BOX - Earnings call transcript Q3 2018

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Operator

Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the Box Inc.

Third Quarter FY18 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers' the will question-and-answer be After [Operator Instructions]. the I'll Stephanie call Wakefield, turn Vice to Relations. over now Investor President of

may You conference. your begin

Stephanie Wakefield

year and earnings afternoon welcome Box's quarter Good to conference fiscal call. third XXXX

today, call our Smith, and the Levie, our we On CFO. CEO; Dylan Aaron have

remarks, take Web Relations our and www.box.com/investor. call webcast questions. site is Investor prepared Following also on be our Today's being will available we will for replay at

be audio only. will webcast Our

supplemental our However, are Web for now from download slides available site.

our quarter we obligation cease up-to-date. actual update to statements being judgments Securities today, should and and factors the Exchange Commission, highlights the may handle are the based our to 'XX post on for our regarding full also them, known growth XXXX our November other our our today's to revenue of call, call information will free and and currently forward-looking report partnerships. or the regarding our disclaim the will We operating fiscal maintaining positive future expectations recent These forward-looking products new financial achieve change to us and flow XX-Q and differ at Twitter operating planned benefits of Form made targets our investments of release expectations press expected These leverage, reflect and to materially. products, materially. and long-term our may our cash ability Please any statements risks we be our revise @boxincir. we that year documents actual with timing file on and year achieving -- best and and QX this and profitability, results financial on results On and guidance, or or to from adoption events and on statements, differ they our results, uncertainties as be model cause making refer risk including XX, our most market market factor including strategies, size,

non-GAAP financial addition, substitute in addition measures In to, GAAP be should for during considered, a as today's financial our from non-GAAP These we results. isolation measures. discuss will in or call, not

You disclosures site. me the non-GAAP non-GAAP GAAP measures, can all PowerPoint Unless our be presentation, indicated, earnings hand comparable and in results, With reconciliations financial additional release on including with can it press a otherwise regarding of related Aaron. Investor page the are measures that, found these Web our find to in let references to which Relations basis. over on

Aaron Levie

thanks for and Stephanie, joining everyone call. the Thanks,

strong generation. a customer quarter growth year-over-year total for and of growth was quarter XX% adds third cash billings revenue new The of XX%. We and delivered

We last achieved year. flow like flow Foster cash Farms, year-ago, free of generation and positive the the $X marking FDA, a this Gate. $XXX,XXX million customer the over now expansions $XX third versus leading momentum landing X deals a quarter X closed year-ago, million, versus year-ago. one solid year, We Nuclear the wins total million In over and deal Regulatory four over free XX,XXX a improvement cash Commission a Lions deals also of positive over XX paying customers. with we second maintained versus We have quarter, $XXX,XXX XX $X and organizations

and to BoxWorks, quarter the yearend. execute big In our event, we joined towards alignment the before and have vision progressing significant attendees of record deal remained year's to excitement made of bringing we including cloud product up announcements results expectations. at on deals last content track the overall, conference. Box the our big to our in customer of few event Box. demand A underscored days are our in and AI QX strong customers learn of into the in big their we advances QX, few ever now The slipped annual the a hosted needs. number they’re While our were most We deals not in are technology this in to learning about making quarter. Already QX closure content for with machine how our of we're Thousands management. business

We are our the revenue to that $X well position quarter sets first us confident up years. profitability and billion of in in reach non-GAAP operating unique in our FYXX coming

this make efforts and one, As objectives. content innovating before, number on we’ve about we're and major products that Number management move the with world. that around cloud; enterprise help extend In we two, the to in can on cloud innovation, several our global product our workloads more management. platform focusing talked at that BoxWorks, both go-to-market objectives. cloud two Starting announced capabilities capabilities continued QX, year, in to additional advancing progress leadership with we reach content solid new so enterprises we these of

Box. intelligence Google learning a and Our by video powered manage, Skills the Graph, and bringing to by in image and change Box announcement we leading major the of was fundamentally computer is IBM and We three analysis the At framework to platforms applying on such machine powered Cloud. Cognitive will intelligence learning and AI sentiment as Box ways how content state-of-the-art technology by Microsoft from powered for showcased content AI Box. stored believe BoxWorks, Services, machine enterprise. tools Box unveiling vision, Watson, machine content collaborate two learning indexing and we initial skills, Skills secure intelligence new we're in in video audio

business systems. insights AI take have disrupting impractical automate is in With ECM legacy and be costly to into and further capabilities too processes traditionally approach happening Box. Our Box digitize bring that and to to or will innovation those Skills, enterprises been re-imagine best-in-class the able uncover

industry, experiences frameworks we to collection of can create business ranging allow Skills available cases also skills service applicable challenges. Skills. any next in That's solve year. management. to the Box from Skills Kit we to contract Box learning to new, unique to custom customers enterprise Custom Box initial are for why Skills developers these intelligent business use any developers allow customer to to and their integrators While our legal Skills Kit, leverage call will generally machine system vendors, announced and wanted be will software analysis extend Skills tools so independent a content build

Lastly, how that between with content and Box Box. an organization own Graph, introduced and technology we users activity learning by match the works machine and our analyzing content proprietary weighting relationships in

security. will automation new Box recommended experiences year. out first powered Graph services allow Feed, feed Box rolling in user activity next in bring and that Graph like areas be and us will by The to for experience a personalized is content that intelligence each also curates to workflow

security, real Graph may us help service and threat security Box can a environment and potential our For a unusual that identify in behavior to instance, of team time. in in the respond customers’ represent area allow

Our strategy our Box making powerful is intelligence for customers. about more all

our track just availability build, Relay with anyone As every ensuring than the customers Box announced workloads product lines, in their piece Relay, general the to workflow valuable the we we help new same in IBM. co-developed content own manage, other Box migrate that is Along also more infinitely easily of and our laser focused any to workflows. cloud, we of on are allows customers to system.

simplicity. Relay, to self-service next the more and year, will maintaining sophistication we Over focus our while add to continue on

past $XXX,XXX of quarter, these one is deals Box. key included less from Zones, for least growth drivers new year. continue we’ve than XX% are just These adoption the Governance products which are Platform are differentiators increased excited see at competitive of XX% products. This we of announced our Box about and more of products, and We and products than up KeySafe, last to our

open-up Our for our opportunities legacy new not also systems. enterprise Box cloud support they replace to product capabilities management strategy, content management only content

seeing management over from and retire Box customers We’re to increasing move looking momentum legacy time. their content solutions to

their a enable purchased ultimately this them more organization Box Group past expand and Insurance the instance, leading to use to American of legacy ECM Governance of Box North systems. For their replace across quarter

reports. of to appear is with only in use innovation makes to being platform in both Content has across as name Content a only heels earlier in This Gartner Quadrant these leader Box named of one of this a year Platform’s All October. in the of this on two content Magic Magic and Box a Services led Collaboration all Platform the for cases. Quadrant comes the visionary vendors single their vendor

second Chief Operating strategic new FYXXXX to enable areas and our partners customers. business Financial at Carullo, to focus through world our Analyst engagement, with more reach of Stephanie Day objective the Our BoxWorks. in met our global internationally average comments, is In customer major go-to-market outlined of Officer, every expanding you for driving reach at she value, efforts. working Many and increasing contract her her up

by KeySafe, business we already our will included multiple by leaders, by understand and better products the seeing were We're Transformation. with greater product this able of traction CIOs at of demonstrated the Governance, to attendees Zones. Heads Digital rates value average customers which attach BoxWorks, We types attract contract CISOs, helping value and and purchasing improving of drive like

We in online customers average to make seats, help well. business and and and quickly easily more to buy just be segments new will help able focusing which value contract sales be segment all our our products efficient as grow channel also our much smallest not will sales to process

services we’re Additionally, Consulting, engagement through customer group. driving our professional greater Box

collaboration we’re digital digital to and broadly. Our are through but cases, content only business new in trusted help to transformation Box introducing processes dedicated, incredibly initiatives. for also management Box they be their drive not Transform with consultant looking month, in transformation To that critical customers advanced a content a long-term think to consulting package other their end, management are get ensure embedded for cloud customers offers this successful later us their Box and that to advisor integrate customer use adoption, them

global such We management strong growth. content advent compliance for growing. an GDPR, of constant in also With secured threats as increasingly our even international cloud the stricter to protocols and results security is continue the see need economy,

with With We growing and all new continue Japan GDPR XXXX Box across to to grow in coming see share our demand positioned and innovation in markets. we’re Europe. these market strong continuing well in Zones, and

critical carriers driving in strategic by cloud. it's reach our be deployments of selling the agreement to available. partner ecosystem innovation that are a IBM, whether $XXX,XXX such reps differentiation The markets, sales globally best-in-class AT&T, strategy. compensated recently And role and announced Box world. and critical around a Azure our generally Japan, with is over our and we Microsoft, awareness contributed technology generation channel half a the be efforts in sales Azure. its solutions through more deals able alliances, or than to enterprise component the our go Box with integrating lead using new and now our leverage channel that Under and product deeper Lastly, of will to QX, we co-sell global in Box and partners played go-to-market in for helping by Itochu partners resellers, In Box Microsoft as

Looking position products, on AI market enterprise to in $XX of to industry incredibly cloud excited to the their future about ahead, move they By core content we’re Box we’re content to billion and learning how the and Box best cloud. management. capabilities the with information machine innovate management adding enterprises power the work storage for help in every and and continuing

We FYXX our in profitability will a achieving goal committed drive annual non-GAAP billion of to remaining a these strategies, QX run of $X growth and rate while FYXX. by attaining revenue quarter of

hand over it Now to I'll Dylan.

Dylan Smith

afternoon, Thanks, today. and joining Aaron. for us you everyone, Good thank

In compared $XX solid also non-GAAP noted, free million to that the marks $XX.X improvement operations $XX.X also GAAP we’ve improvement year-ago. of achieved revenue XX% measures flow million ever cash are months. from the our flow top on discussing revenue be commitment to of Web and and unless flow, I QX we States generated presentation XX% free achieved cash of positive will otherwise of above million significant the outside year-over-year. and our of are delivered year-over-year. of cash came available we in In IR on strongest We positive $XX.X operations flow growth this of record financial site. generating of $X.X XX Stephanie on The improvement This noted. We non-GAAP last our drove cash call while guidance million QX cash QX, up of As our an a XX% reconciliations in from than year-on-year million, regions $XXX.X year-over-year. the improvements. high-end over QX, more million United to line achieve is delivering

six deals quarter international roughly our figure one-third markets. of came This from

XX% and billings year-over-year. million, quarter prepays. customer in Third adjusted XX% growth was at this delta $XXX.X driven a representing came quarter by billings couple The growth billings of calculated larger driven

over On versus track We deals continue billings and XX versus in X X a revenue to a year-ago. year-ago, we in over X over QX. deal deals a year-ago line closed and X $X growth million $XXX,XXX $XXX,XXX versus expect deal a growth to metrics, roughly XX

our bookings had in an saw we commercial well While segments. high business, quarter larger commercial lumpiness internationally our very enterprise we this our plus as as XXXK for strong a quarter, in a deals all-time deals achieving record in

to including by resellers. year-over-year products newer We play deals developer included strong Microsoft Platform. of of with over attach drive enhanced these $XXX again Governance, to in Deferred fee the our access continue of these partnerships attributable million, products. one our XX% strong with Zones, $XXX,XXX Even figure a up, In was a X QX, two-thirds very was IBM. from role deals one half of of deals our with and up impacted six partners revenue a least our positively newer KeySafe and just now ramping rates our and Fujitsu roughly at

strength and gross last infrastructure year-ago came a XX.X% quarter. margins. margin per non-GAAP price efficiencies, to in Turning versus seat and With at continued XX.X% in XX.X%

continue to come of $XX.X quarter QX. gross We QX expenses and our in of an successful in improvement expect were in Sales the in marketing XX% driving quarter year. from the to operational revenue, roughly prior representing across business. another the efficiency margin million XX% at was XX%

As in of accounted this for and place customer our our quarter a BoxWorks million annual third $X year our roughly takes spend. QX reminder, conference

cost on and [ph] grow and of year. year track roughly The expenses also the been Excluding remain ongoing our This headcount revenue. this we're accelerated marketing given to from now million have BoxWorks, sales global quarter, which X% of by seeing paid. would our rate are XX% of we opportunity users expense, AE our AE XX% hiring we’ve third quarter We a of marketing which XX.X the base X% a in an have to in is user support million free to sales year-ago. and XX the same decreased improvement registered revenue

of year-ago and Box Next, development revenue, and made products, down development research availability. November significant XX% $XX.X expenses from Box and general to our were Skills we Relay enhancements a or as early the Box million XX% including even Graph, for of preparing

administrative were in to and year. compared or QX general of of million costs $XX.X XX% last revenue XX% Our

we continue benefit to leverage expect We to and drive operational greater as scale. in from excellence G&A

into as margin a our focus efficiency noted previously, to X we’ve negative and double our facilities XX% prepare QX to we these QX. rent currently new our As improvement are London we paying a in operational negative Tokyo drove on offices year-ago. operating percentage solid XX% Still year-over-year move in at non-GAAP on point coming in versus

EPS As $X.XX improvement a at result, in negative $X.XX, non-GAAP an a year-ago. came from negative

One strong is our business retention. makes of so that model elements our key customer powerful the

just roughly at Our QX with annualized full flat rate under was on X% remains churn best-in-class basis. and an

newer seat was XX% and Our driven growth net by rate customers in strong of expansion cross-sells our primarily existing products.

of As XXX%. retention such, rate with the we a ended quarter

in box from Over markets downward year, the created pressure particularly customers, rate. on our international new past percentage a seen coming bookings has of retention some our we’ve higher net which

million flow cash proxies total in We’ve resulted year-ago $X.X $X.X been flow. roughly year-ago. and on now capital balance sheet restricted very with $XXX.X $X.X versus quarter versus year-ago. and from our million operations management was lease $XX.X to collections ended improved million were our cash delivered flow was cash CapEx cash and rates making a from to a We improvements $XX.X which million several restricted. QX, of cash move of In equivalents $X.X and a million strong capital million [ph], has in negative me versus the million We payments working million operations. which $X.X Let

of center QX. revenue We for and to be CapEx leases combined roughly expect X% capital data

In on into in CapEx FYXX. addition, to Tokyo to of spend expect expansion CapEx facilities in X% and expect related expanded London revenue QX. Once to levels we in normalized roughly more in move to we our we return facilities QX,

fiscal million improvement now as Finally, negative free from cash achieving flow QX let's remain we flow a to for guidance. XXXX. significant positive of well our for With in flow as million $X.X committed full-year cash cash the to generated of a that, turn free year-ago. quarter, of $XX.X the third We free

setting quarter of range XXXX, the we’re of million. in to For guidance $XXX revenue fourth fiscal million the $XXX

non-GAAP the in $X.XX to and be of for negative to negative $X.XX our our to range expect We EPS $X.XX on shares. range GAAP EPS negative the of $X.XX negative million be in XXX to approximately

$XXX For the expect $XXX million in full-year to of the million. fiscal revenue XXXX, we of to range be

million to our negative of shares. expect innovation non-GAAP to We be us of $X.XX and in are $X.XX and tightening was EPS the approximately of range $X.XX with summary, the strong range our Graph. for EPS a our on for to negative Box In guidance Box quarter introduction XXX to range GAAP and product in $X.XX of be the negative QX Skills negative

bring We Content encouraged by and we’re learning are Box enthusiasm machine at intelligence content excited and and artificial cloud the BoxWorks. management to partner capabilities to solutions our for customer in FYXX

nicely QX annualized free With delivering like are flow set up These full-year non-GAAP Analyst of to to achieve and rate Operator? open I QX FYXX. $X our us highlighted committed in to billion recent as it first the presentation. in profitability for positive FYXX at of would to questions. Day We for in and up delivering FYXX target cash of that, quarter our run revenue

Operator

[Operator first Markets. with from Instructions] Your is Rob question Capital Owens KeyBanc

Mike Casado

Rob This XQ? where Aaron, cause is for provide Mike of could guys. in stand slipped further the they the deals Casado on some and Hey, you on Owens. perspective

Aaron Levie

into QX. unfortunately industries, complexity was types Yes. some pushed deal so customers the out these of Couple of the deals nature unanticipated were of regulated in just there given key they and and

this so will confidence deal mentioned terms in of are prior quarter I seeing close. as are the expect quarter for them big really be We in metrics that the our that on good statements, they strongest we And ever. any to full and have progress

confident are record part us for the in especially continuing our was we terms So even add-on a in our that see larger leveraging customers very mid the momentum of we in of It quarter products very, commercial larger seeing. we're market deployments we’re by and of also so Box, over to $XXX,XXX segment, the in that business deals and have.

we’re deals out signs. couple were directionally deal the really a complexity positive to overall, QX. key seeing again have push Unfortunately did that to due there So, into

Mike Casado

one had of mix. we in Okay. market? for I larger to And go product this draw takeaways a any Was the that? business up general this shift quarter And longer from Dylan. Dylan, a long-term as I and then sizeable there to deferred saw guess, deals are philosophy you regarding

Dylan Smith

what larger a differently, a for there about in lot so anything and choose past the and first this shift things mentioned, wouldn’t Yes, couple up out did sort the when we some short-term so of adjusted of delta the couple was that we're the in starting nothing but trend talked a the to little of anything there say terms a well, being this different is coming quarter. bit and in short-term persist revenue, we bit driving of a really for flow quarter billings between different to a to that see are short-term things recognized rate that long-term reseller, about shift deferred either it that bit a the so we’ve does as through strategy add of advance, revenue. of long-term typically development quarter, long-term the prepay to and mix that then between have different is the is before and in rate. versus to I customers is Box or that in years we there’s so way a And contributions our our two you doing up shift was wouldn’t which prior fee our those related platform really We billings calculated or there mix of deferreds showing multiple of of and a that between of create and as philosophy, expect as

Mike Casado

Great. the color. Thanks for

Operator

Iwanyc from is question Your next Oppenheimer. with George

George Iwanyc

you my question. taking Thank for

how the internationally? momentum, IBM little So much seeing of there? partners an of you digging well from and into impact were as a the partners Can give your us color on what large bit deal you’re

Aaron Levie

we very from our deals Yes, we seeing significant still partners. partnerships through as and have a -- We overall. over on I mentioned, of positive in are percentage $XXX,XXX momentum the come

so key and in Europe, So, like especially on impact we momentum IBM see and others, we Itochu strong partnerships markets the from some look strong then when very at partnerships do overall. Japan with Japan and

to I then know through that so a we the of ramp in do year the think particular, and be that we IBM a to end period going deals for the As in partnership, be into tends expect big focus. up a see channel year of larger some you this next obviously continues

as Chief Stephanie good Officer a our reach a So, making focus of segment. Carullo, big new that extend enterprise sure on mix our we’ve really we partners Operating larger has go-to-market into

George Iwanyc

been side, Okay. And ramp sense hires with a last sales of the doing the quarters? you over hiring all been on that has newer of give the productivity what you’ve the can couple for us

Aaron Levie

Sure.

really fields you’re to way of that’s seeing. months, XX% we’ve on been it for the ramps the X commercial that's we’ve fully sometimes say I been reps become in little this would talked that heading though. bit with sales months spend takes to the a about and segment. about into and about been the segment, that by seeing pleased the reps a I’ve In on the marketing year, reminder depending XX about shorter that that we’d to productive one as our the segment increase and those the scale as of grow biggest drivers headcount sales of this are So and global force track year, we able with pleased up the we're

capacity we year. for throughout that that next expect to year, been business we’ve of contribute outside I to most to that know sales QX, reps most the this but materially expect in be certain don't So hiring to a and of we of the extent

the the of are strong we’ve years, year and to in across the couple a double as reps been digits reps of that signs overall reps positive a contribution now. in over talked are ramping terms seeing driver in productivity not of gains the that bookings, major we are terms this the new those. about hiring lot of we’ve So last But ramped

George Iwanyc

level got Is encouraging, momentum Okay. a you the where deal but it just visibility is out is large already record pushed closed? confidence what And just that coming rates that can give one win a from? a on a if last Is of out it question. sense us those of is? normal that will deals that The be it visibility work pipeline just record quarter, sense and that that

Aaron Levie

Yes. This again. is Aaron

deal transactions, I to that align start spend, strongest based seasonally that the the reasons products. think, lot capture in of the more is with next on QX, allow right one to seeing see is tends the much for as us us it's so pipeline now. customers involved a a in add-on for we're to our budgets we're to strategic our with do customer all conversations lot and initiatives we which of year the more of especially alignment strategic obvious

of fortunately driven in -- seeing content and compliance by we And is already a more and their have in larger and solve particular, platform problem. in new confidence move going momentum legacy is again to around up-market favor lot our in aren’t that ensure medium-size the what management. we’ve for that we’re in to that is directionally ways content their the visibility the seen realizing enterprises a their completely content, just quarter cloud and November. are including this into the our they more But, of in systems manage secure that content, of by driven that the have So happened this

of a strategic overall a growth strong QX be our very again the just and So driving that’s seasonal to what’s reasons happened for customers. lot for quarter and

George Iwanyc

much. right. very Thank All you

Aaron Levie

you. Thank

Operator

Your with Morgan Melissa Stanley. is next from question Franchi

Melissa Franchi

the may Thank motion? maybe so quarter. talk made, [Technical you this think could I’m for go-to-market wondering has Great. that she some taking difficulty] been of And any just the perhaps I’m those if much you of quarter? about just maybe question. if disruptive changes to changes you wondering have my

Aaron Levie

Yes.

any -- haven't side. on seen we execution So, the in the disruption

business I going is the QX quarter in was think and fully on board period deep of that ramp first mostly that of on and some continue how we a business was of want experience things the to in different -- dynamics compare understanding to quarter Stephanie lot this the the it terms all was evolve first her the that and contrast to on. a works leveraging

talked Day and at the areas on at focused making she going Analyst to we’re As she about Day value average contract and driving Financial Analyst a around that up, especially the more key closer few working be them, sure continue that customer, up-sell with there's can is build stronger our so partners, getting ensuring them, our that to relationships. retain we’re more and globally to and we BoxWorks

we’re what initiatives So, are doing. very believe to all we of additive those

is more get function, much certain certain areas can execute focused make and that to align sure and more across integrate segments aligned the effectively. and to more of continue more more and then our are us enabling Some that in of so we business

terms how going of these next changes. because into standpoint more from or the we’re think all will changes in implementing these of we benefits substantive So as of year expect I standpoint a executing changes that But start we’re and go-to-market sales disruption we see see we positive it don’t right to now.

Melissa Franchi

just federal got I’m relative how And how you I’m was this your FedRAMP end, you year that’s an that just material today? update it. are government if expectations give then maybe and proceeding Okay, to and now on for Box wondering fiscal can it wondering is

Aaron Levie

of part business. it's the a still Yes, so growing

still extremely small of overall. up we driving, of growing terms materiality, a -- its material So it but business to see as in the its not base,

more We again globally. deploying seeing domestically are agencies more both Box and and key

the our That police deal deal seeing agency QX their of collaboration. one and we’re the in very deploying Box FDA globally management so Metropolitan deals more that more we ever. of extensively are the for was and Box that on leading Police the largest secure and content was One across board using agencies key organization. quarter London, was coming announced that European Last

to both and be management. a productivity government that as to think able and compliance U.S an again a cloud going in to testament well and collaboration was security, to improve is local of see we that the think a at offerings that’s globally year to still institution costs lot and going get placed plush into on level at side. content within Box the have. security we huge drive I and levels But we interagency next government growth all as There improve down, departmental government a level So the federal the of within and the both favor are

we to key next to verticals in pretty addition government growth some see within and So services lifesciences spaces. expect like and year financial other the healthy sector other our

Melissa Franchi

you. Thank Right.

Operator

Your from is next Murphy with JPMorgan. Mark question

Mathew Coss

is Matthew for This Murphy. Coss Hi. Mark on

complexity Was could and deals. bigger sizes that mentioned deal to get as reason unique to some something continue the deals deal to this You slipped some bigger? non-anticipated the potentially is it those complexity germane your as deals for or of larger be

Aaron Levie

ramped deals the stakeholders more areas more the go that expect where deployments, as were we services that the unanticipated we all improvements sponsorship quarter kind deals systemic regulated ongoing be the We're implementing as the there to that and Compliant there markets a up of of we it's a to deals as of for any tend of don't have years, we as not the a to ahead more upfront. did the these end and in -- as couple have did these And larger with any this executive aligning unfortunately. so involved at couple but from some something fully and as couple pushes, we enterprises. over -- but larger issue we expect weren't so us seen industries possible, strategic as be on we much markets or very are to some Security work surprise have some larger impact especially is this kind able some into in process etcetera they on of of instance, don't stakeholders it regulated obviously enterprises in is key efficiently it issue of get but we ensure cases get of key Yes, past more is financial to in just Legal like

Mathew Coss

observations Okay. selling you. Azure, stage have far the that been sales Microsoft incentivized that’s Is of reps your sell know surprised but you there that it's so given some this And seen? at how early, just I would anything of affected way Box? the early to you've Thank are of

Aaron Levie

Yes, generally for became mentioned. context, just available the I so as technology

sellers to to so the very or So ability a that field contingency dependency actually with work was when sure our in in Azure. we’re together that to product early very, make our the able were because it's go-to-market Microsoft, with

in seeing get So as some we very especially Microsoft's, well this are early organization or Azure and active Azure pretty effort adoption as conversations field. into in in are weeks to rep What is accounts that trying an new our we where more the adoption is just with environment. penetrate sellers sales of an

Microsoft. are conversations very those that with found collaborative have We

very with just of stages as the of be IBM have seen with but the early trends more very lot is in to relationship, of with our very, and partners. field seeing as many this a helpful confidence optimism you’ve some go Microsoft and working earliest we other that more us just into and we strategic of going together So accounts the

Mathew Coss

think to you. target? forma how towards any you operating pro towards not Dylan, completely that as in of for mean, you how sort And can there getting us do anticipate might obviously, you be guard you 'XX, target? are margin your to Thank scale XX% Sure. I of but fiscal scaling that rails target going about one. it's linear, QX one give last

Dylan Smith

Sure.

the the don't our as today put biggest were at at to expect bit in -- and margins, make linear. leverage ago we look that the flow cash in Box billion So margin model target as Analyst $X target our to you say Day, expect marketing. would and just biggest steady to do and the improvement completely we operating both drive sales we well line point, but spend year-on-year area is to that out expect the just a I we model, that the your if be

natural we to And model from a come scale. a lot just is business that of think going so

and the renewals. very margins an about very different customer expanding new talked from between economics past, just we’ve net we’ve kind associated strong of but not landing contribution very, customer as So and in existing

the in that’s leverage a continuing and an ACV, We little kind overall of like that, naturally. drive than just anything down leverage what see productivity we comes So of the different trends locations maturation terms dramatically efficiency to sales things fulfillment, we with base get of the over like as that But increases kind just driver to bit scale, we've path $X target just to that. that drive model measures continued a continuing and to to which channel for past or improvements, to of doesn't leverage we seen years that lot going that of assume then it about that of of rep couple do in talked that our productivity online a lot business. force already today. It's billion continue be or the doing things should to across our

Operator

is with next James. Brian Raymond question from Your Peterson

Brian Peterson

taking Hi. the Thanks for questions.

just deals of the quarter? this did of the BoxWorks, a the I to [indiscernible] deal which of curious later the on on hit historically I in little of to bit. timeframe, related -- little the So activity was impact timing kind that this it's October in in a change August was the any and quarter did think wanted

Aaron Levie

out its the BoxWorks coming of of that happen the kind in the the and into it does -- lot call quarter, September to start this the the August fall, so out. the -- beginning a at Usually great really It's of beginning so gives at that of of of seasonal a fall of tends period. trend momentum you happen

help and event all able deals on but were as pipeline it's significantly customers to standpoint. us that and specifically a BoxWorks really driver support that overall So were momentum leverage, we of a QX. to the at building a of for was a difference and from to were a product lot that definitely hands us on as generate event, as the a wouldn't that standpoint focus does a from and go-to-market our well not October BoxWorks point that want deck event momentum was year-over-year both is we which obviously We mid closing for in

then real that of -- that of was year. BoxWorks the kind positive obviously and that’s takes So result us into next

able content into again being future really them room a and of still So, customers and updated of significantly benefiting new the of pretty to thousands for customers show from products management. cloud the and get launch lot

happy pushed very of but output, but the yes, we��re just on overall cases I really complexity point, about again have deal So think that, final key couple it that a some names pretty unanticipated kind think about a good transactions and happy X,XXX of I number new total really many industries logos in lot regulated very in overall, still of customers of the cases. and that

happy standpoint. still that So pretty from

Brian Peterson

Maybe, Aaron. Dylan, for Thanks, you. Understood. one

You in commercial referenced pricing quarter. customer record some may the commercial was that directionally of count results? guys. this driven we just be those pretty talk curious you could strong for should or results user been count C I how much how about if Thanks, has think by

Dylan Smith

Sure.

the in product really for So, price seen per seat. overall, core even trends strong we’ve

at then above we've years. Day, up per and we as this of in talking customers kind we’ve or had the at year. per $XXX segments, year year, of that across three and pricing range we’re those user because especially seen for increasing significantly that the historically of penetration about really So to levels type stable per per sales $XXX user per Analyst And user been being highlighted two making

less into more solutions kind So really and we’ve the from that that certainly selling the price continued talked that kind about especially well, the of segment. of as high-end past, the driven that its in in are per has seeing that’s specifically seat that. types of a driver of is trend resonating And QX as the and segments we're we’re commercial use of cases cloud content and management

more talked the to was customer past we platform and compelling cases of us can things that who as commercial a a lot in we’ve Box. the there there's been surprised conversations than the demand front So about out about are from have roll Similarly, applications that one that really midmarket more more build started segments on companies of Governance used of and we've in driving interested kind lot the commercial who value expecting. on and

XXX of also to who commercial I employees full get and the in six driving figure and a seeing we outcomes. are biggest in suite is some more really such the products, just So of be thing segment that’s those our might companies delta who six buying we few where are deals those that's seeing buying these figure we're think that Platform a

Brian Peterson

Dylan. Great. Thanks,

Operator

is from Securities. question next with Your McDowell JMP Greg

Greg McDowell

you Thank Great. very much.

because a can Dylan. close will revenue I your through Just I of look reported commentary to it's number get QX you one help QX XX% the for was and us would when guidance, I closely billings hoping think growth think QX at of growth match guidance question billings the QX how it revenue which us revenue growth the rate, XX%. midpoint around

rate adjusted I the adjusted reported could and higher the in us between QX of number Thanks. billings how as QX? the plan in think commentary part deal than second So through X half look as prepays the and won't and question the you what growth than just all higher of deals big the billings reported perhaps was some contracts? or revenue year, of the was and we structure QX hoping QX help in at points we think And actually in is is the of difference billings to to happened I'm last be growth that why in terms get of second what these number with trying number it some slip the you saw customer if lower about

Dylan Smith

will this behavior with be a a we’re expect incentivizing Sure. any deltas. I sales customers either Yes, big we or from both that but with so driver see time-to-time we of our payment mean, year sort year driving durations not force. this wouldn’t it's and to last customers of prepay,

FYXX where of about to And calculated multiyear delta it year X% take broadly of had comparing coming so, did quite if we there numbers is QX a overall in in as in But a billings between you we our pretty last year different approach. recall, was adjusted more and billings our last prepays. terms

is do the QX a deal some say What expect there's and payment growth I for that in fairly results. about with sort that the year going much we quarter, we but this pretty we roughly setup and pretty of last the the look tend transactions at to good this you So know noise the very fairly large year. fairly of we conservative with Again, metrics large portion as we approach metrics sort year, strong growth take would enterprise sales the pleased we so that large overall stronger in that of the the just the highlighted, feeling are respect were expectations same we to of in set. we delta some normal a year, have quarter the have and last of if overall had in pipeline you have and terms a QX we pipeline durations into

revenue growth. as upside for and larger we fall it's way of we tracking could those in and we some revenue growth growth roughly is move billings line business both about QX then probably think there billings some the see if deals certainly growth forward. the think way, So right as outpace to our But

Greg McDowell

That’s Aaron. I quick do for one will follow-up Maybe great.

the just it churn you was start I happen expansion done of needs anything compared -- was hoping talk little of that a sort net the to get to good grow you and sort declining, internally what customer bit to have to of guys could flat Thanks. now in -- to rate to churn Just see about tighten rate to maybe or that again? QX start and up to instead QX

Aaron Levie

of Box this into one the coming areas focus and Yes side. go-to-market is biggest Stephanie's certainly on

results also clearly products has but to we stickiness that from are or customers be seeing strategically and though like thinking Governance sharing, file embedded what rates that we more add talked that's customers much much there an a to a programmatic customer front. on the effort do transition QX content KeySafe Box cloud more of focus involved we years our into customers management, platform, we on it and the doing we we’ve great this Hopefully, title in think we transition base, -- as past a an add are example and sharing be it from ago on sharing still are being for I tool to and more a in in the and add-on especially really XX,XXX content really year can and on was can customers so how as that process us up secure what about in Platform, about that of only and and file more a about customers customer much about Zones broader have is cases the have more -- tool products, or and we processes. platform this if more how is. some before, into and And it be into into and are more end-user one much ramping or strategic do core as more collaboration, continues that management the the is our of as retention business confident So, plus, will is move see evolution really and Box lot success is I results. a on business we're as there the enterprise that that those our and means thinking come that that we’ve and collaboration broadly management so on are been file migrate people of retention, you’re moving in their more meant how obviously this parts for means we that we communicate scale think market customer more positive in a effectively starting to adopt

just the Box for customers we retention So solutions. correlating rates both that’s And customers our see Analyst that and rates out see see Governance opportunity we add-on Again, we adopting a ahead over really lot that called over Box products, up-sell the Day more those again more X,XXX add-on the that that’s -- hopefully we better that more because at have we a have do with then adopted and time. start of the Governance. all

Greg McDowell

very Thank helpful. much. That’s you

Operator

Instructions] is question with White Drexel. from [Operator next The Brian

Brian White

maybe we products, partnerships, calendar to have new you if verticals, big 'XX? things but lot into you for a point we Obviously, calendar and about different the go look just think new Yes. or that a you’re four small as new as to you’re about give going just of could could three after excited four three lot you us if Aaron, of into us 'XX, you year. items

Aaron Levie

Yes.

obviously this cases added the Box with governance, think able Governance, if look for residency for developers push been strategy of the which where at to couple on then past being helps and you huge Zones build Platform our I So solved on -- data -- Box. product we’ve Box advanced that get international used our push Box. on years information we’ve

their become clear continue want is will we I of additional a and a of change think what be bunch whole at completely see think there do pattern to we from was and manage you how thinking a we’re the best-in-class are critical of that to really other companies trying about record standpoint. areas to content. content customers system secure for And how organize

bulk around So the we obviously next of at be the coming will innovation really around thing to but for intelligence. one BoxWorks, is year that announced this

way intelligence our machine that people the completely of begin we so and power management, content automate the to bring into with change working we do and content. how learning So artificial can are

focus big one area So is intelligence.

in then is to key area. and doing Graph deeper as for allows I lot that a We by be as our powered and around to be we like regulated security, customers to see functionality more front. of best the And financial could that think so best an to as place going innovation lifesciences on Box secure basis, security anomaly finally, also the things into can be example well as the content like it's there's us services think more global both there's that us detection place you move lot that whether industries a a on or cloud, the or be be compliance continue verticals massive

a us lifesciences is for which be were with drug able catalyst -- to deeper more to that’s the companies, lifesciences able services use element management a is companies of organization, track customers at more go for a lifesciences GXP, content to about one management next that on many talked part to But begin on just in to for we’ve in the content the management of already the to the to level requirement collaboration going that support, So regulated who to one a as to receive that way trial the another We cloud. customers allow but move leading less our organizations, content and high business to within regulated strategy. year. of processes or with in their compliance May be strategy compliance rethink example. is in the major enable that’s customers horizon of overall their see GDPR in GXP work we have

intelligence, of really compliant, few year. a our look into I broadening that at pushes going next these if areas and you’re going So where think to kind platform, security of some big you see that’s

Brian White

That’s potential similar that to it of think helpful. or relationship, the it, Microsoft should it with we about go-to-market about aspects And IBM IBM when aspect we a is different think the about there has should but we ramp to in differently? you’ve think similar what obviously seen

Aaron Levie

bit of to different I the the relationship because different. fundamentally still is look going little a think structure it's

IBM Box. we're developing jointly obviously of true So reseller with and they’re a products

Office and of the one products and set like a dynamics. Active integration we’re Azure be set of in one and field to and co-innovation able XXX, relationship. on co-sell lot we Directory On a won't takes relationship that Microsoft, So of Box It do resell aspects going with together. Azure be to etcetera Microsoft

is the little relationship of bit nature a different. very the So,

we distribution to I again, channel to compare the but just different well. about overall excited a both customers ramp Microsoft bit sort which way it how IBM we and will seeing top think think going the have of going joint that in the the enable are Microsoft able of as would innovation have is positive lot think I momentum very But lot to going -- about the Azure, to a to own, characteristics, little of Box with a soon it. and bring to pretty too going it contrast up, the think it some of that it's to that dynamics we’re we we and to be and sellers the are way we’re -- tell excited is field be a want as our similar pretty to on

variety trying of of partners a So, we with will build that overall, we’re a to strong portfolio out work ways. in

Some going and some case oriented be like to the partnerships technology speakers]. side to the on much in more then are we’re just and going IBM be [multiple of pure or Microsoft go-to-market

Brian White

lot, you. Thank Great. Thanks Great. Aaron. a

Operator

Merrill The is Kash next of question from with Lynch. America Rangan Bank

Jane Wong

gross group, And expect Hi. you to This impact Box the question your first have to to new that My Rangan. do of you services to you professional percentage margin? Kash with of revenue regard of that services impact on what as total? have expect behalf that to is announced. What Wong kind do Jane Consultant Transform of is a mix professional the kind

Aaron Levie

Yes.

help to and of just early in all rolling much strategic more it's into parts initiative. what is environments customers really now very still it's about extend right with and our of them business. Box us out allowing So usage the the this It's get closer

strategic more it's about of customers with activities, just and core integrating some much management instead rollout So have. processes the change and of business optimization our

that to customers Box cloud empower to file management to helps and being collaboration that able secure business. back the to earlier content of transition platform truly from using So a question sharing

Box what about is that’s point. So Transform all to your

to down its expect attention given because but early what of that lot so it our gross pay that drive it's program, think that’s know necessarily we to impact, obviously margin of more so overall is don't strategic something of a aimed sort don’t customers, aimed customers impact margins of we look at, the the at we’re terms to. segment in the to gross going Its like. going the In I

Dylan Smith

in running if just of of that think a gross I to or that in that we on build single-digit to the time upward think about do kind be it's will revenue. steady total XX% just expect And mid update, over our overall scale you services the and XX% the part trend low margin business, been to range of clip. the state consulting overall of steady fairly professional bit business at

margin. on note very are projects making think other about large tend that we pretty I advanced the overall is those So types to the unless in large well. tend an And high much wouldn’t just drive there so from the purchases that be consultants and is deployments, to nature that of customers the expect be thing etcetera is impact change way revenue materially, how transformation of those do adoption as really mix and probably digital margin who shift gross of these to with customers

Jane Wong

Thanks. of the mix and in of Thank rates Platform? maybe could maybe give by attach for an trends the adoption you. Box up and that’s you update usage of made in ACV us the And developers Maybe Platform or on Box percentage your customers? some

Aaron Levie

Yes.

had Platform. QX FYXX, to So, year-over-year we really from in QX strong growth 'XX

Box We we’ve everything in are pipeline used portals deals of to for use customer be Platform financial wealth and the to patients. continuing services so various right able powering more and portals in firms from be medical space patient kind to to cases, strategic to now delivering information power more see the again advisor healthcare in documentation

extend to content don't elect breadth used those and seeing by used of core process an platform and our the management away. Box it overall cases for become right even and message for is continuing into more that the we customers, sales how to the enterprise all more are are it So of cloud

year-over-year a revenue the growth on major a the us traction growing strong seeing as from yet customer of for but very we it out break we the for strong and we don’t So really are this see are part basis. differentiator We seeing business, and base.

Jane Wong

you. Thank

Operator

at are time. call further will the no back questions There turn presenters. this I to the over

Stephanie Wakefield

so today. us much joining for you Thank

Operator

call. conference This today's concludes

disconnect. now may You

Box (BOX) 29 Nov 172018 Q3 Earnings call transcript