DROPBOX, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and our Annual Report on Form 10-K. As discussed in the
section titled "Note About Forward-Looking Statements," the following discussion
and analysis contains forward-looking statements that involve risks and
uncertainties, as well as assumptions that, if they never materialize or prove
incorrect, could cause our results to differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause or
contribute to these differences include, but are not limited to, those
identified below and those discussed in the section titled "Risk Factors" under
Part II, Item 1A in this Quarterly Report on Form 10-Q and in our Annual Report
on Form 10-K. Our fiscal year ends
Overview
Our modern economy runs on knowledge. Today, knowledge lives in the cloud as digital content, and Dropbox is building the world's first smart workspace where businesses and individuals can create, access, and share this content globally. We serve more than 600 million registered users across 180 countries.
Since our founding in 2007, our market opportunity has grown as we've expanded from keeping files in sync to keeping teams in sync. Our smart workspace is a digital environment that brings all of a team's content together with the tools they love, helping users cut through the clutter and surfacing what matters most. In a world where using technology at work can be fragmented and distracting, the smart workspace 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 drives viral growth, which has allowed us to scale rapidly and efficiently. We've built a thriving global business with 14.6 million paying users.
Our Subscription Plans
We generate revenue from individuals, 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 and
Professional plans, or purchase multiple licenses through a Standard, Advanced,
or Enterprise team plan. Each team 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.
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. 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
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.
In the first quarter of fiscal 2019, we acquired HelloSign, an e-signature and
document workflow platform. The acquisition of HelloSign expands our content
collaboration capabilities to include additional business-critical workflows.
HelloSign 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. Depending on the product purchased, teams must
have a minimum of a certain 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 HelloSign
customers at the beginning of their respective terms and recognizes revenue
ratably over the subscription period. We sell HelloSign products primarily
within
Our Customers
Our customer base is highly diversified, and in the period presented, no customer accounted for more than 1% of our revenue. Our customers include individuals, teams, and organizations of all sizes, from freelancers and small businesses to Fortune 100 companies. They work across a wide range of industries, including professional services, technology, media,
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education, industrials, consumer and retail, and financial services. Within companies, our platform is used by all types of teams and functions, including sales, marketing, product, design, engineering, finance, legal, and human resources.
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Table of Contents 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. Together, these enable us to generate increased recurring revenues from our existing user base.
Upgrade and expand existing customers
We offer a range of paid subscription plans, from Plus and Professional for individuals to Standard, Advanced, 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 or Advanced 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.
COVID-19 update
The extent of the impact of the COVID-19 pandemic on our operational and
financial performance will depend on certain developments, including the
duration and spread of the outbreak, impact on our customers and our sales
cycles, impact on our business operations, impact on our customer, employee or
industry events, and effect on our vendors, all of which are uncertain and
cannot be predicted. The extent to which the COVID-19 pandemic may impact our
business, financial condition or results of operations is uncertain, but may
include, without limitation, impacts to our paying user growth as well as
disruptions to our business operations as a result of travel restrictions,
shutdown of workplaces and potential impacts to our vendors. Additionally, our
results of operations and cash flows are subject to fluctuations due to changes
in foreign currency exchange rates relative to
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Table of Contents 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. 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.
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 to our platform. We adjust the exchange rates used to calculate Total ARR on an annual basis at the beginning of each fiscal year.
The below tables set forth our Total ARR using the exchange rates set at the beginning of each year, as well as on a constant currency basis relative to the exchange rates used in 2020.
As of
March 31, 2020 December 31, 2019 March 31, 2019
(In millions)
Total ARR $1,864 $1,820 $1,600
As of
Constant Currency
(In millions)
Total ARR $1,864 $1,811 $1,592 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 Business 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 Business team, we would count the individual as two paying users.
We have experienced growth in the number of paying users across our products, with the majority of paying users for the periods presented coming from our self-serve channels.
We acquired HelloSign in the first quarter of fiscal 2019. HelloSign 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 HelloSign results, we include as paying users either (i) the number of users who have active paid licenses for access to the HelloSign 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.
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The below table sets forth the number of paying users as of
As of
March 31, 2020 December 31, 2019 March 31, 2019
(In millions)
Paying users 14.6 14.3 13.2
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.
In the second quarter of 2019, we repackaged our existing Dropbox Plus plans to
include additional features and, as a result, increased the price for new and
existing users on this plan. For certain existing users, the increase in price
is effective on their next renewal date. As a result of the price increase, and
combined with an increased mix of sales towards our higher-priced subscription
plans, we experienced an increase in our average revenue per paying user for the
three months ended
The below table sets forth our ARPU for the three months ended
Three months ended March 31,
2020 2019
ARPU $ 126.30 $ 121.04
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Non-GAAP Financial Measure
In addition to our results determined in accordance with
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, and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.
Our FCF decreased for the three months ended
We expect our FCF to fluctuate in future periods as we purchase infrastructure equipment to support our user base and invest in our new and existing office spaces, including our new corporate headquarters, to support our plans for growth. These activities, along with certain increased 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:
Three months ended March 31,
2020 2019
(In millions)
Net cash provided by operating activities 53.3 63.2
Capital expenditures (27.8 ) (29.7 )
Free cash flow $ 25.5 $ 33.5
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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.
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, also known as Basic 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 costs such as salaries, bonuses, employer payroll taxes and benefits, travel-related expenses, 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 increase in absolute dollars in future periods.
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. As we continue to utilize our internal infrastructure, we generally expect our gross margin, to remain relatively constant in the near term and to increase modestly in 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, compensation expenses related to key personnel from acquisitions and allocated overhead. 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 plan to continue hiring employees for our engineering, product, and design teams to support our research and development efforts. We expect that research and development costs will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue.
Sales and marketing. Our sales and marketing expenses relate to both self-serve and outbound sales activities, and consist primarily of employee-related 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 plan to continue to invest in sales and marketing to grow our user base and increase our brand awareness, including marketing efforts to continue to drive our self-serve business model. We expect that sales and marketing expenses will increase
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in absolute dollars in future periods and vary from period to period as a percentage of revenue. 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 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 increase in absolute dollars in future periods and vary from period to period as a percentage of revenue.
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, partially offset by interest expense related to our finance lease obligations for infrastructure.
Other income (expense), net Other income (expense), net consists of other non-operating gains or losses, including those related to equity investments, lease arrangements, which include sublease income, foreign currency transaction gains and losses, and realized gains and losses related to our short-term investments.
Benefit from (provision for) income taxes
Provision for income taxes consists primarily of
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Results of Operations
The following tables set forth our results of operations for the periods
presented:
Three months ended March 31,
2020 2019
(In millions)
Revenue $ 455.0 $ 385.6
Cost of revenue(1) 103.1 98.4
Gross profit 351.9 287.2
Operating expenses(1):
Research and development 181.8 150.0
Sales and marketing 104.3 101.5
General and administrative(2) 39.0 57.0
Total operating expenses 325.1 308.5
Income (loss) from operations 26.8 (21.3 )
Interest income, net 2.4 3.7
Other income, net 10.6 4.2
Income (loss) before income taxes 39.8 (13.4 )
Benefit from (provision for) income taxes (0.5 ) 5.7
Net income (loss) $ 39.3 $ (7.7 ) (1) Includes stock-based compensation as follows:
Three months ended March 31,
2020 2019
Cost of revenue $ 3.5 $ 3.0
Research and development 37.2 30.5
Sales and marketing 6.7 7.1
General and administrative(2) (7.6 ) 15.0
Total stock-based compensation $ 39.8 $ 55.6
(2) On
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The following table sets forth our results of operations for each of the periods presented as a percentage of revenue:
Three months ended March 31,
2020 2019
(As a % of revenue)
Revenue 100 % 100 %
Cost of revenue(1) 23 26
Gross profit 77 74
Operating expenses(1):
Research and development 40 39
Sales and marketing 23 26
General and administrative(2) 9 15
Total operating expenses 71 80
Income (loss) from operations 6 (6 )
Interest income, net 1 1
Other income, net 2 1
Income (loss) before income taxes 9 (3 )
Benefit from (provision for) income taxes - 1
Net income (loss) 9 % (2 )%
(1) Includes stock-based compensation as a percentage of revenue as follows:
Three months ended March 31,
2020 2019
(As a % of revenue)
Cost of revenue 1 % 1 %
Research and development 8 8
Sales and marketing 1 2
General and administrative(2) (2 ) 4
Total stock-based compensation 9 % 14 %
(2) On
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Comparison of the three months ended
Three months ended
March 31,
2020 2019 $ Change % Change
(In millions)
Revenue
Revenue increased
Cost of revenue, gross profit, and gross margin
Three months ended
March 31,
2020 2019 $ Change % Change
(In millions)
Cost of revenue $ 103.1 $ 98.4 $ 4.7 5 %
Gross profit 351.9 287.2 64.7 23 %
Gross margin 77 % 74 %
Cost of revenue increased
Research and development
Three months ended
March 31,
2020 2019 $ Change % Change
(In millions)
Research and development $ 181.8 $ 150.0 $ 31.8 21 %
Research and development expenses increased
Sales and marketing
Three months ended
March 31,
2020 2019 $ Change % Change
(In millions)
Sales and marketing $ 104.3 $ 101.5 $ 2.8 3 %
Sales and marketing expenses increased
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General and administrative
Three months ended
March 31,
2020 2019 $ Change % Change
(In millions)
General and administrative $ 39.0 $ 57.0 $ (18.0 ) (32 )%
General and administrative expenses decreased
Interest income (expense), net
Interest income (expense), net decreased
Other income (expense), net
Other income (expense), net increased
Benefit from (provision for) income taxes
Provision for income taxes increased
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Liquidity and Capital Resources
As ofMarch 31, 2020 , we had cash and cash equivalents of$486.4 million and short-term investments of$614.4 million , which were held for working capital purposes. Our cash, cash equivalents, equity securities, 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, equity securities,U.S. agency obligations, supranational securities, and municipal securities. As ofMarch 31, 2020 , we had$131.0 million of our cash and cash equivalents held by our foreign subsidiaries. We do not expect to incur material taxes in the event we repatriate any of these amounts. Since our inception, we have financed our operations primarily through equity issuances, cash generated from our operations, 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. Our principal uses of cash in recent periods have been funding our operations, purchases of short-term investments, the satisfaction of tax withholdings in connection with the settlement of restricted stock units, making principal payments on our finance lease obligations, and capital expenditures. InFebruary 2020 , our Board of Directors approved a stock repurchase program for the repurchase of up to$600 million of the Company's outstanding shares of Class A common stock. Share repurchases will be subject to a review of the circumstances in place at that time and will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. The program does not obligate the Company to repurchase any specific number of shares and has no specified time limit; it may be discontinued at any time. During the three months endedMarch 31, 2020 , we repurchased and subsequently retired 3.7 million shares of our Class A common stock for an aggregate amount of$64.0 million . InApril 2017 , we entered into a$600.0 million credit facility with a syndicate of financial institutions. 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. The revolving credit facility terminates onApril 4, 2022 . InFebruary 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 . We may from time to time request increases in the borrowing capacity under our revolving credit facility of up to$275.0 million , provided no event of default has occurred or is continuing or would result from such increase. Interest on borrowings under the revolving credit facility accrues at a variable rate tied to the prime rate or the LIBOR 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 1.5% per annum on the amount of such letters of credit 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 covenant and a minimum liquidity balance. We were in compliance with all covenants under the revolving credit facility as ofMarch 31, 2020 . As ofMarch 31, 2020 , we had no amounts outstanding under the revolving credit facility and an aggregate of$45.6 million in letters of credit issued under the revolving credit facility. Our total available borrowing capacity under the revolving credit facility was$679.4 million as ofMarch 31, 2020 . 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. 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 existing and new office spaces, such as our new corporate headquarters, the satisfaction of tax withholding obligations for the release of restricted stock units, 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 any potential impacts of the COVID-19 pandemic on our business. We have and may in the future enter into arrangements to acquire or invest in complementary 44
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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 would be materially and adversely affected. Our cash flow activities were as follows for the periods presented:
Three months ended March 31,
2020 2019
(In millions)
Net cash provided by operating activities $ 53.3 $ 63.2 Net cash used in investing activities
(11.7 ) (173.3 )
Net cash used in financing activities (104.3 ) (51.0 )
Effect of exchange rate changes on cash and cash
equivalents (2.2 ) 1.0
Net decrease in cash and cash equivalents $ (64.9 )
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 (loss) adjusted for certain non-cash items, including depreciation and amortization expenses and stock-based compensation, as well as the effect of changes in operating assets and liabilities. For the three months endedMarch 31, 2020 , net cash provided by operating activities was$53.3 million , which mostly consisted of our net income of$39.3 million , adjusted for stock-based compensation expense of$39.8 million and depreciation and amortization expenses of$39.5 million , and net cash outflow of$60.9 million from operating assets and liabilities. The outflow from operating assets and liabilities was primarily due to the payment of our corporate bonus and key employee holdback payments related to the acquisition of HelloSign, offset by an increase in deferred revenue from increased subscription sales, as a majority of our paying users are invoiced in advance. The decrease in net cash provided by operating activities during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , was primarily due to net income, as adjusted for stock-based compensation and depreciation and amortization expenses and an increase in cash outflows from changes in operating assets and liabilities. Investing activities Net cash used in investing activities is primarily impacted by purchases of short-term investments, purchases of property and equipment to make improvements to existing and new office spaces, and for purchasing infrastructure equipment in co-location facilities that we directly lease and operate. For the three months endedMarch 31, 2020 , net cash used in investing activities was$11.7 million , which primarily related to$12.3 million in net investment activity inflows, primarily related to purchases of short-term investments, net of sales and maturities and$3.8 million in equipment rebates. The increase was partially offset by cash paid for capital expenditures of$27.8 million related to our office and datacenter build-outs. The decrease in cash used in investing activities during the three months endedMarch 31, 2020 , compared to the three months endedMarch 31, 2019 , was primarily due to our acquisition of HelloSign offset by higher net investments activity inflows during the three months endedMarch 31, 2019 . Financing activities Net cash used in financing activities is primarily impacted by the repurchases of our common stock, for which we launched a stock repurchase program in February of 2020, repurchases of common stock to satisfy the tax withholding obligation for the release of restricted stock units ("RSUs") and principal payments on finance lease obligations for our infrastructure equipment. For the three months endedMarch 31, 2020 , net cash used in financing activities was$104.3 million , which primarily consisted of$64.0 million for the repurchase of our common stock,$21.7 million in principal payments on finance lease obligations and$18.9 million for the satisfaction of tax withholding obligations for the release of restricted stock units. 45
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The increase in cash used in financing activities during the three months ended
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Contractual Obligations
Our principal commitments consist of obligations under operating leases for office space and datacenter operations, and finance leases for datacenter equipment. See Note 9 "Leases" to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information. There have been no material changes in our contractual obligations and commitments, as disclosed in our Annual Report.
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Off-Balance Sheet Arrangements
As of
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Critical Accounting Policies and Judgments
See Part II, Item 7, "Critical Accounting Policies and Judgments " in our Annual
Report on Form 10-K for the year ended
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Recent Accounting Pronouncements
See Note 1, "Description of the Business and Summary of Significant Accounting Policies" to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements as of the date of this Quarterly Report on Form 10-Q.
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