BOX - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. My name is Christine and I will be your conference operator today. At this time, I would like to welcome everyone to the Box First Quarter Fiscal 2019 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator of you Head conference. begin Investor Lopatto, may Relations, your Alice

Alice Lopatto

afternoon, Box’s conference to and quarter Good welcome earnings first everyone fiscal XXXX call.

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

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

Our webcast will be audio-only.

available website. However, our supplemental on slides for download are now

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

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

to You can related updated GAAP Relations basis. Unless and with references be presentation, Investor revenue find otherwise over standards to which reconciliations our it ASCXXX a in website. retrospective measures, for comparable financial compared let our the disclosures please ASCXXX release recognition measures results of non-GAAP a our Investor press found modified regarding in to non-GAAP on press to including all our hand results financial that, under of reconciliation our transition earnings deck our new method. the disclosures Please supplemental me on are reflect website note, the PowerPoint refer With page Relations and additional these the indicated, our adoption we to financial can financial of on ASCXXX. under Also release Aaron. the

Aaron Levie

year-over-year and was guidance Blackboard generated total and $X.X and We of focus We grew million, with flow DARPA, We to demonstrating operations Thanks, cash thanks Health free positive XX% million. start of profitability. cash on like of the and more Alice expansions our globally. $XX.X joining XXXX. ahead $XXX.X million QX paying flow and strong Revenue solid everyone than fiscal our to ending million, from billings with organizations $XXX.X XX% Coca-Cola up Dignity the call. had landed customers XX,XXX leading and a for wins Company,

ago. in deals $XXX,XXX with more ago, higher and year over resulting focus $X year our X strategic deal As versus XX is versus on X in line deals. In customers, relationships ago million a we X we growth last closed deeper, with big discussed $XXX,XXX over a year a driving and quarter, QX, our over XX deals

companies vision products new for at to our industries is of it’s management the strategy artificial with size intelligence our wide range cloud our you and of resonating. that content products When of Box, growth continue and look to attached X-figure new adopting drive deals. two-thirds clear Importantly, our

enterprises a more management. of cloud and Box. the Starting most largest and them world objectives. To and continued one, supports continue power the workplace differentiation running wildly leadership future that make go-to-market we successful to enhancements product two company’s this digital to our to great and we the management to power can innovating efforts advancing are our for with We digital innovation, work world’s in make on age so our around portfolio global prime product progress made our vision, achieve and enterprises. several the reach our with Number the regulated content in we cloud major content

off first file of the as is to network eliminating secured management the with legacy way content simple for to Looking make seamless our choice. and productivity available other layer Apple’s suite. and iWork, collaboration desktop need XXX Box Google to as with doing generally new your and their the working work became Suite Box now of our Drive all productivity suites, underlying content on-premises including experience, the the stream the offers Office new core shares. Drive ensuring of are that and at beta Box major with employees tools right QX. integration files Box possible, in we in Box kicked the your integrates integration for tools Box an extremely And general our productivity all availability of

also significant of the a use market. cases demand their additional for proposition to value We around our addresses is and processes ECM part becoming from are Workflow our seeing automate customers business large content.

Relay product, business additional streamline develop processes IBM, features co-developed customers workflow excited Box automation to we that repeatable Box. our with are Beyond within for

updates the regulated our to capabilities, to the to and move on Moving several security help advanced enterprise even compliance most we industries cloud. introduced grade

content such and integrations other where to are they administrators, our Dashboard, on they which Box Box. as insights, and working, For key people work visibility what now security released used we into how our new Insights with Admin are collaborating offers collaboration

also data strategies. to as popular and their a continues deal part and add-on product We Box six-figure their and most them line. in Governance to control governance driven metadata released over included over was giving Box our be Governance, enabling enterprises our flexibility retention of of half increased transform

continue to in at with traction also event. and for We Box Europe customers support Box I multizone Zones. Box at XXX GQ gain London, the Tour Last Zones week announced to World

collaborate have organizations seamlessly data to in existing global any Now, zones. across ability and seven Box’s of the store

significant of effect took GDPR, Box expressed Our in customers light enthusiasm capabilities, last at especially for new which World storage Tour multizone the week.

information and landscape, our only will for Products encryption multi-product Zones an the security Governance of ever to cloud every customers the keeping and strategy. demands while or compliance security in and in our compliant With these regulatory help in driving industry, success changes continue grow. secure for nearly Box evolving the KeySafe protect like

support continue and we to Box. our research industries. GDPR quarter, readiness, global our to DARPA, leveraging their most such capabilities, compliance to regulations differentiators will GxP, advantages and with regulated Corporate be customers the helping significant and to compliance addition Overall, collaborate drive for and clear example, with Box closed the Box from demand our be who products as deal workflow agencies. for This for projects In past FedRAMP collaboration for continue on HIPAA, our with new Binding and Rules European security

with South banks and deal in We IBM. of advantage and a largest Governance partnership America of one purchased addition The won seven-figure the in Salesforce, XXX. KeySafe to also our Office integrations services world’s in with with taking bank IBM

when innovation, to the allows partner architecture Lastly, important us and capabilities a IBM, partners is unique, technology nowhere mix-and-match Google range ensure variety of machine different of Box the customers in Box in it’s strategically most Box. with their Microsoft that open AI value of because they Skills. learning and our advanced from like our platform allows is leverage their application neutral Skills more from a wide AI get than to to it and this with and partners content

automatically has analysis coming as been hundreds each video with partner. sentiment signed augmented simultaneously customers have strong different beta. Demand and a example, we for for transcribed indexing For can a the be Skills Box up with and skill from of file

third-parties private their Box develop which business to are specific power beta also processes. to enables customers Box skills in a custom We for and own kits Skills

major and through enable world reach global the business to is our second in every objective go-to-market Our efforts.

value As contract growth QX, had include sales to partner we to our more over we said deeper reflecting XX% relationships multiple on of sales new selling. contract well our we before, are with in made driving focused average the new strategic logos that prioritize customers our adding and average help growing focus solution changes grow compensation our product year-over-year value, we sales growth In is international ecosystem. through To products. on solution

was real our in products start new for strategic another rates for attach sales gain Consulting. as higher Box seeing QX solution strong to motion also are quarter We pipeline our momentum.

for a business and is in will enterprises, aim As Coca-Cola Company and to In helping be Consulting their their in business is to cases Box in Box cloud applications. digital becomes organization. as our across and broader a Transform including of Box Box Box be workplace critical Transform trusted charge. Box projects Consulting, the customers supporting new Coca-Cola QX, into company processes purchased implementations processes our digital transform service, our leading advisor platform advanced also content key the use drive the integrates management

Corporation, strength in Technologies, Japan saw major As one Hitachi personal like brands, of significant for Motors and favorite we Pokemon. and with international, my Mitsubishi growth wins

digital Japan the our solutions with we by month, a year, With extending go-to-market we aligned to Fujitsu’s partnership Mitsubishi expect in employees while IBM to more by leverage Finally, Box Okta Pfizer QX, from IBM partners QX XX,XXX further announced digital as six Work we we on required skills deployed Farmers co-developed as the our leaders our and and last our technology Insurance part component month looking of IBM for In Box closed in custom our are powered broaden enterprises product, is in Watson. was partnerships. on Council, of our reseller Earlier a culture joint Express, Relay, expands this deploying $XXX,XXX strategy. joined rethinking this like to NIKE, workplace. of sold to to critical transformation of than particular, together and technology was work American a with reseller and form we innovation teams ahead, several our Future our plus with Skills earlier reach still Corporation achieve globally. and its With Fujitsu, and deals. And Workplace and Box beyond Facebook of Box early, along IBM focused through channel the are strategy. Motors who greater group internal and better

including we with will was defining product working to enterprises Netflix; SunTrust at and of meeting a year world the future CEO the showcase the share more. Chief be Stanley, and another former and author well NASA and BoxWorks. huge Officer leaders of some latest will CEO August on vision Jensen also Butterfield, most work. inaugural and This future strategy of Our IT Stewart our of Morgan with work be are Slack; Patty Wang, as as innovative success event of speakers, and thrilled our This NVIDIA we Talent McCord, the from for in many developments at incredible Banks

go-to-market to Officer Global a conclude, sales we and Sue of and Interactive, around at excited Chief are Barsamian VP her marketing leadership global Mercury appointed Directors. announce software experience that wealth Sue that Before enterprise of Board at Software and we centers brings roles, to have including From our HPE strategy. go-to-market we Sales

billion that, we for and of scale, we billion grow a is our the enterprises and beyond, $XX transform excited building relationships it economics. help are are add as areas business. in to every putting place Dylan. we we I The Box by on tremendous the continue innovate to age. with right core continuing into members digital and industry that to we our management with As ecosystem building board are products, strong content grow we cloud to expanding will wrap collaboration and are the position over revenue for market content critical about in future up, With partner more in hand To ensure cloud strategic that management $X in will in we our blocks customers, company a the to than

Dylan Smith

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

under a noted. measures in available otherwise comparisons non-GAAP operational stated. of financial of that discussing on In non-GAAP ASCXXX As adopted X% a our from GAAP otherwise XX% up ASCXXX website. this have year outside Also, We method, growth the reconciliations on fiscal to achieved this significant revenue QX, were presentation be XX% call The which the year-over-year results are QX driving $XXX.X million under like-for-like ago which using XXX. year-over-year, the we would noted, IR QX is unless ASC I made comparisons cash QX United drove having improvements will efficiencies. under solid year to are modified also while year are in revenue transition retrospective regions delivering flow unless against all Alice roughly came top States line higher QX been of XX% compared ago. and for

deals XX% quarter This with came market demonstrating in our particular our of global opportunity. penetration international Japan X-figure from increasing strength markets and

would XX%. million range impact First year-over-year to have XX% look billings calculated and year-over-year from XX% representing payment quarter without enhanced growth fee, durations. our been billings XX% If when reported we the developer $XXX.X adjusting growth low the the billings came in compared year-over-year at billings any in at billings growth for

our solution As Aaron initial results. yielding focus positive in been deeper selling mentioned, has on QX

We are in higher with increasingly product attach Box rates new associated pipeline implementations. our seeing robust

given in are While of in year. expect it’s still close early to these the the in current we pipeline, seeing later many deals our what year larger we

As couple driven by points which headwind was XXX a percentage of million, up distribution. in such, to last billings year’s a ‘XX enhanced of billings from mainly to relative year-over-year, billings the developer XX% a FY come as revenue of $XXX X% total the adoption QX fee. we Deferred at of roughly strong includes expect higher

our role ago to a deals year deals, in noted, played over at annualized over with of deals, X X line the than and win two-thirds a our year As over ago, deal value partners six-figure versus of attributable least more were IBM. $XXX,XXX XX deals, year in quarter. Aaron X including these X Of which contract deals continue versus new included XX% a large we ago, $X six-figure and X in to product million $XXX,XXX XX enterprise

X our In Box ago of Transform six-figure business, year transactions with addition to increasingly highlight X closed we professional Consulting strong seeing the enterprise services a adoption are we traction in versus recent our and Box as engagements strategic customers. early

a Non-GAAP at versus quarter. Turning gross XX.X% in came margin XX.X% ago last margins. and year to XX.X%

footprint to seat a cost of XX% making be includes saw which XX% $XX.X of marketing year. upfront have XX.X year ongoing this XX.X on generating million we based areas roughly expect a in are QX in just at per we quarter range. some the were same As margin our year from We are north per are $XXX users, to X% sales planned, in of which successful in and benefit the revenue, price roughly center quarter year another the per X% ASCXXX. outcomes fiscal in the seeing our coming the X% in The improvement of We investments and user we million expense our improvement Sales strength and million to data which ago. in XX% in XX% gross demand operational of continued an quarter paid. base revenue was the QX well driving came registered expenses in all representing user marketing from prior efficiency leverage under business. across the adoption year, to QX, related free in an of support of now is this

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

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

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

margin operational negative coming our solid to drove point year-over-year percentage at X versus ago. QX in improvement non-GAAP a operating a focus year X% XX% Our negative efficiency on

As $X.XX, a $X.XX and end improvement EPS high result, negative of an the ago negative non-GAAP guidance. our year from came at above in a

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

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

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

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

see markets. discussed create coming growth. nicely have These customers, but up on pressure downward retention previously, of we continue particularly well new from Box sales set contribution rate, for net trends we our initial deployments new international as higher as As to larger us future in

on million me Roughly sheet CapEx $X.X payments delivered operations the to cash balance In revenue million and full a and million We million year move was cash our in $X.X ago to total $X.X ago. flow combined build-outs. $X.X now capital lease to QX, of Let still from We cash and year versus year X% $XXX,XXX $XX.X cash ended a million be the ago. with payments facilities strong $XXX this and a We were million very flow. X% ‘XX. quarter versus for $X.X CapEx CapEx versus FY million to related year of of of expect was capital lease equivalents.

we free million the from flow $X ago. a an in first improvement quarter, $X.X year cash million Finally, generated of

payments our With to As a capital turn which we that, reminder, we in guidance cash flow now are providing deduct lease under calculation. let’s our free ASCXXX.

second the are setting fiscal of in $XXX revenue million range XXXX, For $XXX guidance the quarter of to million. we

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

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

negative the our range of $X.XX. negative We to be in non-GAAP $X.XX expect EPS to

of the and stock $X.XX Our $X.XX shares. XXX recent on to our in GAAP EPS is expected increase negative price in to reflects negative the be million range approximately

remind everyone on to taking XXth and our place of conference, want August BoxWorks, I I Before user XXth. conclude, annual

QX expenses in on this years, roughly $X an have million impact with last line will As sales and conference in in year. of prior marketing

non-GAAP to remain our earnings will seasonality and expect experience an we sales. including We solid announcement profitability was a be Please committed BoxWorks note we continued improvements product our and our also demonstrating and that momentum to XX. of international new our in August quarter this start delivering non-GAAP QX on typical and XX our line Tuesday, bottom Day first QX EPS hosting executives will session, year. with the Q&A August be In summary, at Analyst year of strong on

beyond. path to and on Our large for focus nicely long-term market opportunity enterprise us and billion positioned $X our growth

us Before in we will she with take from IR Lopatto Stephanie questions, Box couple more I’d has on helped of everything our the function years. leading Alice spending like Stephanie accomplish for thank Wakefield to over be past and time her with family. moving

Box’s going excited driving since are up IPO would forward. role Alice to announce We on before our be of Head open has taking I that, been IR questions. IR like to that for it who efforts With Box’s will Operator?

Operator

Markets. [Operator first Owens of line Your from Instructions] Capital from the comes question KeyBanc Rob

open. line Your is

Rob Owens

at of business and rounding, just acquisition it curious where realized customer these acquisition Great able it’s the year-over-year customer flat if lager kind taking the I I on where and look want good year-over-year you to so deals. the show how to and basis have and bit clearly with of are thank velocity for questions. pretty Thanks. solutions little velocity a a the to is roughly But on selling, basis with metrics numbers business regard guys overall? trending X,XXX, my focus roughly is I that on but with was

Aaron Levie

Aaron. is this Yes,

of really strong from obviously are smaller business standpoint. standpoint, part consider for the pretty core business that see although revenue provides this rates customers still think from be a our still enterprise a model of we businesses is the have rates effect we We a our those a a What of retention we I of be be to retention a strategic little able smoothing velocity but small drive as serving than larger it efficiency bit very to trying businesses. up do consider segment, are to sizes all to part lower to Box. the still

our but commercial the but segment focused our of see as on segment or possible have the and which of larger growing are we channels will channels, contract on the sales powerful selling logo among ensuring the small values the will sales, that continue basis. on these our of in more of enterprise not the are efficient segments, online larger self-service and cost going considerably rep that’s spending effect volume necessarily businesses certainly in time to field increasing So, whether and a you just experiences to as as are and that year-over-year continued deals, lower

but run-rate So, is we add-on pretty still focus expect those on of sheets additional value products contract in, a coming customers. the and to good more bigger selling new selling via logos

the now our bigger it’s happy So volume are current sure all doing are we all I think are seeing really and amongst of we bigger we about about deals making and that segments.

Rob Owens

then and the flattens around when Great. rates of move some to renewal talk on can what’s regard deals, out that with the way you pressure And comments based the understanding maybe of with you effectively some see in and international to churn and anniversaries about other the starts model? Thanks. Dylan’s or

Dylan Smith

deals. Sorry, clarify you on renewal when the so international to rates say

Rob Owens

sorry am are seeing degradation modestly increased I bit your you since No, little of than net a increasing rates. renewal and in churn overall the

direction? talk about anniversary things when and So move other start Thanks. the those to maybe

Dylan Smith

Sure.

the as highlighted So we really business. saw uptick in that’s healthy throughout year where international pretty we last

is creates that contracts then coming this trend for – larger of and up renewal new pressure appointments coming year lot from be higher I of And are that’s bookings trailing One so really and is of those rate our which kind the and of XX-month mentioning. net what see continue retention is and customers note to metric. overall you to a would a going thing the customers, new of we a so course that downward throughout initial percentage

into stabilize have are pretty seeing period. and metric we in good it current the So we that do visibility

retention that, rates are XXX% good on range we So what medium-term pretty feel should the that today. we in XXX% stabilize business in that the based seeing to over net the

Rob Owens

Thank you.

Operator

from comes Melissa from Morgan line the question Stanley. next of Your Franchi

Your line open. is

Melissa Franchi

QX. focus on a cross-selling are gave the you Aaron, some questions. metrics my taking that for few far so and you increased traction talked thanks in seeing you highlight about Great,

you wondering the could helping cross-selling Just thus this down on better that drill you that some you if far drive maybe implemented initiatives have of opportunity? that’s year

Aaron Levie

Yes.

So are to customer orientation the much solution taking sales the sales the efforts, held being pretty now right the able aligned and to obviously where the not governance collaborating sharing from storage ultimately content, so with workflow residency and obviously management everything our data secured full more around of cross-selling their just is focus our with content but core the to is international information with Relay. we so the to, lifecycle, solution

So, is strategic this this single push that’s that we is that overall a the as and focus year biggest obviously the year. – have company

we efforts changes better our the have incentivize of Some multi-product that some we are selling. compensation driving had sales that

a our as going integration have We see and customer success to strategy. efforts sales we drive this done to of are degree multi-product more even continue greater and our our we that much of marketing, between

either least are at We complete conversation into renewal. upfront driving go solutions an a right have so at more and our that path or customer able via to bundling oftentimes of being up-sell

our have handful the integrated the we volume go-to-market in of plus and XXXK and bundling it’s we are deal been. big think execution and closing product and ever than year-over-year add-on large deals have ensuring into we that really converting driving and that’s I initiatives segments more that of sales of So, or so a XXXK growth are that compensation, we are

Operator

Your question Canaccord. Richard comes from next line from the of Davis

open. line Your is

Richard Davis

much. very thanks Hey,

feel the having technology with in one know roadmap stuff the feel kind or or done I system through are a on organic? area, the data for have the bit of get to you you you just data is the like interesting almost us way make but Thanks. talk to in little that’s get like of kind content because binding that, or of of do that things kind the bots a right Can is walk but you of the you always like to kind another. you it guys. things opportunity you that, that’s management I content you one So challenges about, big where some like and have

Aaron Levie

Yes.

of from Box information their to core is on in for So, are critical being and and possible standardize as much strategy able an to as more record our obviously content we more bring customers actually and enterprise content. seeing of system as our

first our their have whether is of customers obviously information to the have move functionality that make have metadata core to platform move Box or And all of and features migrate core able secondarily, roadmap. priority sure either or out to features that their security then want the data you that’s to the and or product the So, that’s help workflow Box. the or to cause we customers into services

that we the the equivalent, doing So some actually Box available network couple have cloud. connection in became can Drive way which store for acts enterprise of file that examples QX of share the generally have a been how a where and the this but their of customers as every is data recent in instance innovations, just client is on desktop in

and move ability Box. So, to storage go then network their file and that data shares, retire into it’s infrastructure

Consulting are overall. platform which we in services have helps And is the a initiative ways number have also other Box Shuttle, data. scale then of We moving into customers that with large customers division, Box of which our actually migration a data from

seeing into are a growth We significant the in pretty coming that’s system.

we the So of processes, machine we into to gets Box that their really AI, solid even are traction moving customers more of of seeing really, and power considerable more obviously about the think learning more and of information automate very that so business helping customers were manual their able from in begin with nature. extract kinds information, insights more things previously then and being that when to

inside a or metadata fields inside extract of text an a or of from images, video able classifying image So to tagging detecting being document.

functionality intelligence and content and in secure Box, that’s we and to So, that once and have. Box now broader our once focus manage it where insights the deliver top and on to more learning the of it, more AI information is we efforts to want we be obviously able and the machine all is with have Skills

Richard Davis

so you Thank Perfect. much.

Operator

Mark JPMorgan. the from comes line question of next Murphy from Your

Your line is open.

Mark Murphy

Yes, thank you.

how initiatives that see and curious available? where could opportunity contribute years more here your to has AI or you other materialized become broadly of and guess kind So Box going maybe do you is be that applicable on timeframe are over be X% subtle do whether of or Skills offerings a maybe longer those product with theme in contribution X% I than that? am or when going product you think the that to continuing revenue the think to next revenue couple I

Aaron Levie

Yes.

Skills So, Box we power think of is horizontal. very that the

industry. able in to be help and So it will every us customers help really

most that Some applicable well, which for we skills services, videos, audio are on working life etcetera. of critical work as are with ones for documents is obviously those initial images, the financial but sciences, are for with files, that insurance

So this at be be was from a think accretive it it customers a to as finalizing pricing and see to relates ultimate still that to beta wanted say the against to will we the that we standpoint. applicable. data. broadly with go revenue we can market I high-volume pricing are model work where From our we a but pricing very, would ensuring on focused customers to able uplift, really revenue, out very standpoint, their private are it’s use

business a So reason of their on we is are Box. and of into their ensuring bring more run will focused on that more much content Box more Skills customers processes

like additional like stickiness, And around capabilities. our so command to we think it’s a more higher price much services Governance, us Workflow and through Box allows other differentiation

example, have an customers, strategic have on Skills the to where in beginning driver, that to use it’s capabilities And what driving using revenue enhancing business ability for their up a because and differentiation already we the be as significant play obviously seven-figure and can functionality going they out deliver metadata we number Skills the will our seen processes which we know with six platform, but cases rates. that Box aren’t future. the yet of deals already, pretty to just all do our other discrete are we significant customers, be a in modeling retention So revenue and of on end of and layer redesign to as this Box

revenue or manual be what to revenue process. their but of with add-on taking causing Skills to for And that processes is or or about Governance So seat it’s in really how to other revenue up is as really really that causing automate or the to re-imagine catalyst customers the beginning to show and then. the again, customer form are revenue think platform going they reengineering business content product features, reengineer working used

Mark Murphy

Okay.

So, very Aaron, the business of for sort that fair? AI have uplift. as an a category immediate opposed for more Is indirect material as revenue of impacts longer to Box differentiation term would around an

Aaron Levie

we of sort you reason you not information of we and is is sort very it would to number Yes, processes based core directly, calling the akin to how your re-imagine the – using out move gets so wouldn’t which Box uplift and stage, much be why at to it’s cloud it going or is on of but security is mass it to mobile going is again, this to what up We to immediate line our to and ultimately future, don’t a how you as Box monetized platform. but consider we are in end kind think be on your be AI business discrete obviously revenue the moving the item. AI are

Mark Murphy

sense. Okay. and makes Well that said

change loaded one we billings you the from for we I than So, be in understand the duration benefit would for modeling but the remainder assuming are be some saw I year by there are that year about benefit Dylan, year, assuming you on more billings into net you this and will what billings am through you, out payment a durations? I that duration of curious maybe QX what from of last mentioned how and is some think quick much durations payment year QX, just when think just did

Dylan Smith

No.

would what with durations deals. expect with securing our or pretty our saw which multiyear for payment to we be year So, full we consistent force pushing either year, sales we not were prepaid the last customers

durations quantify drivers adjusted calculated rates kind a multiyear big renewals. see to prepaid growth we that of range consistent. pretty the low around and Actually, saw that, single-digit large did multiyear be rate be different delta billings prepay would both one QX to highlighted the overall payment expect that in of and So to and couple and of in that for we the with

several came kind when did ago coming they deals had years prepay were then that again who we those for decided of the customers pipe up seen down and for and So, so years then renewal. to multiple

impact was of the not there. that durations So that have kind customers new on payment

Mark Murphy

you. Thank it. Got

Operator

of from next line comes Your the question Oppenheimer. Ittai Kidron from

Your line is open.

Ittai Kidron

the about Not dollar you the stabilizing core number? beat Dylan, that or have revenue think correct going have $X.XX your good the of now outside or here, expansion, of introduced a if dead correctly, of drive X, there of to new still between we here revenue product products talked trying is into feels can a am dead I about I contribution to been horse XXX% way that by any still to again not Thanks. X wrong. XXX% to them but net a new remember beat of platform how me are It pricing broadly them, X, that horse maybe massive here in or the it am dig all I growth and retention if adopted a

So much trying guys seat new going is how to am still within for to understand forward of of expansion raising rate attach be products customers? growth the you I going versus

Dylan Smith

Sure.

the expect we products greater for more about we expect expect our say we with products newer would highlighted high higher comparable even see still percentage or sales by net what and products, be are expansion. biggest do said of newer – at the greater newer our fast that the towards as we is of why kind rate as actually for newer call, current coming a few be we the mature I in would forward majority So, future and that being products a total we that’s that versus this retention those if quarter it of in seat both the mentioned over products stage, from introduced foreseeable there coming as of from in seeing well period as overall to We growth one and sales you said we those of a newer bookings but seeing watermark driven but weighted time years the that seat our and stabilized. the contribution we drivers QX of will our to new we primarily of as from would have bookings seats we products, are market on to

Ittai Kidron

and a year looking Okay. are addition net last this basis year, declining year net last net being versus customers am paying numbers And that strongly actually. case at this quite I the customer additions year-over-year on versus last your year the

you the understand many it’s I point your than are that penetration – we you a and do change within customers of the dollar is got to get this is on me incremental where rather can as going as or here? accounts, help So trying permanent maybe wide, you as about right investment, refocusing how redirecting get think say about strategy but go efforts this deeper right from that going probably we deeper at deep, new here think long-term now

Dylan Smith

in have logos industries as most as in say relatively a We and see international would well pretty still penetration we certain there. I new with markets. opportunity still that low significant

get in Australia, that lot overall note billion core seeing have public would we from necessarily when still growth of new markets speak comment bookings And growth, of a serve. medium-term new But health view, customers. that areas to in customer the lot kind the the of cases that expect would a now in and Germany, investments. metrics kind just financial on to come those expect then get to the would but of been Canada, think net those of at opportunity is the existing still of to pretty $X just places we the customer about we or making services, So I some the we XX% like between run-rate opportunity new is are of overall that significant, to rate representative sector of other aren’t there user we

the churn largely but our by low high but sales see low that’s of So sorry, will value a – customers. excuse me, kind of mentioned high also online volume customer for some volume volume, time-to-time from driven growth as Aaron for

we but are impact terms in So to growth newer as mentioned very our overall be new and seats well. selling strong those as we the not to but are huge, products existing customer price seeing seat net per base just customers, might of not we

net retention can give and pretty stabilization new material, And headwinds the natural get it how we forward. going more the good so products of the granular about are that’s to we kind especially and that despite mentioned pretty color trends overall as in how become we but that’s reasons evolving contributing retention feel for rate, net of are more terms will do the we the more about that rate that seeing in strong and

Ittai Kidron

sticky you talking the scenario fact question of your you on a customers prices more by would simply is, context am customers it, to see a good years lot and it of very yourself you and about leader in Aaron one regards got a fading Okay. competitors management Microsoft X have you standpoint, as X we And of portfolio if is the then a base have there X do approach actually slowly someone also for to that with might content I away? of guess an don’t established and kind here to more or have and Google lastly by modern my market. are you take clearly ago again I a a mean, and large got I or now into very capabilities into I picture investors you just think which clearly of bigger enterprise broad needs have no? opportunity, that your that that had loyal raising base have of start be a concerns

Aaron Levie

agree our position obviously I Yes. in we the mean, you on with strategically certainly and market.

our as when look we customers as the to – through I many focus one of talk still the as certainly as and to our much drive add-ons bringing think we possible. the around on strategy, is look platform as think we as traction And we at within into I still team seats the our executive that possible trying sell are as ability our think table much when number I as to platform have customers share well possible. volume these market and and as the at many data as ensuring possible that

on So, add-on terms of growing but just not price of up in necessarily value drive although per massive those product the contract impact seat, the have size, receipts. both price focus of obviously

to possible is definitely are there steady I up broadly might deployed ensuring on to right that to continue as per you that focus Box within see going the execution and is certainly, but seat, although still now, room go customers. for price on as the overall So, think be

will are net we possible So which have as price effect those more on of per and of more as basis increase and buying customers an the apples-to-apples the products, many in seat. that have seats add-on then

as doing So you but still I kind we going of market what talked think are as share possible as effect, well. for about in much

Ittai Kidron

Good luck. good. Very

Aaron Levie

Thank you.

Operator

next Your Peterson from comes from question Brian line James. Raymond of

open. Your line is

Brian Peterson

taking for the questions. thanks Hi,

and good this So seeing I quarter timing, does so your that billings wanted numbers understand to to are seasonality on and deals what deal deals is for of into to what’s of more ACV that how the and fourth large the some you there the look pretty pipeline comments or pretty hit the for on large deal some these So are that? is or being quarter? positive? that obviously commentary pushed new should normal think slipping due we the larger wanted about Is the driving I the

Dylan Smith

Yes.

year mentioned. looking use cases to of nature of we the more that types the talked solution So add-on we that’s we early selling up, that showing the quarter you the as the building is not for the that later motions the outcomes much and pipeline in just that definitely saw in in about in deal representative sales the are success seeing in products But the drive. we traction of are and also we larger in are

and are of at In as we more the as timing terms are whatever in kind we of having that out the when reason, for pushed getting pushing we look wouldn’t close. it cycles run of the but deal been the the conversations those are pipeline And we earlier necessarily analysis had expect and now to just their and year as that describe timing, deals that the in we the the seeing of and year, which outcomes is and just we in volumes color of what terms past of expecting commentary points the more later overall ‘XX in deals especially see why on a couple the billings couple stronger of to falling those larger QX year-on-year around gave fall FY basis, percentage versus the of in larger to a comparison see years. in

the whole in hasn’t as it’s really our we work, starting are dynamics. because and solution changed as a but sales FY confidence ‘XX of the mentioned to within about So sales motion more really the seeing those distribution year,

Brian Peterson

you one revenue maybe ‘XX Got Thanks, and just And deferred for able XXX under to Dylan. a comparability figure clarification, fiscal for revenue give are it. us first quarter sake? just

Dylan Smith

press So and the that is in I is XXX year-on-year highlight release XXX. think under we do what both the growth

Brian Peterson

guys. Thanks, Okay.

Dylan Smith

you. Thank

Operator

Rishi the question [indiscernible] Davidson. next line from of Your from D.A. comes

open. is Your line

Rishi Jaluria

Aaron, – think questions. Hi, I top guys. my Thanks Jaluria. let’s I has kicked guess of a lot first, been wanted is to to people. of attention paying for mind Rishi again, everyone start This in, for GDPR on taking

what generation, opportunity of generation seen then and follow-up Box? Just have in like kind about you lead result a curious And have that of I any maybe interest talk feeds can you terms for of GDPR looks Dylan. pipeline as inbound a for

Aaron Levie

Yes.

for of been with have couple we quarters conversations So having certainly the really now. our last GDPResque customers

that. of solution, in last which of We not certainly went effect, have residency So, customers the and the on continues to compliance. strength to when we GDPR data announced traction because stay which week, commit London GDPR GDPR awareness ability customers’ sales the required we seen to and be is kind to obviously compliant, coincidentally is into multi-zones for increase of good front were but our

or legacy causing So, pretty things the good all to seeing industry-specific as these need act you their just region-specific as into just when reevaluate going And general the We from are IT their have standpoint. momentum tailwinds customers think global to for requirements, to cause compliance cybersecurity to of set regulatory as it’s in tailwinds for customers zoom and we to privacy architecture. out conversation modernize existing of GDPR well broad architectures.

to content really nicely cloud in this so management and more, about And the build the cloud leader we content, answer us for around the up Box management, inevitably need and architecture their the securing earlier where ensuring customers content then to Box cloud customers the the really content the to that’s specifically. being and think to sets compliance lead question going to a management modern IT more moving becoming managing,

compliance Governance data invest we continue our to with of capabilities we significantly. are aggressively around functionality are and for and cybersecurity pretty that. help excited all privacy customers to And our enhanced in Box customers, by areas other So which really going protection features

it a macro So helping at level. is

Rishi Jaluria

and talked some gross deals helpful. the And about of seeing Dylan margins the scales we Box great, in expect prepared Consulting of to Okay, with, bit then relatively remarks that on in the are about or large this should perspective? with up you Consulting as neutral terms little Box impact should you a as have be success any it from

Dylan Smith

Yes.

So, would we percentage what impact. on business, have our of ultimately do Skills could expected some it depending have business the Consulting

there that expect impact XX%, the typically range to the to of the a the expect gross pushing our time fairly Consulting XX% step that and expect would a wouldn’t business use so percentage see those increase. headwind are that revenue, drive overall are efficiencies dramatic to doing the a we So as we would as certainly function cases but but a margins subscription lot terms same in as a nature the see offset XX% of Consulting so complexity be and of of increase deployments that be of is muted. across to changes we we and our at margins increase strategic shifts and mix over that time, to should particularly revenue We increase, the things overall don’t nature versus of margin, does in

Rishi Jaluria

perfect. Okay, Thanks guys.

Dylan Smith

Thank you.

Operator

Your comes from the from of Monness, line Brian Crespi, next Hardt. White question

open. is line Your

Brian White

us also the on Box you seeing happening could platform? geography Great. update if you called Japan, a just wondering a dynamics platform what’s bit Box through in could in if are you as you. strong talk little it you Aaron, go more about Thank what there? And out maybe

Aaron Levie

and combination large just with seeing Sure. a sort on and traction we I the of incredible of geographic causing Box. more that Yes, effects significant think Motors, on really great ground, great to early in more of move network a in standardizing enterprises strong the that Hitachi, announced channel team quarter and the launched are had specific also more Japan, we of partners is to Box the That’s of and Mitsubishi move cloud quarter so very deployment last the employees. in their peers we to Box, doing XX,XXX more we Fujitsu over

the that are again But team really our a large and just alignment transformation we the performance on Australia our lot the some same are in doubled similar Canada. a again digital and seeing with in are of our kind about look lot having in we and Japanese conversations that it’s Tier So the we that’s when IT X this of the market efforts markets business that technology we in indicative Germany of seeing trends kind of have businesses driving. those of in are having transformation UK of of we in early focus

Tier are X similar early we to that types are the our new IT of we emerging when necessarily as momentum lot now momentum expect of longer, take don’t we look of the markets partners have obviously will efforts we because there at we are make kind sure seeing putting signs a level right are seeing are seen really and markets, of of little those in just, but and and needing We great we so in Japan, channel just growth a fewer we same areas. together overall. So

we year having. are platform this our for we of talked we every what platforms coming conversation that becoming a core sales As part have about seen what and is into

Box are to it’s third-party that So add-on embedded we or or applications platform move to in client-facing traction, have as traction, reasons experience reason integrating very, custom discrete content to whether monetize selling. directly applications we technology and grow. to happening very they not similar but sector whether monetized customer coming services into and having traction our both platform move board Box, a healthcare to core their see and a and customers on experiences becoming that are Box for why we we their are product to the that considerable in industries customers again paid as why or or an building are legally information range this are insurance everything discreetly they continuing using us to product. is it general less also going seeing they are their platform We of But see in more are Skills, from do financial

Brian White

Okay, great. Thank you.

Operator

no call time. further at are Lopatto, the you. questions Ms. turn this There Alice back to I over

Alice Lopatto

and Thank next look you we forward for us to speaking everyone you joining today with quarter.

Operator

conference This concludes call. today’s

You disconnect. may now

Box (BOX) 30 May 182019 Q1 Earnings call transcript