Good afternoon, ladies and gentlemen. Thank you for joining Dropbox’s First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. 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 Page Portas, Investor Relations at Dropbox. Mr. Portas, please go ahead.

Today, Dropbox will discuss quarterly financial results that were distributed earlier. Statements on this call include forward-looking statements, including future financial results, including our goals and expectations regarding future revenue growth, profitability, and our ability to generate and sustain positive free cash flow, our expectations regarding anticipated impact to our financial results, including estimated impairment charges and subleasing income as a result of our shift to a virtual-first work model, expected performance of our business, our expectations regarding remote work trends, related market opportunities and our ability to capitalize on those opportunities, our capital allocation plans, including expected timing and volume of share repurchases, future M&A opportunities and other investments; our ability to drive future user growth, upgrades, and retention by enhancing our products, developing and offering new products or features through our acquisitions, our strategy and the effectiveness of strategy in achieving our business goals and overall future prospects, and ability to generate shareholder value. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors, including in our Form 10-K for the year ended December 31, 2020, and the risk factors that will be included in our Form 10-Q for the quarter ended March 31, 2021. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by law. Our discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings, which was furnished with our Form 8-K filed today with the SEC and may also be found in the supplemental investor materials posted on our Investor Relations website. Additional information regarding the exchange rate assumptions used in our guidance may also be found in our supplemental investor materials.

Good afternoon, everyone, and welcome to our Q1 2021 earnings call. On the call with me is Tim Regan, our Chief Financial Officer. Today, I'll share our business and product highlights from the quarter. Tim will then review our Q1 financial results, provide guidance for the second quarter, and update our outlook for the remainder of the year. And before we get to our results, I'd like to thank our employees, customers, and partners for their support and their contributions to a very successful quarter. Around this time last year, we, along with many of our customers, were managing through an unprecedented global pandemic and a sudden shift to distributor work. It was certainly a challenging time, and I'm proud of the way our team showed up and supported our customers. While many companies are still adjusting to this shift and grappling with such decisions about hybrid, flexible or remote work, one thing is clear, the traditional way of working has changed forever. We've made decisions about our own workforce, adopting what we're calling a virtual-first way of working, combining the best of both fully remote and in-person collaboration. So as we shared previously, we reoriented our entire product roadmap to address the challenges our customers face in this new environment. At the same time, we also reorganized and streamlined our teams against our new strategies. And now we're focused on execution. This new era of distributed work has given rise to new opportunities for us and set up several trends that were already in play. We've seen some spikes in the rich media and video content. We've seen the rise of freelance economy and an accelerated shift of businesses to the cloud. And we're seeing these trends reflected in our own business with the increased growth in our professional SKU, expansion within SMBs and heightened demand for new capabilities that connect our customers' content to their workflows. So as our progress in this quarter demonstrates, there's never been a better time in history to be building collaboration software, and I'm excited about our road ahead. Turning to the quarter, we saw positive momentum in the business as we continue to execute against our strategy. Revenue growth is strong, and our non-GAAP operating margin expanded meaningfully as we drove operational efficiencies and stayed on course with our long-term targets. We also completed several financial transactions that improved our ability to execute against our investment thesis, which Tim will speak to in more detail. As I shared just last quarter, we have these three strategic priorities for 2021. Evolving the core business, investing in new products and driving operational excellence. I'm proud of the team's execution and the progress we've made against each of these in Q1. Let's start with a clear update on our first priority, evolving the core business. As a reminder, this strategy is focused on building on the strength in the simple and intuitive core Dropbox experience to improve our functionality, make collaboration around content more seamless, and help organize our users' content tools and workflows. As we make these investments, we believe they'll drive higher levels of engagement, better retention, and ultimately, stronger revenue from our core business. One way we improved the user experience this quarter was streamlining our in-product promotions to ensure people can focus on our content and work. We were successful in maintaining our overall conversion volumes while reducing the total number of Dropbox promotions that the average user sees. As a result, we're now able to more purposefully surface in product prompts at optimal moments to encourage upsell and cross-sell of our products. This simplified experience gives our users a more seamless way to engage with Dropbox, while still retaining the flexibility to strategically leverage in-product prompts to really drive adoption of our newer products. Evolving the core is also about delivering more value to our basic users to promote conversion to our paid SKUs. For example, last year, we launched Dropbox Passwords to all our paid users to help them stay organized and better connect their tools. And we recently launched a freemium version of Passwords to our basic users to deliver more value beyond FSS and introduce them to some of the premium capabilities that we offer as part of our core products. As these basic users are exposed to and find value in these premium features, we believe this will help drive activation, retention and migration into paid plans. I'm also excited to share the progress we've made with Transfer, which we introduced as a stand-alone SKU late in the first quarter. It's also really easier for basic users to discover and upgrade to the Transfer plan, which we expect will drive additional uplift in our paid user conversions and retention rates. We see this as the first step in making the Transfer product more broadly available to our user base as we continue to iterate our upsell funnels to drive ARR growth. As a final example of how we're evolving our core products, I'll share an update on the progress we're making with our Family plan. The Family plan feature keeps families' digital lives connected with one organized place to share photos, videos, and important documents. It supports two terabytes of shared storage for up to six users, each with their own personal folders, a centralized family room and access to premium features like Vault, Transfer, Backup, and Passwords. Since launching last fall, we've seen exciting traction with tens of thousands of Family rooms created. And the feedback has been great. Customers are finding unique value in their ability to easily share important family content like photos and videos on an ongoing basis. Collectively, by streamlining the total number of Dropbox promotions our users see, releasing Passwords to our basic users and continuing to invest in solutions like Transfer and Family plan, we're making great progress in evolving the core Dropbox experience. We're also building new routes and files that can share and delivering even more value to our users with a differentiated feature set, while remaining true to our core product philosophy, a simple and easy to use experience that helps users manage both their work and personal lives. We believe this focus will strengthen our relationship with our customers and help us sustain healthy growth in the core business. Let's move to our second priority, which is investing in new products as we cultivate and scale additional capabilities beyond the core Dropbox experience. As one of only a handful of SaaS companies that have ever reached $2 billion in ARR, we believe we have a big opportunity to build on the success of our core business and expand to new and adjacent product areas. We're now tapping into the success as we invest in powerful tools like DocSend and HelloSign to the next-generation of freelancers and SMBs in the new distributed work environment. In March, we announced our acquisition of DocSend, a secure document sharing and analytics product. This acquisition builds upon a key strength of ours in sharing. Today, users share hundreds of millions of documents using Dropbox every year, which leads to viral extension and increased retention. The acquisition of DocSend expands on our sharing capabilities, offering users added security, along with powerful analytics on how viewers are engaging with their content. It's a great fit within our product portfolio. The combination of Dropbox, HelloSign, and DocSend will give our customers a full suite of self-serve products and help them manage critical document workflows end-to-end and ultimately drive these meaningful business results. For example, client services teams and creative professionals who already rely on Dropbox to organize and collaborate on documents, presentations, and projects can use DocSend to deliver proposals and track engagement and use HelloSign to sign contracts. Not only does this acquisition allow greater value for our customers, but the combination of these three products can help drive adoption and upsell across our product portfolio. DocSend is a great addition to the Dropbox family and will allow us to deliver such functionality to really meet our customers' needs. I want to extend a warm welcome to the DocSend team, and I look forward to everything we're going to achieve together. Let's turn to HelloSign, which continues to be one of our fastest growing products. In Q1, the team made great progress toward our goal of becoming a leading new signature solution in the SMB market and in our target international markets. First, we launched our bundle Dropbox Professional and HelloSign Essentials SKU, which we're calling Professional plus ESI. As I mentioned earlier, we're seeing increased engagement from freelancers and SMBs, and this is especially reflected in our Professional SKU, where we've seen more than 30% increase in paid users year over year. We're capitalizing on this momentum by exposing these users to more of our expanded functionality like HelloSign, as our customers look for comprehensive ecosystems that serve all of their business needs. In turn, we drive further awareness of our e-signature capabilities and deliver additional value to our customers. We're also seeing traction in international markets. After launching HelloSign in 21 additional languages last year, we've continued to offer geographic-specific solutions tailored to meet the needs of our international users. In Japan, for example, we now support these electronic stamp seals, which are often used in lieu of signatures in that region. DocSend and HelloSign are great examples of how we're building on the success of our core experience and expanding into adjacent markets to increase the value that our users get from Dropbox. We'll continue to invest here, both through M&A and in our organic innovation pipeline with products like Spaces to drive our next stage of growth. Finally, we'll stay focused on our third priority of operational excellence as we improve the efficiency, reliability and security of our technical infrastructure while increasing our operational discipline, and optimizing our capital structure for high ROI investments. This quarter, we executed on a number of important initiatives, including closing on our convertible debt raise, implementing an additional $1 billion share repurchase authorization, and driving a 13-point improvement in our operating margins. And while we're making great progress against our profitability metrics, we remain focused on investing for the future. We've always been focused on balancing growth and profitability, and we believe our recent alignment against these three priorities sets us up to be more nimble, innovative, and to dedicate more resources toward building these great products. Looking ahead, we'll continue to be disciplined with our capital while still making thoughtful ROI-based investments. We believe these efforts enhance our ability to reinvest in growth initiatives, execute against our investment thesis, and continue generating shareholder value. In summary, I'm proud of our first-quarter results, as we relied on our strengths to address some of the growing demand for more seamless collaboration software. We continue to execute well against our 2021 priorities, delivering more value to our users with both our core products and new capabilities while also strengthening the balance sheet and improving profitability. I'll now turn it over to Tim to walk through our financial results.

Thank you, Drew. As I've done before, I want to begin with a reminder of our financial objectives as this provides the context for how we operate the business and outlines where we are headed. The core tenets of our financial plan are as follows: doubling free cash flow to $1 billion annually by 2024, investing for continued revenue growth, driving annual improvements in operating margins targeting 28% to 30%, allocating capital to organic initiatives and acquisitions that align with our strategic and financial objectives, and returning capital to our shareholders by allocating some significant portion of our annual free cash flow to share repurchases with the goal of reducing our share count. We believe that execution against these objectives will generate long-term value for our shareholders, and we remain committed to making decisions in line with this financial trajectory. Today, I'll talk through our performance for the quarter, our updated guidance for this year and about some of the actions we've taken in the period, which I'll tie back to and demonstrate our progress executing against these objectives. Let's first turn to our quarterly results. Total revenue for the first quarter has increased to 12% year over year to $512 million, beating the high end of our guidance. Foreign exchange rates provided a one-point tailwind to growth. Total ARR for the quarter was $2.112 billion, up 13% from the year-ago period. On a constant currency basis, ARR grew $61 million sequentially and 12% year over year. I'd note that we update the FX rates used to calculate ARR at the start of each year. We have continued to drive growth in ARR through the release of value-enhancing features, the introduction of new SKUs, such as the Family plan, the expansion of HelloSign's capabilities and market awareness, and the acquisition of DocSend. We exited the quarter with 15.83 million paying users, and added approximately 350,000 net new paying users in the first quarter, driven in part by positive momentum in our adoption of the Family plan. Average revenue per paying user was $132.55 in Q1. Before I turn to the P&L, I'd like to highlight some of our go-to-market wins in the period. As a reminder, our go-to-market strategies involve both our self-serve motion as well as our outbound sales motion. On the self-serve side, we've recently made meaningful improvements to the way our users discover and purchase paid SKUs. Now our web pages more clearly surface our selection of paid plans as well as the corresponding features each plan offers. This has helped SMBs adopt our Pro plan, which offers robust functionality for sharing, transfer, and file requests. These improvements have also helped our individual users to discover and migrate to our new family plan. In Q1, we saw a resulting improvement in conversion rates stemming from these changes, helping to drive our revenue performance. On the outbound side, we are excited to announce that an American building materials retailer is now a Dropbox Enterprise customer. The company has over 400 retail locations nationwide and has helped to transform millions of homes with their digital rendering resources. They also chose our Dropbox to enable them in creative workflows that take place across their marketing and design teams while also allowing them to securely share and receive content from external vendors. Before we continue discussing our profit and loss, I would like to mention that unless stated otherwise, all income statement measures referred to are non-GAAP and exclude stock-based compensation, amortization of purchased intangibles, certain acquisition-related expenses, impairments of our real estate assets, and expenses related to our workforce reduction. Our non-GAAP net income also excludes net gains and losses on equity investments and factors in the income tax impact of these adjustments. As previously noted, since we have shifted to a virtual-first model, we have begun downsizing our real estate portfolio by subleasing our current facilities. We have estimated total impairment charges of up to $450 million related to this transition, and in the fourth quarter of last year, we recorded a charge of $398 million, which represents most of the impairment we anticipate incurring. In Q1, we recorded an additional impairment charge of $17 million driven by several factors, including the impairment of DocSend's lease, additional costs stemming from the sale of our San Francisco headquarters and other factors. This also brings us to our cumulative impairment incurred to date to $416 million. We continue to estimate the high end of our total exposure to be $450 million. As a reminder, we continue to expect to generate in excess of $800 million in sublease cash inflows over the course of these leases, which predominantly range in duration between 13 and 15 years. Now let's continue with the P&L. I'd note that all expense categories continue to benefit from lower facilities-related costs driven by employees working from home, a reduction in depreciation as a result of our write-down of the real estate assets stemming from the aforementioned impairment as well as lower overall costs related to our workforce reduction, which took effect in Q1. Gross margin was 80% for the quarter, representing an increase of 2 percentage points on a year-over-year basis. The improvement in gross margin is primarily a result of unit cost efficiency gains with our infrastructure. First-quarter R&D expense was $131 million or 26% of revenue, which decreased compared to 31% of revenue in the first quarter of 2020. Sales and marketing expense was $88 million or 17% of revenue, which decreased compared to 21% of revenue in the first quarter of 2020. In addition, we've been delayed in certain marketing initiatives, which are now expected to occur in the second half of 2021. G&A expense was $43 million or 8% of revenue, which decreased compared to 10% of revenue in the first quarter of 2020. As a result, we earned $149 million in operating profit in the first quarter, which represented an operating margin of 29%, which is a 13-percentage point improvement compared to the first quarter of 2020. Net income for the first quarter was $142 million, which is just more than the 100% improvement over the first quarter of 2020. Diluted EPS was a record $0.35 per share based on 405 million diluted weighted average shares outstanding, up from $0.17 per share for the first quarter of 2020. Moving on to our cash balance and cash flow. We ended the quarter with cash and short-term investments of $1.916 billion. Cash flow from operations was $116 million in the first quarter. Capital expenditures were $7 million during the quarter. This resulted in free cash flow of $109 million, which compares to $25 million in Q1 of 2020. In the first quarter, we also added approximately $24 million to our finance leases for data center equipment. We also executed some important financing initiatives in the quarter that not only improve overall capital structure that will enable us to continue delivering value back to our shareholders. In February, we successfully raised nearly $1.4 billion, including the exercise of the related overallotment options through a zero coupon convertible debt offering, which was comprised of roughly equivalent five- and seven-year notes. We then used $62 million of the net proceeds toward executing bond hedge and warrant transactions, which effectively raised the conversion price of the notes to about $46 per share, representing a 100% conversion premium over our share price on the day of the offering. These collective terms culminated in some of the most favorable pricing seen in comparable offerings in recent years. This transaction strengthens our balance sheet, and allows us to support organic growth initiatives, pursue M&A and return capital to shareholders through share repurchases. Looking ahead, we will also remain disciplined in allocating capital to high ROI opportunities. I'd also like to provide an update on our share repurchase strategy. As we signaled during our November earnings call, we increased the pace of our share repurchases, starting in the fourth quarter of 2020. Accordingly, in our Q1, we exhausted our first $600 million authorization and subsequently announced a new $1 billion share repurchase authorization. Over the course of Q1, we repurchased nearly 19 million shares, spending approximately $430 million. These figures include shares we repurchased in conjunction with our convertible notes offering, which were not related to our existing share repurchase program. As a result, and as of the end of Q1, we have approximately $970 million remaining on the $1 billion share repurchase authorization. We continue to believe that utilizing our capital for share repurchases is efficient, and we will leverage the strength of our balance sheet to deliver returns back to our shareholders. And with that, let's now turn to our guidance for Q2 and for the full year. For the second quarter of 2021, we expect revenue to be in the range of $522 million to $525 million. Currency exchange rates assumed in this guidance account for approximately 2 points of growth at the midpoint of guidance, and are based on a combination of recent and historical average rates. We expect non-GAAP operating margin to be in the range of 27.5% to 28%. Finally, we expect diluted weighted average shares outstanding to be in the range of 397 million to 402 million shares based on our trailing 30-day average share price. For the full year, we are raising our revenue guidance range, which was previously $2.095 billion to $2.115 billion to $2.118 billion to $2.130 billion. Currency exchange rates assumed in this guidance account for approximately 2 points of growth at the midpoint of our guidance, and based on a combination of recent and historical average rates. We continue to expect gross margins to be approximately 80%. We continue to expect non-GAAP operating margins to be in the range of 27% to 28%. We are raising our free cash flow guidance range, which was previously $645 million to $655 million to $670 million to $690 million. This includes $29 million in cash outflows comprised about $16 million for the 2021 installments of deal consideration holdback related to our acquisition of HelloSign, and one-time severance payments of approximately $13 million related to our reduction in force. We continue to expect capital expenditures for 2021 to be in the range of $25 million to $35 million, net of the tenant improvement allowances. We continue to expect additions to our finance lease lines to be approximately 6% of revenue in 2021. Finally, we expect 2021 diluted weighted average shares outstanding to be in the range of 397 million to 402 million shares, down from our previous guidance range of 402 million to 407 million shares. This reduction in our share count reflects our new commitment to an anticipated impact of our share repurchase program. To share some additional context on this guidance. We are raising the midpoint of our full year revenue guidance from 10% to 11% year-over-year growth where approximately half of this increase relates to the strength we are seeing in our organic business, and the remaining half relates to the revenue contribution from our acquisition of DocSend. We are maintaining our operating margin guidance as we absorb DocSend into our P&L as certain marketing initiatives initially planned for Q1 shift to the second half of the year, and as we plan to make strategic investments back into the business to drive long-term revenue growth. We are also raising the free cash flow guidance due to an increase in expected billings from our organic business in DocSend as well as increased confidence in the favorable impact of FX rates. With regard to paying users and ARPU, as I mentioned during our call in February as we drive upsell to Family plan and other SKUs, while concurrently shifting away from pursuing large paying user deals with low ASPs, we could see variability in both paying users and ARPU on a go-forward basis relative to historical trends. We, therefore, continue to focus on ARR growth as being the best indicator of the long-term health of our business. Lastly, while we are rapidly approaching our long-term gross margin and new operating margin targets, we remain focused on investing for sustainable revenue growth. Accordingly, we plan to reinvest some of the savings we are generating from our efficiency initiatives into growth opportunities where we see a compelling ROI. Therefore, we have remained committed to our long-term target model, to our 2024 free cash flow goal of $1 billion and to generating shareholder value. In conclusion, we're off to a solid start to the year. We delivered strong results across both the top and bottom line, strengthened our balance sheet through our capital raise, reduced our share count by accelerating our share repurchase activity, and enhanced our growth potential with the acquisition of DocSend. We continue to execute against our financial objectives, and we remain on course to achieve these long-term targets. With that, I'll now turn it back to Drew for his concluding thoughts.

Thank you, Tim, and thank you all for joining us today. As our Q1 results demonstrate, we remain focused on executing on our 2021 priorities, our long-term financial goals, and our commitment to our shareholders. We believe we're well positioned to meet the opportunity ahead of us as customers continue to look for technology that helps them adapt to their rapidly evolving working environment. On behalf of our management team, I'd like to thank our customers, our partners and the entire Dropbox team. And with that, I'd like to open up the call for Q&A.

Our first question comes from Mark Murphy with JPMorgan. Your line is open.

Yes. Thank you very much and congratulations on a healthy result. So I'm noticing that the rate of deceleration is improving quite a bit. You have three consecutive quarters where revenue growth is basically 12.5% to 13.5%, and you're lifting it on the year. Can you shed any light on which levers you're pulling to influence that? In other words, the conversion retention, new products, etc. And just how sustainable do you think this improvement is in terms of kind of improving that rate of deceleration?

Sure, thanks, Mark. This is Drew, and I'll begin, with Tim adding to the specifics. We see significant opportunity in our core business and are driving growth through a wider range of products. We've discussed some of the improvements we've made in the core business, and we continue to find many ways to enhance conversion, retention, and user experience, such as with Transfer and Passwords and Family plans. Additionally, we're expanding our portfolio; HelloSign has been one of our fastest-growing businesses, and we've recently added DocSend. We will keep building on our innovation pipeline, both through internal development and acquisitions. In summary, we have a variety of strategies in play, and we're excited about the progress we are making.

That's exactly right. And maybe to build on that. So our guidance does have us growing at about 11% at the midpoint, which is a 1% increase from the guidance we shared with you in February, where half of that is from DocSend and the other half is from the expected organic performance. And it's really attributed to all the factors Drew discussed in his prepared remarks, the Family plan, adding Passwords to our basic plan, launching the stand-alone Transfer SKU, HelloSign, and DocSend where we have many initiatives we're working on to drive growth, and we're not overly reliant on the success of any one initiative, and we absolutely will continue to invest to drive sustainable revenue growth, where we are seeing a compelling ROI.

OK. So it sounds like it's a diversified kind of portfolio effect across the products. I wanted to just ask one other quick one, which is the top of the funnel activity. I recall that had spiked at the onset of the pandemic. And then I think logically, we were expecting that, that would start to subside. I'm just wondering, how is the top of funnel behaving into return to the office activity and business cycle recovery?

Sure. There was a surge in demand in the second quarter of last year. Overall, our business has remained stable. Our customers needed Dropbox before the lockdown, during the lockdown, and they will continue to need it afterward. Additionally, HelloSign has experienced significant growth as many customers started using it for the first time. We believe that the shift to distributed work will greatly benefit our business. As companies adopt hybrid models upon reopening, there is considerable potential for improving the tools we use to manage this transition. HelloSign and DocSend are examples of areas where we are expanding our focus.

Our next question comes from Brent Thill with Jefferies.

Hi. This is Luv Sodha on for Brent Thill. Thank you, guys, for taking my question and congrats on a great quarter. I wanted to ask one on DocSend. I think if you could maybe talk a little bit about the vision with the acquisition and maybe give us any insight into the number of its users or the ARR contribution from DocSend for the year?

Sure. I can start at a high level. We believe DocSend is a great fit as it helps customers manage and share their business-critical documents. It provides business leaders with more control, visibility, and powerful engagement analytics. This is a national expansion opportunity for us at Dropbox, where there are also tens of billions of documents in our system. Our customers want to utilize these documents in various ways, and the more we can assist with workflows, the more natural synergies we create. With DocSend, we can help accelerate its growth and reach a broader audience. More generally, the combination of Dropbox, DocSend, and HelloSign allows us to address the entire life cycle of a document and manage these workflows from start to finish. You can start by saving contracts in Dropbox, sharing and iterating on them through DocSend while gathering feedback analytics, and then signing them in HelloSign. This allows us to manage the entire experience, and we see an opportunity for additive growth. Individually, these markets are significant and expanding, and they exhibit many natural alignments. Specifically, DocSend's product strategy and go-to-market approach align well with our self-serve model, which is efficient and scalable. Overall, we believe there is a strong fit, especially as the world shifts towards distributed work and requires improved content management solutions.

And then let me try to give you some color on their financial impact. So we purchased DocSend for roughly $165 million with about $30 million held back for key executives to be paid over a three-year period, similar to how we structured the deal with HelloSign. And some further insight, DocSend contributed about $15 million to ARR in the quarter, where as a reminder, we record the ARR from acquired companies in the period we closed the acquisition. We also added about 35,000 paying users to our totals. And then as related to the P&L, the impact to Q1 was nominal as the deal closed on March 22nd. For the full year, we do expect the revenue contribution to be roughly half a point to our total revenue, and we are absorbing their expenses into our P&L, where this has been factored into our guidance.

Got it. Great. And maybe one quick follow-up on the top of the funnel question that was asked earlier. I guess, in terms of the overall demand, are you seeing like SMB spend come back? I know, obviously, last year you might have seen some impact from the SMB site, so will that sort of be a tailwind going forward?

Yes. We're fortunate to have a lot of stability overall, and the small and medium-sized businesses using Dropbox, which primarily consist of knowledge workers, are less affected, which is positive. Additionally, our professional SKU has been performing strongly, growing by 30% year-over-year. A significant advantage for us is that through our self-serve and viral strategies, we can effectively and profitably attract small business customers and freelancers more than we could if we solely relied on a traditional sales force. So part of the tailwind is just following demand. There's the whole passion economy, creators, rise in freelancers that we're seeing contribute to demand, and we expect will continue.

Our Next question comes from Steven Enders with KeyBanc. Your line is open.

Hi. Great. Thanks for taking my question. I just want to follow-up a little bit there on the DocSend plans. I'm wondering how you're thinking about incorporating DocSend into the rest of the product, if you have plans to incorporate similar to what you're doing with HelloSign, where you build into plans or what's kind of the expectations there going forward?

Sure. We are already beginning to integrate DocSend into our go-to-market strategy, making it more accessible to our customers and sales team. Additionally, similar to HelloSign, we are developing integrations within the product experience and working to connect them more closely. Our main focus is on distributing DocSend to our current audience, and concurrently, we will be enhancing integrations.

OK. That's helpful. And then I know you just raised the convert in the last quarter. But I guess, how you're kind of thinking about the rank order of those plans. I think you laid out a few things from M&A to these buybacks to your organic growth, but then how you kind of think about the rank ordering of importance there as you think about the plans there going forward?

I think we absolutely have the room to do each one of them. So we plan to allocate a significant portion of our annual free cash flow to share repurchases. That's absolutely still the plan. M&A, that will continue to be an important part of our strategy. You can look at DocSend and HelloSign as great examples of the types of deals we're interested in, and we strengthened our balance sheet with the convert where we can continue to pursue those strategies, and we will absolutely still continue to be disciplined with valuations.

OK. Great. Thanks for taking my questions.

Our next question comes from Ben Rose from Battle Road Research. Your line is open.

Yes. Hi. I wanted to ask on a couple of items. One is, either Tim or Drew, could you speak to the contribution of international revenue during the quarter, total international and how that changed from last year?

Sure. That hasn't changed materially. It's about a 50-50 split as far as the international contribution to revenue. And so yes, so that will be disclosed as part of our 10-Q filing tomorrow but that has not changed materially.

OK. And then just a question on product pricing. I was just curious to know how you are thinking about the pricing of various different plans whether you are anticipating or contemplating any price increases for your user base over time?

Nothing specific to share about future plans there. And one thing we are focused on is we have an enormous space for users, which represent a big opportunity. We will certainly continue to drive them to the standard Dropbox plans, but we're also creating a broader menu for new subscription options and entry points basically and optimizing pricing and packaging in general. So Dropbox Transfer is an example of the stand-alone SKU we launched in Q1, and we'll also continue to experiment and double down on what's working.

OK. And if I may just to ask one additional question, I know that part of the changes over the last several months has been you're doubling down on reaching users via the self-serve model and sort of have less emphasis on direct sales. I was just curious to know your thoughts on how that has been contributing to your strong growth that we're seeing in recent quarters?

Yes. Our rationale is that we will continue to serve larger customers. One of our strengths is that Dropbox is adopted organically in companies of all sizes, including large ones, so we will maintain this approach. However, in terms of paid customer acquisition, we want to leverage our strengths, be disciplined with our investments, and streamline our efforts. Our land-and-extend model and self-serve motion are generally scalable and profitable. We have found that our outbound efforts in the mid-market segment tend to be more efficient and profitable compared to some of the higher-end enterprise efforts. So these changes are more than just about focus and really doubling down on our most efficient go-to-market motions. We find that the very large customers or the revenue coming from very large customers is less than 10% of revenue.

OK. Thank you very much.

Thanks.

And I'm currently showing no further questions at this time. I'd like to turn the call back over to Drew Houston for closing remarks.

Great. Well, thank you, everyone, for joining us. We hope you and your families are staying safe and well, and we'll see you next quarter.