Dropbox is dropping a huge chunk of its head count.

CEO Drew Houston relayed to employees that the company was shedding 20% of its workforce, equivalent to 528 roles, in a letter published on Wednesday.

“As CEO, I take full responsibility for this decision and the circumstances that led to it, and I’m truly sorry to those impacted by this change,” Houston wrote, adding that the company is in “a transitional period.”

Houston continued, “Maintaining our current structure and investment levels is no longer sustainable. We continue to see softening demand and macro headwinds in our core business. But external factors are only part of the story. We’ve heard from many of you that our organizational structure has become overly complex, with excess layers of management slowing us down.”

Houston also noted that the company isn’t remaining competitive relative to some of its industry peers, and is aiming to become leaner and more efficient overall. The layoffs will cost the company up to $68 million in severance and related outlays, a company SEC filing states.

The larger context surrounding the layoffs is that the company has been struggling to grow in recent quarters. Its latest earnings report, released in August, showed that revenue tallied $634.5 million for the second quarter of 2024, a year-over-year increase of 1.9%, and a slowdown from previous quarters. Dropbox has also been fending off key competitors including Box and Google, which offers Google Drive.

The markets seem to have appreciated the news of the layoffs, however, as share prices were up around 2.5% as of midday Wednesday. But year-to-date, Dropbox stock is down more than 8%.

As for what’s next? Houston didn’t exactly go into detail, only saying that the company would make announcements shortly.

“The steps we’re taking today are necessary to both strengthen our core product and accelerate the growth of our new products,” he wrote. “We’ll share more about our 2025 strategy in the days ahead.”