2/24/2018 S-1 Table of Contents (1) Includes stock­based compensation as follows: Year ended December 31, 2015 2016 2017 (In millions) Cost of revenue $ 2.6 $ 8.2 $ 12.2 Research and development 36.1 72.7 93.1 Sales and marketing 19.8 44.6 33.7 General and administrative 7.6 22.1 25.6 Total stock­based compensation $ 66.1 $ 147.6 $ 164.6 Year ended December 31, 2015 2016 2017 (As a % of revenue) Revenue 100% 100% 100% Cost of revenue 67 46 33 Gross profit 33 54 67 Operating expenses: Research and development 33 34 34 Sales and marketing 32 30 28 General and administrative 18 13 14 Total operating expenses 83 77 77 Loss from operations (51) (23) (10) Interest expense, net (3) (2) (1) Other income (expense), net (1) 1 1 Loss before income taxes (54) (24) (10) Provision for income taxes — (1) — Net loss (54)% (25)% (10)% Comparison of the year ended December 31, 2016 and 2017 Revenue Year Ended December 31, 2016 2017 $ Change % Change (In millions) Revenue $844.8 $1,106.8 $ 262.0 31% Revenue increased $262.0 million or 31% during 2017, as compared to 2016. This increase was primarily due to a 25% increase in the number of paying users between periods. The average revenue per paying user also increased slightly between periods primarily due to an increased mix of sales towards our higher priced subscription plans, including our new Dropbox Business Advanced plan. Cost of revenue, gross profit, and gross margin Year Ended December 31, 2016 2017 $ Change % Change (In millions) Cost of revenue $390.6 $368.9 $ (21.7) (6)% Gross profit 454.2 737.9 283.7 62% Gross margin 54% 67% 71 https://www.sec.gov/Archives/edgar/data/1467623/000119312518055809/d451946ds1.htm 79/235