we’re seeing that with IT in particular, the Protect and Control capability that Dash has is unique and addresses a major pain point that we see most of our customers and prospects experiencing as they want to roll out not just things like Dash or Search, but just AI in general. A lot of admins recognize there’s a lot of improperly shared stuff in any given company and there’s no good way to have visibility into what’s shared across multiple content platforms and there’s no way to have universal governance across platforms. And so, Dash gives — Dash for Business gives admins that capability for the first time and that was ceded from an acquisition of a company called Nira that identified that opportunity.

More broadly, beyond — and there are a number of other dimensions of product differentiation and more you’ll see next year, but we have a number of structural advantages too. So, our scale and our distribution are a big advantage. So, we have over 500,000 business accounts and a better part of 20 million subscribers on Dropbox. And so, we have a big home field advantage with our FSS customers who view Dash and organizing your cloud content as a natural extension of taking care of your files. And then, versus some of the other folks like Microsoft or Google or some of the incumbents, Dash is platform-agnostic, designed from the ground up to work across every ecosystem where to date when you look at some of the copilot type offerings, they’re often limited to within their own ecosystem.

So for example, you don’t really see like great Google Slide support in office, for example, but Dash is designed from the ground up to platform-agnostic and you have to really design that from the beginning. It’s hard to bolt that on later. And we see across the board with Dropbox’s trust and trust brands, privacy brand is going to be a big advantage for us because when we talk to customers, we see a lot of apprehension, hear a lot of apprehension about what happens to your data when you use AI and I think none of us really want our stuff or our information, our company’s information to be used for other purposes like better ad targeting or for training the next foundation model. So, the fact that we self-host our AI by default and how it can make strong assurances and guarantees about the privacy of your data, that’s a big advantage.

And then, because we store literally trillions of pieces of content on Dropbox and all the technical infrastructure that entails, that’s going to be a big advantage for us too. And the last thing I’d say is the other competitors are pretty enterprise focused. And so, we have a particular advantage with the SMB and mid-market audience that — where we succeeded in FSS and that kind of self-serve and viral motion, we see a big opportunity to do well there too, and see that as a completely greenfield opportunity. So, lots of advantages, excited to get out for next year.

Luv Sodha: Got it. That’s super helpful. I just wanted to quickly follow-up on that. So, just it would be helpful if you could frame the monetization opportunity on Dash. And given the Teams customer seems to be a little bit more price sensitive, could you talk a little bit about how much you think this could translate into ARPU monetization? I know it’s super early, but any indication would be super helpful. Thank you.

Drew Houston: Yeah. So, I mean a couple of things. I mean, the Dash market has some pretty different dynamics than the FSS market. I mean, first is maturity. So, in the competitive landscape and category maturity in FSS, it contributes to some of that price sensitivity and the fact that we’re — in many cases, we’re competing against an offering that’s bundled for free or at no added cost for the office suite, where you don’t have those dynamics with Dash. And then second, we are very excited about the size of this potential market. I mean, it’s very rare you meet a customer that doesn’t have these challenges around fragmentation and information overload and having trouble finding their stuff at work or the security and governance challenges I talked about with IT.

And so, we see, even though we’re very proud of the scale that we’ve built with our FSS business, a couple of billion in revenue, 0.5 million — more than 0.5 million business accounts. We think the opportunity is even larger with the kinds of unmet needs that Dash addresses. And there’s a billion knowledge workers out there none of them have — virtually none of them have any solution to these problems. And so, it’s a greenfield opportunity for us.

Luv Sodha: Got it. Thank you so much. I’ll get back into queue.

Drew Houston: Yeah. Sorry, just one more thing. Just on pricing in general, I mean it’s pretty early. I mean, we’re still iterating, but early signs we expect it to be accretive to ARPU.

Luv Sodha: Got it. Thank you.

Operator: Thank you. Our next question comes from Rishi Jaluria of RBC Capital Markets.

Rishi Jaluria: Wonderful. Thanks so much for taking my questions. Maybe I want to ask a dual-pronged one still sticking with Dash. The first part — and these are both related, but the first part is, maybe help us understand this is a competitive space. You’ve got well-funded venture-backed companies that are achieving real scale in this. What do you feel uniquely gives Dropbox a right to win, especially at the enterprise level, which is where arguably the biggest TAM in this is? And then the second part to that is, Drew, you’re making a really big bet on the future of the company and understand that, right? I mean that’s what the history of entrepreneurship is rife with. What — I guess, number one, what gives you confidence that this opportunity can materialize? And number two, what’s kind of the contingency plan or thought process if just the demand for Dash and for these new growth drivers don’t materialize the way that you think they will? Thank you.

Drew Houston: Sure. So, I think one thing that’s different about Dash is its proximity to our core business and then the magnitude of the opportunity. So, I talked a little bit about the magnitude. I mean, we see these challenges around information overload as being universal and we see that a lot of what you do to kind of organize all your cloud content, builds on a strong foundation of first organizing many millions of peoples and companies’ files. And so, certainly with our existing FSS customers, when I talk to them, they’re all, look — they are apprehensive about AI for some of the reasons I covered, like what happens to my data, and there’s a lot of hype, and there’s a lot of concern that which of these products are going to work as advertised or what happens to my data, all these kinds of considerations.

And so, there’s a lot of enthusiasm or I see when I talk to our customers that there’s a lot of enthusiasm about extending the value we provide and they see it as a natural extension. They see Dash as a natural extension of what Dropbox already does, and I think we’re all looking for services that we can trust as we adopt all these new AI tools. And then, more broadly, this is — I mean, the other difference is, I really think about Dash as kind of solving a lot of the same problems I started Dropbox to solve. So, I mean, in the beginning, I started the company because I kept forgetting my thumb drive. But the question I was really asking is like why is it so difficult to find and organize and share and secure my stuff. And in a lot of ways, we’re sort of solving the 2024 versions of those same problems, lots of challenges finding, organizing and sharing your cloud content in a world where a lot of your work happens in the browser and there’s a lot of new value you can provide that wasn’t possible before GenAI came along.

So, we see both confirmation and validation from our existing customers. You see the market developing and other folks in this space. Of course, you’d expect that. You see revenues starting to scale. You see lots of investment heading into the space. And so, we think we’re arriving right at the right time to capitalize on this. And if things don’t work, we’ll continue iterating, but we see this as generally a pretty linear evolution of what we do and that builds on our existing strengths.

Rishi Jaluria: All right. Really helpful. Thanks, Drew.

Operator: Thank you. Our next question comes from Mark Murphy of JPMorgan. Your line is open.

Josefina Ruggieri: Hi, this is Josefina Ruggieri on for Mark Murphy. Thank you for taking my question. Just with the recent announcement of the headcount reduction, so could you guys talk a little bit more about how you’re approaching hiring going forward and kind of team restructuring and how are you — what steps are you taking to ensure that Dropbox remains agile and efficient while pursuing these long-term initiatives? Thank you.

Drew Houston: Sure. Well, I mean, it’s a really difficult decision to reduce headcount and do the kind of restructuring we did. And as you would imagine, that’s in service of — or a difficult decision like that is both in service of not having to make this kind of adjustment again and then also to set — to best position Dropbox for its next act and getting Dash to win. So, some of the more specific differences or changes are as far as how we’re approaching hiring. So, I mentioned that this wasn’t just a headcount reduction or a cost optimization. This is really a redesigning our organization to be flatter and leaner and more balanced. And it’s not just a one-time effort. These are now kind of a permanent way that we operate and having a lot of controls to make sure that the organization’s shape and layers and everything stay within bounds as we hire.

Now, part of this is also we’ll reinvest some of the costs that we cut in Dash, and in particular, as you’d imagine, there’s a lot of specialized talent that we need for Dash and for our future products around ML engineers, around deep search expertise, that kind of thing, but I think it’s also an indication that we’re going to balance all these considerations. We are focused on in growth and investing for growth and capitalizing on the opportunity in front of us, but we’ll also be disciplined with our spending in areas of business where we’re seeing more category maturity or growth headwinds, then we’ll focus more on efficiency and cash generation. So, we’ll always be balancing all three factors.

Tim Regan: And maybe just to briefly elaborate from a numbers perspective, we’re not offering precise guidance at this time, but we do expect ’25 non-GAAP operating margin expansion of about 150 basis points compared to 2024. That includes some of the offsets that Drew talked about as far as both annual merit increases as well as the investments we’ll be making across both R&D and sales and marketing to scale Dash and some backfilling we’ll be doing relative to select positions subsequent to the RIF. And then, a quick reminder, ’24 also benefited from a $30 million tailwind due to the extension of the useful life of our data center hardware, where we won’t see that tailwind again next year.

Josefina Ruggieri: Thanks, guys. That’s all from me.

Operator: Thank you. [Operator Instructions] I’m showing no further questions. I would now like to turn it back to Peter Stabler for closing remarks.

Peter Stabler: Thank you everyone for joining us today. We look forward to speaking with you next quarter. Have a good day.

Operator: This concludes today’s conference call. Thank you for participating, and you may now disconnect.