Good afternoon, ladies and gentlemen. Thank you for joining Dropbox's first quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 sections of Dropbox's website following this call. I will now turn the program over to Karan Kapoor, Head of Investor Relations for Dropbox. Mr. Kapoor, please go ahead.
Good afternoon, and welcome to Dropbox's first quarter 2022 earnings call. Today, Dropbox will discuss the 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 benefits to our business and the impact to our financial results, including estimated impairment charges as a result of our shift to a Virtual First work model, our expectations regarding the future 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, our ability to drive user growth and retention through marketing and by enhancing our products, developing and offering new products or features and through strategic partnerships, our strategy, as well as the ability of our key employees to execute our strategy and our 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 the risk factors included in our Form 10-Q for the quarter ended March 31st, 2022, and the risk factors that will be included in our Form 10-K for the year ended December 31st, 2022. 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 release, 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 at investors.dropbox.com. I would now like to turn the call over to Dropbox's Co-founder and Chief Executive Officer, Drew Houston. Drew?
Thanks, Karan, and good afternoon, everyone. Welcome to our Q1 2022 earnings call. Joining me today is Tim Regan, our chief financial officer. I'll first share our business and product highlights from the quarter, and then Tim will review our Q1 financial results, provide guidance for the second quarter, and update our outlook for the remainder of the year. Before we begin, I'd like to extend a warm welcome to our newest board member, Abhay Parasnis, who was appointed in March. Abe served as Chief Technology Officer at Adobe for seven years, and over the course of his tenure, held other leadership roles, including Chief Product Officer and Chief Strategy Officer. I first met Abe many years ago, and I'm thrilled to have him join our board.
His familiarity with our customers and his experience leading technology, operations, and engineering during times of transformation will be really helpful to us as we work towards our long-term vision of building one organized place for all your cloud content and the workflows around it. As we and the rest of the world navigate through this period of geopolitical and economic uncertainty, our strong performance and execution this quarter reflect the resilience of our business and our team's ability to stay focused on our strategy. We saw solid growth in our teams and professional plans, along with continued strength from DocSend and our Family plan, while driving stronger than expected profitability. Before I walk through some of the product highlights from Q1 in more detail, I want to quickly remind you of our 2022 initiatives that we outlined in February.
First, we're continuing to evolve our core FSS business to improve retention and drive monetization. Second, we're expanding into workflows beyond FSS around documents with HelloSign and DocSend and rich media content to better serve creators and freelancers. Finally, we remain focused on operational excellence as we continue to balance growth and profitability, as Tim will discuss further. We'll start with our efforts around retention. I'm pleased with our progress here as we continue to see our churn rate come down as a result of improvements we've made to the user experience. Last quarter, we further improved the sharing experience by giving users the ability to send shared links with edit permissions. In the past, recipients of shared links could only view content and weren't able to edit or collaborate on it directly.
Now, with edit permissions, recipients can easily collaborate with folders in the same way as a single piece of content. We also drove meaningful improvement in loading performance with previews, which is one of our most trafficked surfaces. After a number of technical improvements, users are seeing these pages load 30% faster compared to the beginning of the year. We believe that performance enhancements like these should drive further retention gains. We also made progress in our basic user monetization efforts around conversion, particularly through our mobile channel. We leveraged targeted prompts to a larger cohort of mobile basic users where we saw an opportunity to drive conversion rates higher, and early results are encouraging. We continue to see opportunity to drive more personalized and effective mobile prompts. We can surface the right plan to individual users at the right time, whether it's the Plus, Pro, or Family plan.
We continue to see expansion with teams as we've made it easier for external collaborators to request to join a Dropbox paid team, which drives incremental free users to these plans. As I touched on last quarter, we're committed to iterating on pricing and packaging as we bring new products and features to market in response to customer demand. This quarter, we launched our newest version of Dropbox Backup with upgraded restoration flow and management settings. Backup allows users to keep their computer hard drive or external hard drive secure with an easy-to-use automated cloud backup solution. It gives our customers extra peace of mind beyond FSS. With just a few clicks, users can easily set up automatic backups and complete full restorations. Over the last year, we saw millions of paid users activate the original backup feature.
This gave us insight into how to enhance it and repackage it as a standalone product for both our basic users and new potential users who don't have an existing FSS account. This differentiated pricing and packaging approach expands our distribution to a wider audience of customers searching exclusively for cloud backup solutions. We plan to leverage our existing go-to-market motion to drive backup as a new product along with strategic partnerships. We also included this enhanced version of backup in our paid FSS plans and continuing to see strong activation rates from existing customers, which we believe will drive retention gains. Moving to our second initiative of expanding document and creative workflows beyond FSS. Over the past few months, we released several updates to strengthen our multi-product portfolio, building on the momentum from HelloSign and DocSend, and developing deeper integrations into the Dropbox platform.
Last month, we introduced HelloSign templates, where Dropbox users can streamline e-signature requests by turning their most frequently used documents into templates. High-volume documents like NDAs or offer letters or purchase orders can now easily be created and edited and tracked through the entire signing life cycle, all from within Dropbox. We also released a highly requested PDF editing feature, which allows users to rearrange and insert, rotate, delete PDF pages natively from within the Dropbox experience. These integrations are great examples of how streamlining the document workflow process can drive user satisfaction and engagement, which ultimately leads to higher retention. We also saw continued adoption of our eSign and Pro bundles, as well as the DocSend bundle with advanced teams, which launched last quarter.
By surfacing the eSign and Pro bundle to basic users in a similar targeted approach, as we do with our existing paid individual plans, we saw a halo effect of greater conversion to Plus and Pro. DocSend, which completed its first full year as part of Dropbox, continues to exceed our expectations. We're also starting to drive revenue synergies through deeper integration of DocSend into the core Dropbox platform. Now, when users click to share their content, they can choose Send and Track, which leverages DocSend's capabilities to track our recipients who spend time reviewing the content. This extension to the core Dropbox experience has already driven self-serve DocSend revenue by users coming from the core Dropbox platform. Last month, we launched DocSend Dashboard Analytics, which gives customers insights into their most engaged contacts and visitor data.
We're pleased with the strong organic growth from DocSend and see more opportunity to drive its adoption to more teams by investing in marketing and partnerships. As we expand document workflows within Dropbox, we'll be strategic in marketing to specific audiences where we believe our more integrated platform will resonate, allowing us to reach a wider set of teams customers. Sales, HR, and project management teams are some examples of customers who rely on document workflows like NDAs, proposals, and other contracts. We're focused on driving more awareness of our capabilities beyond core FSS to these groups, in addition to creative customers, which remain a core demographic for us. In Q1, we continued to iterate on our creative product experiences, Capture, Replay, and Shop. For Capture, we launched several new features like better markup, video trimming, viewer insights, and closed captions.
With Replay, we're seeing high customer satisfaction scores among our beta users so far, and we see more opportunity to invest in capabilities to make this a competitive video collaboration tool. Last month, we launched Shop and public beta. Users can now customize storefronts and URLs, embed HTML codes, and add tipping capabilities, and we're building more tools for sellers this quarter. While these are still early product bets, we're excited to get these differentiated yet simple lightweight tools in the hands of more creators. We're helping our customers do more with their content, and I'm pleased with our progress in building solutions that allow them to seamlessly and efficiently move their work forward in the new remote and hybrid world.
I believe the rise of remote work will be the best thing to happen to knowledge working generations, but it requires a complete rethinking of the office, the work week, and the technology that we use to get our work done. Dropbox is taking the lead here with our Virtual First strategy. In Q1, we reopened our U.S. studios, allowing us to finally experience Virtual First as it was originally intended, where employees can benefit from the flexibility that remote work offers and the in-person collaboration that comes with our studio model. We're seeing positive early feedback from employees. In a recent survey, nearly 70% of our employees reported that Virtual First helped them be more productive by providing more time for focused work.
During the last couple of years of COVID and lockdowns, employees also reported a decline in the ability to build relationships with colleagues, especially those outside of their immediate teams. We all know how critical it is to bring that in-person experience back safely, both to foster creativity and make progress on our mission in service of our customers. We're also navigating this transition to flexible and remote work. As I've shared before, we're on a mission to design a more enlightened way of working, where technology helps you do your best work. I'm confident we're on the right path to helping our customers with many of these universal challenges and building towards our vision. With that, I'll hand it over to Tim to walk through our financial results.
Thank you, Drew. Before turning to our quarterly results, I'd like to start with a reminder of our financial strategy. We continue to focus on balancing growth and profitability in a thoughtful, disciplined way. We remain committed to our long-term objectives, including delivering operating margins of 30%-32% and generating annual free cash flow of $1 billion by 2024. We also remain focused on allocating capital to growth initiatives, both organic as well as through acquisitions, while also returning a significant portion of our free cash flow to shareholders in the form of share repurchases. We believe that execution against these objectives will generate long-term value for our shareholders. Today, I'll talk through our performance for the quarter and our updated guidance for the year that demonstrate that we continue to operate the business in line with these principles.
Let's begin with our first quarter results. Total revenue for the quarter increased 9.9% year-over-year to $562 million, beating our guidance range of $557 million-$560 million. Foreign exchange rates provided an approximate $1 million tailwind to growth in line with our guidance. Total ARR for the quarter grew 8.4% year-over-year for a total of $2.290 billion. On a constant currency basis, ARR grew by $40 million sequentially and 8.9% year-over-year. I'd note that we update the FX rates used to calculate ARR at the start of each year. We continue to drive growth in ARR through strength in our teams, the adoption of our Family plan, and momentum in our document workflow businesses, HelloSign and DocSend.
We exited the first quarter with 17.09 million paying users and added approximately 300,000 net new paying users sequentially, driven in part by our Family plan. Average revenue per paying user was $134.63 in Q1. ARPU decreased by $0.15 sequentially as the mix shift to higher price plans was more than offset by an FX headwind and the strength in Family plan, which, as a reminder, is comprised of six seats and therefore carries a lower ARPU profile. 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 purchase intangibles, certain acquisition-related expenses, impairments of our real estate assets, and expenses related to our reduction in force.
Our non-GAAP net income also includes the income tax effect of the aforementioned adjustments. I'll now provide a brief update on our real estate strategy, where we are taking steps to decost our real estate portfolio as part of our transition to a Virtual First model. We continue to make progress against our goals, executing subleases in San Francisco for a portion of our headquarters, as well as Seattle and Ireland since our last earnings call. We did not incur any impairment charges in the quarter, with our cumulative impairment incurred to date remaining at $430 million. We continue to estimate that our total impairment charges will be up to $450 million. With that, let's continue with the P&L.
First quarter R&D expense was $157 million, or 28% of revenue, which increased compared to 26% of revenue in the first quarter of 2021. The increase in R&D was driven by our continued momentum in hiring to drive future revenue growth, where we are investing in DocSend and HelloSign, developing adjacent products and features to our core file sync-and-share category, and strengthening our retention and conversion capabilities. We also continue to invest in ensuring a seamless experience for our customers as we adapt our desktop client to operating system updates, as well as investing in our own security by bolstering our data protection while improving detection, response, and compliance practices so our users can continue to trust our platform.
First quarter sales and marketing expense was $88 million, or 16% of revenue, which decreased compared to 17% of revenue in the first quarter of 2021. First quarter G&A expense was $42 million, or 7% of revenue, which also decreased compared to 8% of revenue in the first quarter of 2021. In total, we earned an operating profit of $170 million in the first quarter, which represents an operating margin of 30% or a 1 percentage point improvement compared to the first quarter of 2021.
Our Q1 operating margin exceeded guidance by over 2 points and was primarily driven by our stronger-than-expected revenue performance, efficiencies stemming from hiring in lower-cost locations, as well as delayed costs that we now expect to incur later this year. Net income for the quarter was $141 million, roughly flat compared to the first quarter of 2021, as our income tax expense increased significantly through the impact of R&D tax legislation newly effective in 2022, and given that we have now fully utilized our NOLs for non-GAAP tax purposes. Diluted EPS was $0.38 per share based on 373 million diluted weighted average shares outstanding, up from $0.35 per share based on 405 million diluted weighted average shares outstanding for the first quarter of 2021. Moving on to our cash balance and cash flow.
We ended the quarter with cash and short-term investments of approximately $1.5 billion. Cash flow from operations was $141 million in the first quarter. Capital expenditures were $11 million during the quarter. This resulted in free cash flow of $131 million compared to $109 million in Q1 of 2021. In the first quarter, we added $20 million to our finance leases for data center equipment. Let's turn to our share repurchase activity. In Q1, we repurchased 11 million shares, spending approximately $260 million. At the end of Q1, we had approximately $84 million remaining on our previous $1 billion share repurchase authorization.
As a reminder, last quarter, our board approved a new $1.2 billion authorization, which we expect to commence this quarter once we exhaust the previous authorization. I'd now like to share our guidance for the second quarter and provide an update to our full year 2022 guidance. I will also provide some context on the thinking behind this guidance. For the second quarter of 2022, we expect revenue to be in the range of $568 million-$571 million. We are assuming a currency headwind of approximately $3 million in the second quarter. We expect non-GAAP operating margin to be approximately 28.5%. Finally, we expect diluted weighted average shares outstanding to be in the range of 366 million-371 million shares based on our trailing thirty-day average share price.
For the full year 2022, we are maintaining our revenue guidance range of $2.320 billion-$2.330 billion. This range is inclusive of two headwinds. The first is an approximately $14 million currency headwind, and the second is a high single-digit million dollar impact from changes to our service and sanctions in Russia, which I will discuss more in a minute. We continue to expect gross margin to be approximately 81%. We are raising non-GAAP operating margin to be between 29%-29.5%, up from the prior guidance of approximately 29%. We are maintaining free cash flow guidance to be in the range of $760 million-$790 million. This includes $17 million in cash outflows for the 2022 installments of acquisition-related deal consideration holdbacks.
Additionally, our free cash flow guidance is inclusive of an estimated $30 million headwind resulting from the impact of R&D tax legislation newly effective in 2022. We continue to expect capital expenditures for 2022 to be in the range of $25 million-$35 million. We continue to expect additions to our finance lease lines to be approximately 5% of revenue in 2022. Finally, we expect 2022 diluted shares outstanding to be in the range of 366 million-371 million shares, down from our previous guidance range of 368 million-373 million shares. This reduction in our share count reflects our commitment to, and anticipated impact of, our share repurchase program. To share some additional context on this guidance, we are maintaining our full year revenue guidance.
As mentioned, we expect the impact from discontinuing new sales and financial sanctions in Russia to be in the $ high single-digit millions to revenue this year. Despite this, our outperformance in the first quarter and the trends we are seeing within the business give us confidence that we can absorb the impact of Russia while still maintaining our initial revenue guidance. Additionally, and as a reminder, we continue to expect updates to our pricing and packaging approach for a subset of our customer base. These changes will incorporate the value that we've been adding to our plans, in particular, capabilities that we have been developing and will soon release related to security. I look forward to sharing more this quarter on these pricing and packaging changes.
As related to operating margins, while we continue to expect margin headwinds in 2022 from FX as well as incremental T&E, office reopening and event expenses as pandemic restrictions soften. We are raising our 2022 operating margin guidance as we are seeing success in our ability to hire top talent outside of traditional high-cost tech hubs such as San Francisco, New York and Seattle. As related to free cash flow, we are maintaining our free cash flow guidance. While we are expecting a high single-digit $ million impact to revenue from Russia, we expect a larger, more immediate impact to billings given our ratable revenue recognition model. Thus, a larger cash impact will be absorbed this year, offsetting the benefits of our increased operating margins.
Lastly, we are maintaining and remain committed to our long-term targets, which as a reminder, are expected to be achieved by 2024 and include our goals of delivering operating margins of 30%-32% and $1 billion in annual free cash flow. In conclusion, we had a solid start to the year, delivering strong results and continuing to be focused on balancing growth and profitability in a thoughtful, disciplined way. With that, I'll now turn it over to the operator for Q&A.
Certainly. Ladies and gentlemen, if you have a question at this time, please press star then one. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Brent Thill from Jefferies. Your question please.
Thank you again. This is Luv Sodha for Brent Thill. Thank you for taking my questions. Maybe the first one for Drew. Could you talk about maybe the overall demand environment that you're seeing out there in the light of macro concerns, both from the war and higher interest rates here in the United States, and what impact that is having on your customer base?
Sure. So I'd say overall, things have been pretty stable. I mean, I think we've, like most companies, have been impacted by the situation in Russia and Ukraine. As we've shared, it's like a high single-digit million dollar revenue hit. More broadly, we see things are pretty stable. I mean, our churn rates continue to improve, and a lot of opportunity around the business, and we find that Dropbox is kind of a, or it's a fundamental product that people need in kind of all environments. We saw that in the pandemic. People needed Dropbox before the pandemic, during and after, so there was a lot of stability there.
Got it. Maybe one question on the you know, the conversion that you've seen. You cited higher conversion. Could you maybe talk about the initiatives that are upfront there? Could we expect the conversion to paid to improve over the next few quarters? Thank you.
Sure. We continue to do a great job with conversion. You can see that flowing through to net new paying users, where we added 300,000 net new paying users in the quarter. You can see that we beat our Q1 guidance range. Of course, we're maintaining our full year guidance range despite absorbing the impact of Russia. Again, that's being in the high single-digit millions. We see success across many different initiatives that we're working on. Drew talked a bit about retention. We're seeing team expansion success. We're seeing growth in areas such as DocSend and HelloSign. Of course, SKUs such as Pro and Family Plan are also contributing to that growth.
Got it. Thank you.
Thank you. Our next question comes from the line of Joey Marincek from JMP Securities. Your question please.
Thank you so much for the questions. First one, so Drew, just on the core business, I'm just curious to get your thoughts on how penetrated you think that opportunity is. You know, how do you think about the opportunity that lies ahead there and sort of the runway for growth available to you?
Sure. In the core business or the FSS business, I mean, we're still seeing a lot of headroom in the areas that Tim mentioned. We're improving on conversion, we're improving on retention, we're iterating on pricing and packaging in a number of ways. When you look at things like Dropbox Backup, that started out as a feature in paid plans last year, where millions of our subscribers were adopting it, and now it's a separate SKU and a lower price entry point into Dropbox, which is important given the size of our free user base, so giving people stepping stones into paid plans. I think there's continued headroom there and then in the FSS business across the funnel.
As you know, we're investing in a lot of other adjacencies or certainly our workflow products. I think that there's a big opportunity for us around evolving from syncing files to organizing all your cloud content. We watch as our customers, and probably all of us on this call, struggle with keeping track of the 100 tabs you have open in your browser and all your stuff and all these different drives and different cloud tools. In many ways, finding information, organizing information is much harder in the cloud era than it was in the file era. We don't see anybody addressing these problems with scale. When you think about what would solving that look like, we think universal search is an important part of that.
Acquisitions like Command E, or an acquisition last year we made. Command E is a universal search company. They're fully integrated into Dropbox. A number of other ways that you can better organize your cloud content. We think that's a big opportunity that dramatically expands the market beyond the kind of classic constraints of FSS.
That's super helpful. Thank you for the color there. On the M&A front, you know, given the pullback in valuations, how are you thinking about M&A at this point? Maybe any color you can share on the M&A pipeline would be helpful.
Sure, yeah. I mean, as valuations moderate or as things correct in the broader market, obviously no one wants a challenging environment, but on balance, that massively plays to our strengths. M&A becomes a lot more affordable or efficient. We've had some good success there, and then we'll continue to be disciplined, but I think the door opens to make bigger bets in M&A. We're certainly on the lookout.
Awesome. One more, if I may, just for Tim. How do you feel about your progress towards the $1 billion free cash flow target? What work do you feel like you still need to get done to get there? Thank you so much, guys. Congrats on the quarter.
Sure. We are making strong progress in marching towards the billion-dollar free cash flow target. We're obviously maintaining that target, maintaining our guidance for the year of $760-$790. We do have a bit of a tax headwind this year with this new tax legislation. Despite that, we're maintaining and marching toward that billion. There's a few factors at play that we'll continue to navigate. We are continuing to execute against our Virtual First subleasing strategy. We've done a nice job executing subleases for a portion of our San Francisco facility this quarter, as well as Seattle and Ireland. That's certainly a factor. Continuing to hire in lower cost locations, again, another part of our Virtual First strategy.
Those are two factors, and again, we feel very confident in our ability to land that billion-dollar target.
Thank you. Our next question comes from the line of Jason Ader from William Blair. Your question please.
Hey, everyone, this is Billy Fitzsimmons on for Jason Ader. A lot of new features introduced to Dropbox over the past couple years, a lot organically, some inorganically. Drew, you talked about Capture, Replay, and Shop in the quarter. If you look broadly across, you know, these features and the ones introduced over the past couple of years, any that are outperforming internal expectations or maybe ones customers are gravitating more towards over others?
Sure. Well, I think there's a lot. I'm really happy with the state of the portfolio compared to a much broader portfolio with multiple products really scaling compared to a couple of years ago. I think there's a lot of good in there. I mean, things like Capture, Replay and Shop are early, but showing positive signs. You know, as a single example, I'd say DocSend is doing super well. I mean, they continue to outperform the expectations we had at the beginning and continue to expand. I think they're an example of something that's been a great addition to the portfolio.
Got it. If I'm not mistaken, you guys did a major price increase a few years ago, and I know you've made some changes to your SKUs and added a ton of new features, kind of going off the first question. Is it possible that, especially in an inflationary environment like we're in right now, that a broad-based price increase could be in the cards or make sense?
The short answer is yes. I mean, you see a lot of other SaaS companies or just other people saying the same environment and same factors. We've had a lot of success with iterating on pricing and packaging generally in the past. We think of it as kind of a flywheel where we add value to each of our plans, and as we add more value, pricing is a lever to capture more value.
Maybe Billy, this is Tim. I'll quickly add on to that, where specifically this year we are building new capabilities such as security features to address customer demand in this increasingly complicated environment where our 2022 guidance does include some updates to our pricing and packaging approach, and we'll actually have more to share this quarter on that. Whereas, as a reminder, just given our ratable revenue recognition model, the revenue impact will flow to both 2022 and 2023 just based on the billing cycles of our customers.
Perfect. Thank you very much, both of you. Appreciate as always. Congrats on the quarter.
Thank you.
Thank you. As a reminder, if you have a question, please press star then one. Our next question comes from the line of Rishi Jaluria from RBC. Your question, please.
Oh, wonderful. Thanks, guys. Thanks so much for taking my questions. I guess number one, you know, I wanted to follow up on an earlier question talking about the success that you're seeing on the monetization and conversion to paid users. Can you maybe give an illustrative example or two of, you know, some initiatives that you've been able to do to drive that? And maybe how we should be thinking about the sustainability of that going forward. I've got a follow-up for Tim.
Sure. I mean, so at a high level, we look across the funnel from top of the funnel and signups all the way to how we onboard users, and then how they convert to paid plans and virality or in the virality they have through sharing. You know, I'd say the top of the funnel, lots of improvements to just simplifying the onboarding experience and particularly the mobile experience. We found that and the mobile sharing experiences, and we found that's a key viral loop for us. We've seen lots of opportunity to simplify the experience and take friction out of that. That's really helped on top of funnel or driving mobile signups by making that move as effective as possible.
On the conversion front, I think, you know, another example is just how we've been iterating on the packaging and introducing new SKUs and things like Backup. We tested Backup as part of our paid plans last year, and now it's a separate SKU, and that's just an example of us being able to monetize our free user base better by offering multiple ways in or multiple price points or cheaper entry points, in addition to just having more products to offer our customers. I'd say we have a lot more kind of parts to the engine than we used to, and opportunity in all of them. We triage by, like, you know, where's the area of highest opportunity and continuing that. I'd say if I plot the biggest ones, churn.
Like the churn reductions that have come from improving performance, improving experience, that's a huge lever, arguably the most important lever for the business. We've made good progress and expect that to continue.
Yeah. Got it. That's really helpful. And then Tim, I just wanted to maybe a housekeeping question on the FX headwind that you talked about. So you talked about $14 million for the full year. Just to clarify, is that $14 million total in 2022 revenue, or is that $14 million additional FX headwinds on top of the $16 million that you talked about when you reported Q4?
Yeah, good question. It's $14 million for the full year. It's an update relative to the $15 we gave previously, so I wouldn't add the two together. It's an updated view, where it's $14 million for the full year now.
Okay. Just to kind of follow up on that, can you help us understand kind of, you know? I guess I'm struggling to understand how that's the case when, you know, most companies are, you know, software companies are seeing stronger FX headwinds than when they initially guided 90 days ago. Maybe can you just remind us about your top currency exposures and why that might be the case that you're seeing a relative tailwind, you know, of $2 million relative to 90 days ago, whereas most other software companies are talking headwinds? Thank you.
Sure. Yeah. Fair question. Hard for me to really comment on how to compare to others, just given that, our billings can be denominated in varying currencies. Maybe just from a methodology perspective, walking into the start of the year versus walking out of the end of Q1, we did see an improvement in rates from those moments in time. For example, the lead up into January versus the lead up into April, rates improved according to our billing currencies.
Got it.
Okay. That's really helpful. Thank you so much, guys.
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Drew Houston for any further remarks.
Great. Well, all right, everyone. Thank you again for joining us today. We appreciate your continued support and look forward to speaking again next quarter.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.