BOX - Earnings call transcript Q3 2019

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Operator

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

Third Quarter Fiscal 2019 Earnings 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 you. Instructions] Thank begin Relations, Investor Lopatto, your you Alice may conference.

Alice Lopatto

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

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

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

will be audio-only. webcast Our

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

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

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

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

Aaron Levie

quarter of our the ahead City in and paying QX was Canada, like XX,XXX Boston, negative another for non-GAAP Alice call. of everyone organizations and and leading Bank more had the expansions Thanks, and thanks globally. We including with the guidance. joining solid XX% with total QX, million, of both customers $XXX.X wins of than EPS $X.XX, ended We National Health. Institute was Revenue up National

in saw deals all building strategic strategy deeper QX, XX sales our continued included gain we million traction dramatically Platform and Box and deal Zones, greater XX our add-on five we year-ago; products a on We than year-ago. solution increased As least than phenomenal compared this versus large to more product $XXX,XXX of versus two-thirds $X $XXX,XXX XX% customers. categories. a including deals deals at these as we previously or $XXX,XXX discussed, versus closed with Governance, XX deals one More this these than growth deals to KeySafe one over of like greater relationships year-ago; year three focus roughly than In a XX% more a than year-ago.

opportunities is choosing is growth partner and add-on as AI, we our like powerful processes business, new and strategy intelligent the heart at only into more products to connecting embedded of a a is more we to more stronger to compliance meeting automated. strong solution-selling deeply need becoming for With Box strategic value power than our Cloud and working. position large their their rates a strategy digital business the Content work, security deal are Enterprises our hub and that create attach around prove are Content platform transformation. Our workflow central best-of-breed while geographies. more and customers. multiple the how ever industries critical make machine content and technologies learning, our to content, solution-selling technology it in Enterprises before Management and applications for deliver as demands

major we’ve focused As previously, objectives. about two talked we're on

of reach attended with progress Box. go-to-market is and power partners platform. updates content make quarter these we age, efforts with by innovating customer announced cloud Starting on in hosted management annual we global clients and we innovation, we in of work to successful solid that our enterprises how make the second digital to and In cloud companies advancing to which and several our QX, BoxWorks, run our first in third world objectives. continue them more the and can so around The where thousands both the management product conference was content

interface, stream next new of every hub will Salesforce, see from happening activity collaborate it the ever give Users to activity their across make This able a the Office in use such new that applications. colleagues than announced other their to available easier they and holistic we an directly a Box current all First. starting Box Box. and will how as built when is relevant apps across the XXX, context content all Content on content within people to view applications viewing file more best-of-breed day, be will be connected Slack, in DocuSign, year. quickly

Next, all we seamlessly Slides With the Google Box for G within Docs, users for and Suite, Sheets Box. announced Box beta can of manage Suite our G and integration. from create

and be reimagine delivered systems processes. help backend wide only a like from on customers intelligence employees this, digital our of use the From business it's our Now role capabilities conversations digitize customers in and of given These have for of our we announcements Google variety Also legacy to manual but built the prime can can from which Box's with of platform the best-of-breed applications governance applications an processes by need of their will added Box. enable and the maintaining to collaboration clear wealth flexibility end-user tools security, we of in workflow that our for BoxWorks, they with to flexibility admin believe lack compliance. across an their reinforce flexibility ecosystem and systems. controls, struggled work single at be source choice their more the open automation, business they a of customers People platforms. a new workplace showcased content truth enterprises and powering which how and benefit give ECM need largest have critical future, and

centric, are and new focusing content Our workflow solve on task will [ph] that cases core these use broad those capabilities collaborative. a recurring, native automation set of and

to Our create workflow make actions quickly automation teams it around triggers will and for recurring new their work. Box collaborative for and departments capabilities easy

For tasks teams to assets. marketing example, tasks to review routing can trigger automate can by sales approvals and ongoing approve teams sales teams their operations and contract digital

announced build unlock Box developers, system and use also enterprise Skills recognition technology machine advanced like and video, December will from which Google by image Kit will a like powered AI capabilities be We on IBM, cases range enables Microsoft. available computer with customers, wide leaders XX. learning Box custom Box generally kits leveraging of to powerful AI that audio, integrators and Skills and third-party integrations

excited next kit We’re see our Skills what starting Box and to developers with create customers month.

primary for chose set learning management of policies files, for behavior detect and internal restrict we proprietary cloud from a protect they advanced suspicious advanced external an is customers a will our and content collaboration will a set Shield, able on differentiator to alert proactively and capabilities also content security example, users user and to Security sensitive threats. deviates normal. be behavior sharing machine continues Box what on will technology why customers and Finally, when BoxWorks, previewed be and able from help critical to customers rules security external teams apply be that At our platform. Box that reason built their

we available not While are strong and already seeing from year, Shield generally incredibly will customers. interest be next until demand

at throughout Magic year. Quadrant October. the and earlier the announced the Platform innovation to led Collaboration leader their this This BoxWorks Magic of year visionary Box Quadrant on being a named in Services comes name heels as in Content in of the Content All Platform’s Gartner this

in and increasingly that management fragmented to customers and key point the of cloud Importantly, over and in critical only competitors. cases understanding were this unified a with both that choosing use content evaluated of are their Gartner business, including are Enterprises offering Box that is addresses Microsoft a single these is Quadrants among solutions Magic platform. our requirements quarter, offerings the vendor the comprehensive Box XX

to full the and Box asset external network be to their important Box and QX the will portals file its one selected the organization KeySafe, world's largest with suite third replace example, across firm customers. better management with entire their to serve and and Governance, client advisory including Online legacy Multi-Zones, collaboration firm Box over most of custom partners parties For enable and financial Platform customers. offering, of SharePoint The partners secure in their leveraging Box shares develop

adding ACV, processes and In solution that this path reach value to their FYXX, second global Turning ACV, we sales, we the contract compensation retention. growth, sales new lead on to strategy improved product how be closely transformation. enablement, on our we’re and operational drive sales rigor execution, with objective, our changes to clear selling growing enable major more increase improved better want growth in trusted logos go-to-market big deliver business and We’ve every add-on help to sales in This align customers our driving greater user international through positioned and it's average implemented and To year customers, our relationships selling a ecosystem. a to deeper through and this focuses through in our to digital plan incentives paid strategy. change deal training QX, changed deal to and and initiative advisor a with to grow ourselves or partner efforts. world our in

executed or we agreements our go while saw more Box early this in still Additionally, on enterprise choosing program, also we with license customers quarter. and to ELA wall-to-wall

For their layer use well. application who as broaden its Box example, the Platform with the a ELA, of wall-to-wall development to ELA firm content also its firm is across include Platform the top contract Financial XX U.S Core as a already business. expanded Box will Box Services custom This for

We content also bolster to company, leveraging protect closed who medical sensitive is Zones most an ELA Box the world's largest their device security and with data. Governance and

Internationally, XX. In As the Box enterprises Rocket wins in major Box's transformation also accelerate Japan. offering strength closed initiatives. Transform saw custom leading like the part continued Bank we we its of Shiseido purchased Company, agreement, consulting and Mizuho with customer digital QX, to

Canada execution also new regions. in help uniform us We and Germany those welcome drive leadership in to more

of to integrator, reseller, or technology go-to-market six our the our figure of above strategy. More partner. Finally, our than partners XX% involve deals critical systems remains ecosystem and

integral value key their Looking ahead, our enterprises our become driving play will a from system the Platform. digital strategies, in integrator more as increased to Box broader partners deployments with role

to XXX quickly Boeing to I Motor we the of and brings that Hammonds Bank, our Kim COO Directors. and IT Deutsche Ford at strategy CIO Board global positions thrilled experience Before we month of at companies, conclude, note having last Company. driving want a Kim wealth Company were to welcome held

wrap future will content insights be our the With the on foundation of from over large about I up, As will valuable. our billion to to thus their path progress in we’re far and results excited making cloud To and future. companies it we extremely Dylan. on to build we in revenue. incredible this the modernize Kim's we're help management FYXX $X incredibly In QX, we will that, for saw hand continue work operations,

Dylan Smith

year-ago, of first as quarter Good for and we Aaron. in QX, came and from delivered increasing growth, to top our outside expect in us revenue XX% afternoon joining milestone QX's Thanks, a while the of continuing opportunity. strong progress toward a revenue compared our of our QX. achieve QX, year-over-year. today. on In everyone drove $XXX.X United to thank regions line States company also against execution we XX% our you non-GAAP of major solid million market We penetration up XX% global demonstrating profitability

a large at As deals. XX% versus $XXX,XXX of three Aaron across traction least versus noted six-figure $X deals over deal more a a than one our included XX% a over of versus XX year-ago More XX we year-ago. categories, product in partners played year-ago, six-figure and million including all our deals drove one over strong the role a add-on XX deals than five $XXX,XXX and deals

six our came of XX% quarter, This deals markets. international figure from

$XXX.X multiyear long-term a a year-over-year at revenue was a year-over-year, primarily in driven Short-term of $XXX.X representing Third growth XX% period. up Total customer year-ago. XX% million, revenue XX% year-over-year. deferred as deferred billings growth up XX% quarter calculated in prepays year-over-year some billings enhanced and billings the developer deferred adjusted was year-ago result to due revenue was million, down and fee XX% higher came

Our year large This well increase volumes attach been results. as solution we've an add-on yielding deal with associated selling positive this robust product year as higher increasingly on deeper rates implementations. has initial focus Box been in seeing

deals year, these the As year later to we’ve been QX. most in larger predominantly the we've of throughout been mentioning expecting in close

continue to the expect range. billings As in be to calculated such, we QX growth mid-XX%

to a see XX.X% margins. price last year-ago improvement a came attach and product year-over-year, Turning of an result We seat per pleased to versus sequentially quarter. in gross were in Non-GAAP mainly higher as XX.X% margin add-on and XX.X% at rates.

As an investments facility based before, QX. seeing making this some in center collocation on demand year we into we expanded we moving we’re mentioned upfront our are data will the and footprint in be

to quarter successful expect of an go-to-market related XX% $XX.X revenue, XX% roughly we be operational gross This also in primarily QX driving from improvement year. XX%. quarter expenses The Sales and improved would is driven users, X% million expenses ASCXXX. have the in came to benefit by QX were result, that roughly another marketing XX.X revenue. and million, million a revenue BoxWorks and at of our marketing XX% representing in adoption to note efficiency. the of As to We expense now free It's base, cost which a sales excluding been under in of support ongoing X% margin includes marketing registered was in prior the and user are paid. which important XX.X of our was of efficiencies sales QX. have

of included and Next, our enhancements research workflow year-ago continued $XX.X Box security, Platform as offerings. well revenue the or the intelligence This million expenses line in with of made development to as we were capabilities. the as advanced product development significant expansion our of automation XX% and

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

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

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

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

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

churn rate X.X% basis. last with stable annualized best-in-class and Our an was quarter at remains on

of sells net and driven basis in rate growth primarily annualized was Our XX%, our by cross seat strong existing products. expansion customers an on add-on

rate contribution coming As deployments prior of metrics a quarter. the XXX% a from of initial been flat trending down such, and ended result quarter new larger a of had net These the we sales with as higher customers. retention with customer

our improving rate net few been has our over rate seeing stabilizing past now churn are quarters. in-quarter the and retention We

million originally million QX, balance quarter of that ended on flow. move flow outcome delivered the now but This versus outflows cash a due free million CapEx year-ago. $X.X we was this a cash which to dynamic $X.X to cash versus with million payments of We CapEx calculation QX, Roughly cash million for flow build factor creates we million out. was expected cash our QX we operations $XXX.X Let the into sheet tailwinds than roughly $XX.X million paid in equivalents. and lower facilities flow. million Capital in lease of year-ago. total In a compared $X.X We for were our and me cash $X QX. year-ago. $X.X related from a timing This to $X.X now was anticipated to cash

quarter. We expect payments the in roughly CapEx fourth X% and combined capital lease revenue to of be

third of had in compared cash flow Finally, the to we $X.X free positive negative million million $X.X year-ago. a quarter

in consistent demonstrated a QX. We to expect flow by HX particularly marked the we improvements cash that with our in fairly HX year-over-year improvement dollar be strong free

remain positive full-year to that, the for flow cash With fiscal also ASCXXX. XXXX. free our let's We of guidance, we which under to are committed generating turn providing now

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

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

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

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

remind be the to million of XXX expected we look negative is to shares. on Also, expect year-over-year to in adoption we our EPS see benefit FYXX up to $X.XX a $X.XX GAAP EPS as negative everyone range FYXX, into approximately non-GAAP that $X.XX wanted the to to we ASCXXX. of Our due

each quarter year-to-date. been we’ve noting As

benefit not see will that year-over-year in same We FYXX.

QX summary, $X was of We billion in our scale to out the path non-GAAP to strategy, Day. on as recent our expect we progress laid the in towards confidence our more than $X on in in our deliver another driving FYXX, that model ability at execute further billion In solid we breakeven, roughly EPS FYXX. Analyst target revenue most quarter

We attach thrilled is by our demonstrated large strategy add-on strong that deal solution are and traction, selling gaining rates. growth

growing content go-to-market up and cloud meet we’re innovation for strategy management this demand. for product seeing open to excited are a With would We questions. need it that, I like and are aligned that our to Operator?

Operator

Instructions] Your [Operator comes question with first Fargo. Winslow Wells from Philip

is Your line open.

Philip Winslow

for of mentioned again that seen, Yes, had a you Question attach quarter-to-quarter. QX. on a question, changes go-to-market made in highlighted Aaron, Aaron, great for and the Dylan. you then jump the the my you first highest point and follow-up XX taking a the some obviously we’ve obviously you of for thanks -- earlier that and year which rate the to is XX% add-ons, congrats

So, up of maybe starts sort those Dylan. walk-through you, of for of sort has Dylan in guided that And that because QX. change billings. think the of seeing confidence then, in us of QX, for –sort all have maybe gives What sort pipeline what us, to been behind out? ramp is made, follow-up sort changes them one of how play you are to, particularly, as been mid-XXs then just And that place, the convert obviously, about and disruption you you

Aaron Levie

the to Box content think business to look deal is in that wanted think more in roll quarter that really – we in XX% our that change we while a more show you’re motion, about around how evolve large FYXX starting much And of major power QX, as segment, the of making evidence talking took just starting million the things that going customers, our growth our in customers. the management products, should a that well. XXX-K XXX% seeing likely using with I segment, instead talking first we’re Solutions, XXX-K quarters really the and able so sales how their now ERP really in collaboration, platform regulated and custom advanced noted what a any conversation up the dynamic and segment, you see way. traction information more backend that in to any in customers growth we like be for powering again be are so of or selling beginning through as company driven great Yes, and at processes changing when of significant wants for couple we’re of Platform year, as of industry to file-sharing in the growth our of been the at to and to we to or were with where retention Governance system Governance XXX% Box system our traction document in application bringing it's of customer by this use to the we’re development, dollars we full going for sure really

So, continue we every important how just how fixture I is of of sell that more just obviously seeing products more the sales seeing that on us sure and be from think to add really single think and I now customer been into power driving we motion would show customer making then multiple QX in a demand -- conversation matriculation customer home we’ve up And other solutions, future. going the have really together. we of going the in we’re that’s incredibly in say you’re the more note, and -- and to one forward in seeing these bundling been of to demand

we’ve products a bu bundled sure one have early t solutions you into in buy signs going power to success our add-on can get come at transaction. are in that deliver of were customers going the it as FYXX QX, or can sort together, don’t So, to some Box we important of on sort actually of so full suites one that and this in really time, of build making we but of seen

things future. it we learnings differentiation are management being we’re as from kind core value lot size, that bolsters So grow our content standpoint does the had sales improves into our cloud benefits benefit nice going like a two we the average is nice so of a rate competitiveness win platform, that into it motion of and going it we’ve getting really that. because deal our actually contract of Box's from this not do baked to think And a only this year

Philip Winslow

just two Dylan. quick then follow-ups And Aaron. for Thanks, Great.

just you was you in quarter been up enhanced going if was margin fee wondering billings the us metric then maybe forward? last about thinking more consistently been how this you’re mentioned and give there the gross what’s little color I about has the XXs. outperforming us can also and that a driving line expectations. ex quarter, that developer Dylan, you give Can just First,

Dylan Smith

Sure.

the relates growth. billings it as So overall to

mentioned, a we’ve been to year seeing fee. this enhanced headwind As related developer the

heading how due we year This quarter, that a terms growth of revenue and the of the bigger reported between well the the especially the XX% in billings as there, to deferred so our spend are going at was facility, quarter then with is so we rate as are XX% the sort adoption of up that products is of and most the impact well of the had in and apples-to-apples this recent growth time see the of have than look over if delta the as kind that of about mentioned, how it higher that was to an a growth factor set XX%, expectation gross as financials, that trends. did the strength relates gross of given the step we those the packaging expanded we some factors in the the higher revenue, move to quarter where up flowed was at going growth in -- that short-term both cost into maybe as are around the continued year-on-year, quarter, underlying gross although margin, expected a scale to business, was kind just of for the mentioned it rolls of into particularly of as you that then which quarter. XX% pricing as so up fee run a more this heading that’s efficiencies into a out as come due collocation we calculation you delivering through add-on of that lower the into think billings, the as the about down same overall so margin, it to And bit year-on-year, put long-term the differed to both I we margin lot roughly in is range overall in a levers short-term different the XXX up expect serve the you with are the bit as

Philip Winslow

guys. Thanks, Awesome.

Just the [indiscernible]. keep up

Dylan Smith

Phil. Thanks,

Operator

Your from Stanley. next question with Morgan comes Melissa Franchi

line open. Your is

Melissa Franchi

question. past to pipeline your billings, what revisit that just talked confidence refresh Great. the in had in gives the from know to for that I it extent of in that outlook and QX of taking Thanks terms you But deals wanted us what on you large deals. for about maybe March you’ve customer existing my renewals Dylan, is you’ve of acceleration just I coming of level the versus expectation new win? can

Dylan Smith

Sure.

things the are So we it's of lot year. the are a us really giving that confidence the things same throughout talked about

throughout confidence a through. it's reminder, we’re years. quarter, past -- throughout QX we’ve backend fourth now, But really generating are than why this pipeline in the selling stronger as that of more been a confluence closer lot get in the Many the and pipeline. be in visibility we’ve the that the year we as showing motions have just the of Although of is solution which especially year, said seen loaded to we expect of rolled year up QX, we in those sort we’ve deals the

time. differences it drivers material customers the about expanding terms that Box, time recent either the for our with then in are confidence to customers. as don't customers their that of in split has where see first of relates roughly quarters increased. existing two-third expect from Box passage the to third So quarter same coming see we between deployments a fourth the split we any from really And new and the of in just or customers of coming in And bookings buying are new

Melissa Franchi

Got it.

XXX%. that helpful. encouraging just at still the it retention you like up sell metric are rate, from new improve surpassing going feel here the benefits And to in on initial the is to coming and stabilization see the other on there Okay. the the rate selling, commentary larger, then potential or rate? do seeing That’s you’re growth be see But we deals the retention could a solution like was from given strategic headwinds that in

Dylan Smith

Yes.

as say we headwinds some in of in consistent. the larger upfront although fairly metric. deals seeing But been that continuing businesses So bit same that’s as higher and that still a in mentioned, showing headwind will previous you are any of mix we seeing quarters we’re to customers, increasingly new shift up the see new a we of had the been

as the the up with stability I would this attach expect terms seen retention rates. improvements say higher the we've well as numbers stabilization, So showing as really being because of both in the add-on to customer throughout that’s in the year of offset and

So, to traction I be that over would be metric say we see would trends going the that products. add-on largely say fairly the medium-term. But to over to this dependent metric on this expect least where I time with stable is at

Melissa Franchi

Got you much. very it. Thank

Operator

Your next from Owens comes question KeyBanc with Capital Markets. Rob

open. detail on offer and But the reps just a Hey, XXs relied that This for to Your I billings Mike the guys. exiting mid 'XX questions. believe is growth line Thanks taking is maturation Aaron, is some confidence on increase Casado for my extent for you’ve expectation same Rob hired cohort how drivers bit them. in incremental the on could of that know last discussed of rep remaining ramping? overall you year. I the Owens.

Dylan Smith

Sure.

Dylan. is this So

ramped with would we and that expected especially improvements as the we’ve been pretty those ramping seen, Now say we’ve productivity. rep are reps that pleased in

ramps, past who would is the of relative be ramp percentage those cohorts year the of are in muted because the both But going I versus to ramping of reps. this we’ve to and prior year's. discussed higher in we as productivity throughout say reps more overall reps year So productivity terms ramping

shift makes we the basis. it the we expected, I force plans because made as say the although -- markets, no the Again, focused in looked surprises not kind is we’ve on the rep teens, and and productivity at actually especially we’ve to overall where track in strong seem where we markets overall expect those these that though we’ve are are at international would say ramping, the look sales there. reps then flat this really in of overall, a we and per as to there. What real the productivity ramping would new of and segment, per grow largely actually in the of that hiring same pleased, decisions decreased the driving is putting geography drive been a we We’ve place due to some high of seen -- a retention relates to force so really markets again, the certain pretty pretty changes we are sales the just before but mix productivity discussed seeing. hadn't rest in some to on kind on overall the the mid there We scale growth leaders overall in business of the and execution international as we’re those it we’ve

Melissa Franchi

operational what improvements new know Understood. leadership extent are And little performance then in region? on the a one those contributing into I progressing? Thanks. only it, leadership internationally, how the being EMEA place the really to rebuild you’re is but in to in quarter over

Aaron Levie

Yes.

So quarters really the so you types of takes improved. couple in at as in the the to operational -- get beginning rhythm fact, And know, new the only Europe it it a is, August, of you these leadership started to changes one really quarter Aaron, overall in. point

that expect to FYXX, it's So into core our see we changes performance FYXX. going plan don’t is to within but major certainly something

Europe seasonality influenced what in happy is model But this didn’t heavily think the of doing in have I the place. so, half some we and year where And improvements first QX leadership business by the seeing. early our in QX, of we we’re we’re of of course, were performance that about given

up I think show next see year. into start will going that to you So performance

Melissa Franchi

both. helpful. you, very Thank That’s

Operator

JPMorgan. comes Mark next with Murphy question from Your

Your open. line is

Mark Murphy

there? you Aaron, you’ve thank make SMR long-term I magnetic the will improvement some a and congrats. lines add Is with to structure. opportunity out in technology, as such that gross any experimenting margin that could of the seeing you’re recording, there storage on really single the anything more would or view anything anything seen my large-scale to emerging interested Yes, a little get so data the your technologies along that cost-efficient, lead else or any something

Aaron Levie

Yes.

architecture. architecture overall are we a of our is bit so So, -- a hybrid

partners we're storage, infrastructure And storage additional relatively that we public possible burst secondarily, we’ve And that then own of the in, a standpoint. out the a then of our or we every of dense we sure call own for different data across centers filers work things storage density terms we’re drives residency. systems to two we’ve and of of from with co-located where infrastructure, We we implementing. have tuned significant can of like we’ve as what we really capacity, every and operate data terms filer so efficient in as international file refresh sees make our performance do is cloud the copies where this just gains our our be that -- and that redundant in effectively efficiency effectively hard and generally

seeing from some improvements will those lead past so to of overall. look think even announcements our the And you some also public of of of if fronts. that we’re the partners, both over performance on infrastructure at quarters we And gains and cloud improvements couple

a So to filers. Dylan storage efforts that new medium of we're we of investment on and every architecture, being and But margin. strategy have things from our on density a dilutive including infrastructure Obviously, we step the that We overall, to capacity our about to as we function number our do trends more that infrastructure. efficiency like of working run. the noted, investment, and investments see drive time over really of infrastructure you happy somewhat our see gross are improvements that expect the long-term long do have and

Mark Murphy

have about Dylan, follow-up, top to fiscal 'XX. as just believe quick I in you line the And, accelerate a talked Okay, growth great. potential

what or any guess, between feel I the that, today of of offer evolution growth there? you solution framework getting some innovations you’re preliminary year, with selling over and XX% there. new can or some between, you thoughts comfortable seen it's Do say and next rate So product and the a you’ve bar the relaying better XX% that attach

Dylan Smith

Sure.

So puts growth up as add-on discussed, deal particularly year we large are as definitely again, pleased is rates. more with shaping and the attach progress that And will we're and relates the to but we have set though, into QX nicely strong some visibility overall. on still Definitely bookings for We and pretty takes are next expecting. seeing us reaccelerate in those year. less do been year, track or solution to a pleased we've it which this year, selling up this as

its we a and growth business Of what let's there next biggest that the significant the the our outcome, of specifics is as the course, going more QX overall and of on But detail impact quarter view And of rate that lot is. kind to this kind still ultimately for to QX the FYXX that on off in and year, growth a our more QX QX outcome say loaded. particularly backend reaccelerate will provide especially have ability is year, call. year coming

Mark Murphy

Thank very much. you

Operator

comes Brian Your with question from Raymond next Peterson James.

open. Your line is

Brian Peterson

guys pipeline, close are some you the can or the Hi. and really wanted fourth here. to Thank sorry of to revenue XQ for the terms share that there confidence But about us level give selling that in just I about setup that taking talking in question per in economics quarter. noise the is can the seat you’re you of and that on really that guys is solution see some seeing background pipeline, anything customer

Dylan Smith

Yes.

IT, of are within and space. some government record -- are the So, that and the by our again pipeline will very Sciences, strong those large especially the services, most regulated are Life especially on public big in and targets, of classic financial the deal industries a vendors sector quarter. million seeing traction year-over-year industries Pharma, we so trends I deal terms XXX-K that can and we segments obviously dollar deal beyond share strong for drive within big XXX-K, at look qualitatively, metrics far seeing when think We segments we

in were of QX. seeing giving large within in improvement big confidence on the we’re that’s those based a pipeline traction of and and from strong strong some deals So industries what’s the types growth deals us

Brian Peterson

Okay. guys. lot appreciate Thanks a I it.

Operator

Your from Michael comes Turrin Bank. next with Deutsche question

Your line is open.

Michael Turrin

attach came area particular there rates Thanks. Guys own I’m product in afternoon. product any areas you just call than wondering larger for from Did on particular perspective. products one terms Good in deals. at outperform to of an on contribution? more any your are XX% mentioned there add expectations out add for

Aaron Levie

year. actually to that alluded but more traction think very, Yes. in sort very little continue exceeded it will something strong share next growth our a become of incredible -- on initial We we we our I add-on. particular, Governance year-over-year and this, expectations see I bit That’s about

add-on agreements Governance solutions multiple either come license done to with or as core been strategy. us part up that they together, enterprise of a bundle customers we’ve As have able

like in on financial delivering Governance, in and seeing sector, across we Sciences of future services APIs applications, and or Box core customer in also the backend workflow I kind functionality things and even across as across management their then like facing are some like of in to we’re platform ERP core business from systems, a capabilities and will seeing our needed applications very, public come that think Governance a the use that. their automation information their -- services, very system We markets mix line key us of become Life will as customers Platform nice areas for really financial content

us are use business sales, for on customers really their we’re in increase simultaneously and an And platform modern of management as more enterprise our seeing beginning cloud much us so, a content while to . product in add see the

Michael Turrin

helpful. can the the at And you may Is is that that come were, maybe just Thanks. That’s for quarter one some fourth that quarter we’ve we’ve straight Fortune seen without to seen, advance. XXX Thanks. level possible where extend it This number XX% the more. expect just continue longest to then be moving stretch for more difficult we Rescue last the penetration group all higher. structural see reason. hitting is reach at to a for XX%, point metric in

Dylan Smith

question. great Yes,

the land or in accounts driving more figures. of the a a we some I $XXX,XXX taking of was deployment seven And and business sales and Box. six into major that high customer seven low or increased going within customer cases think turning model up-sell and the that in say because -- expand traction some overall, driving seen that and that I current add-on the would in product we’ve have,

probably look as much both us And within attention some will and bit see overall so, financial get large doing so Fortune probably preventing within There's industries net continued the percent and new XX%. global think manufacturers, transformation digital when XXX, a industrial can't structurally spend so be life realistic you the but and in obviously logo asymptote services, to, we that growth our a incredibly from a areas next well, nothing where we I of markets we’re XXX, QX not at that sciences, are the think our will I but like has beyond. Fortune taken these driving are there where is

Michael Turrin

Appreciate the questions. the taking Thanks for color.

Dylan Smith

Yes.

Operator

with Your Davidson. next Jaluria DA comes from Rishi question

Your open. line is

Rishi Jaluria

question. And guys. I just see of for the stabilization Hi, taking Thanks my some good business.

Just wanted maybe Aaron to potentially for Dylan. and both

me given and if marketing at of under Can benefit ASCXXX. As I some you’re investing expanding help that. level follow-up there get for be Dylan. required a marketing Can higher just expenses, I’ve And your some then in selling, going adapting solution on I you you’re massive comfort not got focus that around should your from a even you more me investment sales level where look go-to-market and for opportunity? you’re maybe control a getting get sales strategy, internationally maybe market help after comfort such the and that

Aaron Levie

Sure.

we the business. or we’re on -- board. leveraging would programs it you’re across and marketing are driving but the just that our efficiencies things driving rep past for just So area highlighted some the seeing, of kind demand cases about say we’ve gen like the talked that user call, the are some of of but ROI other I the not this even also they the across in efficiencies of really in continued and trends productivity we’re is seeing in We overall lot of a improvements actually that didn’t on

grow some so we relates those opportunities, steady So it do by market as those of in cohort, look to we region-by-region, rate it force, We certain that definitely on seen or kind segment seeing sales basis. again segment the as we’ve of the less pullback invest at on and of cohort in our growth think against how And definitely opportunities. but about sort right to are by we decisions of growth mentioned areas, improvements there.

out year. kind so, being the in balances something same to kind where ballpark of that high and next for of rate And teens it range expect in mid

profitability. continue balance good make and probably driving leading think certainly of in a as and that to metrics indicators growth all, underlying decisions some we and market that will of I monitor of growth of the But that's opportunity those accordingly.

Rishi Jaluria

for Thanks. your to commentary billings to back Dylan go Okay. And around helpful. in expectations your That’s actually QX.

directionally, QX Just calculated a to then and seen short-term between does total in we’ve should other that we maybe and like see when and similar off? start billings calculated delta quarters billings level this year

Dylan Smith

quarter. Yes, the it be developer that that fourth an normalized couple deltas enhanced sort was multiyear of And normal, where third should in third quarter in again unusually more fee of in the of prepays would then sign a also quarter high we level but the versus saw steady-state function then it year-ago. there's and expect a very we be QX to

short-term see overall long-term a fourth of more from the revenue between still impact an billings to expect but quarter, and see fee and we kind trends So of consistent that bit much developer deferred enhanced would growth. in

Rishi Jaluria

you. Thank Right.

Operator

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

Alice Lopatto

conference today’s today, our next joining call. Thank you, on look forward call quarter. for you we and concludes with us everyone to speaking This

You may now disconnect.

Box (BOX) 28 Nov 182019 Q3 Earnings call transcript