BOX - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Box, Inc.

Third Quarter Fiscal 2020 Financial Results Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Instructions] [Operator

like Alice conference Relations. Lopatto, Please ahead. now speaker to Thank hand go Ms. today, Head to would over the your you. I of Investor

Alice Lopatto

conference Box's fiscal Good third Welcome to XXXX afternoon. earnings call. quarter

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

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

webcast will audio-only. Our be

also download supplemental @boxincir. highlights post are We'll available our However, Twitter handle the for today's the on on slides call of website. now at

file November press our them the cease reflect they the materially. risks release or made this flow, forward-looking are financial our These QX free our obligation we actual events to XX-Q, markets our On Securities adoption may call, to regarding up-to-date. us planned fiscal and information obligations, as report future maintaining including and XXth, or we size, differ most achieve to new our growth cash our on market to risk and should cause and best and revise disclaim with statements and regarding and and recent and being These on future update making and to including factors other will and Form any products, that our our 'XX the expected performance statements investments partnerships. growth expectations or market operating uncertainties XXXX, to for in statements, actual change timing remaining be timing revenue FY of and our our performance model on of leverage, benefits and our for today, Please and operating unrecognized and long materially. revenue margins, targets be XXXX of results forward-looking term ability and products, based expectations results and judgment our currently financial our we our documents guidance periods, pricing refer positive profitability strategies, quarterly known Exchange may Commission, factors of differ

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

regarding You reconciliations measures, can are references website. in Unless find all measures the additional the results, PowerPoint release to non-GAAP presentation, financial comparable of earnings page GAAP found Investor which and basis. be including disclosures indicated, press can these related with non-GAAP our Relations in on otherwise on our

me it let that, over hand Aaron. to With

Aaron Levie

for quarter Xth everyone QX our joining Airports, and solid year delivered the negative XX% million, delivered up Attorney Epic Games Office of we for management as call the an we year-over-year. General, Los and And product significantly of wins We Annual Non-GAAP and BoxWorks, a Shield. quarter, thanks results. $X.XX ago, World demand And thousands we to of Conference, with In Customer hosted received our Foods. our was Box overwhelming financial Alice. where QX, NHL, improved release exciting products. DC this content we versus today. the Thanks, $XXX.X negative we expanded past $X.XX expansions offering new including revenue Angeles of for customers, cloud EPS with us impossible achieved the

deals This XX ago, with over line worth ago. a greater quarter, year than last versus XX and versus million deals QX past closed in a we year $X than deals XX more three $XXX,XXX $XXX,XXX seven year,

are broadly. in by content see EMEA, in our six selling management than full continuing we slower customers to figure growth metric While the expected cloud was power to progress impacted of our

of look on Day XX% customers, as Investor we total surpassed our the at volume such a metric account out nearly now existing in laid which over has driving number X,XXX October, year-over-year. higher focused key $XXX,XXX, we customers, with that value with we're a of up customers internally As our are at deals

XX% quarter, of plus Box Box's past time product and products Box their few legacy momentum examples expanding more included company Box the our and through bundled advanced six deals company's and this a of continued platform to offering in ECM add-on customers claims our capabilities. replace Further, of add-on at figure $XXX,XXX the insurance financial A of part a long Fortune services leveraging project. than a as Suites product, usage customers least deal showing with of full collaboration technology purchasing where include, XXX will one

they for important claims capabilities with Box will that center A integrate energy viewing, more retrieving with an figure its mobile to and bring six company expansion and will working content. app improve searching, now adjusted field start suites ECM will of Relay, of regulated to with content legacy and use Shield. additional will and allow the specifically Keysafe systems. use Box them instances Relay SharePoint other cases implementing Box, in and retire Their

that expanded Relay their Box address adding finally, figure the Shield Box financial of a of a And with we cases platform Documentum. got deployment organization retiring suites six to new services use by with deal and goal

management QX category-defining on updates are at three of breed differentiators. product compliance, our We we collaboration announced in deliver the content platform that security Frictionless and cloud best integrations. and and major BoxWorks, workflow, building and several

loss of content accidental classification to and user level traditional Shield, greater in flow prevent breakthrough Box policies happens Box, for with our the tools controls. Unlike Shield delivering integrated and showcased work products help unparalleled threat detection leaks that an we data experience security Box. into on is prevention of natively data enterprises Box intelligent Starting through security

early already in last other history. add-on While month, product only are seeing the any end we Box's really Shield than of more sales traction at we

layer top their of in a adding QX professional purchased sensitive security in productive Box it handle the of monitor business hospitals sensitive PHI control. client one firm moves Box information make the to and its Shield Shield US all services content as more example, organization. in global purchased a For data And including highly to that while units across

to to better device. workflows, values features business from enterprises metadata new the history, add enable download routine Relay, unveiled Box. processes and collaborative custom streamline on Next, new activity a complete to and we to These reject features in including in approve any ability Box task mobile

third our being and our to of we're And area the the world. open at integrations of third-party is BoxWorks on data to deep The cloud most that to these share content get mission want finally, is open ensure of and applications. interoperable with especially work with can platform relies disparate for major excited building made customers connect we've future This both platforms content applications platform their and why integration growing platforms. And we seamlessly applications. work, able significant from focus in these upon together and Teams building that were access popularity we given and anywhere, real-time the Microsoft product updates to critical Slack, and communication from

for management full multi-product is These stack. our provide are we've integrated collaboration more easy and market, cloud We'll our an more integrations Overall, experience more and along adopt IBM. and the with customers products and traction suite enhanced gaining via with made customers content ensure these to Adobe, enhanced entire secure suites. seamless in tightly product incredibly partnerships for and to our it our Splunk, IT their across

the from And suites that response the we enthusiastic we're our ways one of selling be customer market future. will sales confident an go primary seeing are teams in We and base. to

as been by recognized and a undisputed innovation, cloud Box a Gartner independent product firms of recently, leader result has Most named content vision. our execution of as an in their analyst and Box Finally, industry evaluation continued IDC as in management. leader our

our customers to consistently help recognized position the our in businesses their transform unique for are We run they how cloud.

moment a laid build wanted Before on out our take Session that I BoxWorks. conclude, financial at I framework our Investor new to to Breakout at we

expect 'XX least growth balance on motion. to and FY improved the driving and we focused profitability multi-product plus XX% are combination growth eventually increase going as measured margin. focused deliver at reaching to XX% significant On 'XX. a FY more revenue free As forward, this efficient long-term consistent are cash October, we in and shared of substantially in of repeatability metric, our we at combined flow drive growth sales in driving our least on revenue a by and To strategy in we

base opportunity an existing We have incredibly our customer within large market alone.

Fortune cross-sell have seat ability a than within tremendous upsell less penetration, have XX% example, our XXX we product and portfolio. our customers, where For to we just

toward While support in result existing customers. with to we the efforts Box's customer of continue add-on the customers costs. to existing To sales our our will are drive suites growth, and motion, economics maturing we new focus are renewals sales targeting expansion, sale prioritizing we and and to use acquisition platform. This their products logo stronger full accelerate of adjusting sales lower customer

keep well as US place, head reducing in able and more count simplified the profitability, in invest resources management plan sales underperforming rigor. repeatable flat be and on FY In as as performance productivity greater greater motion with a to sales overall roughly and focused conduct We three 'XX, to Japan, To we we with drive such performing initiatives. will drive regions. while sales sales expense international are higher in regions

and our The on our across business. approach by cloud spend, including an focusing the and on cost margin ongoing location of utilization improved all workforce most and initiatives first through impactful ROI-based greater gross strategy further our expenses is optimizing public improving to taking strategy, areas our optimizing infrastructure rigorous efforts discipline

we summary, are while efforts, company. we and Dylan a create stronger in advance will leading position provide do, have more more ultimately our our more these product, detail to In vastly to work a customer base, on expand profitable shortly.

to that, over I'll hand With Dylan. it

Dylan Smith

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

our I Before outlined represents Aaron all I how taking the more more run on disciplined a quarter, on invest the to ROI-based and will to deliver business approach results our an important areas spend. expand This that growth. profitable change we to of in go basis, want to an into for ongoing strategy just

with measure. Day, we're a at XX% achieving in to Investor in margin of roughly free flow committed As plus cash we XX% 'XX each revenue of that announced least our coming FY growth at from half combination

margin over a to this be driving on to year. profitability fiscal year, key with X% three deliver We compared We'll break-even expect we business. improvements areas a slightly minimum at of of be these to next focus expect non-GAAP our operating the

The first overall area expenses. our is headcount

optimizing the we streamline productivity to our to be our and expect as scale of time, and regions back overlay workforce we outside improve gain underperforming We reduce model locations At sales in will the US. same costs. leverage

these business, not 'XX. in total As expect changes to the FY across we do headcount grow we drive

public Second, to we data optimizing margin cloud customers. our will footprint, the cost by and infrastructure gross our center improve serve

addition that past over storage, we've delivering of efficiencies year, the we'll search such aspects to service the our discussed be various center as driving In in conversion. data migration and

we strategy, from business increased expect finally, focused And which come more across identify our will naturally business in cost driving will to add-on to eliminate be our of the line spend. discipline We low with margins. higher products, drive and also more ROI

streamlining efficiencies Examples programs and consulting systems leveraging our further to include we scale. and marketing reducing as events, outside T&E, rationalizing and automation spend, drive our

We our and to our these on will to to our enable highest differentiate market. growth resources performing are areas, in product focus to track in critical initiatives, our on which execute us further on maintain investments R&D the

Let's now results. our to quarterly on move

strategy, another We management we of content worldwide year-over-year, million XX% of the of our came improved quarter demonstrating Japan QX with attach XX% leverage. driving delivered see regions United was operating solid high to States, of guidance. our end continue momentum our outside cloud add-on in exceeding rates, QX and product while from in revenue revenue. now strong QX, $XXX.X of above XX% up revenue the of as

obligations and contract are This periods. revenue future contracts RPO backlog GAAP that consistent recognize expect represent and of accounting revenue by non-cancellable assets. as or with remaining deferred metric to Our consists offset in performance we

Our up QX X% $XXX.X million, RPO ended at year-over-year.

next roughly recognize to expect over the this We XX RPO XX% of months.

to last large we of on stated our renewals, still expect we multi-year see due in the QX RPO to and rebound some to we expected As pressure QX. RPO in timing quarter,

XX% came billings quarter million, in growth year-over-year. $XXX.X at and XX% billings representing calculated Third duration adjusted

adjusted and QX, impacted more last enhanced by QX were to growth headwind track developer growth. our we revenue fee, a was the the which As we that to quarter comparisons billings mentioned to billings created expect growth. calculated closely In calculated previously,

line Turning margin our gross with we in and optimizations delivered to came to XX.X% versus margins. center at expectations in infrastructure. XX.X% a data as Non-GAAP year ago,

more this costs. cost center migrate leading our temporarily footprint is data lower duplicative to scalable we to regions, As

roughly upwards FY margin gross trend roughly in gross QX, be expect QX we starting the XX%, FY of such, to with margin to As in be 'XX. line for for in back and 'XX half to

quarter business. across Sales efficiencies down $XX.X In in were continue to in of QX, and revenue, from our leverage prior model year. and the expenses the we improved XX% the see marketing XX% million, business operational drive representing

of our approximately Annual we spend. reminder, $X in for BoxWorks, which accounted QX QX, a million User Conference, As held our

more ahead, and comes profitable execution Looking are to as we our in of and upsells, motion leverage our revenue additional sales more more which consistent we as globally. achieve generate sales marketing expect and standardize renewals from to

Research management and of revenue, general development of Box product of flat expenses the were content XX% with $XX.X availability significantly even Shield. last as or million cloud year, enhanced including our we offerings, QX

costs Our ago. general were of X a point from a and administrative million reduction XX% $XX.X or of year revenue, percentage

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

coming ago. to margin, so of year-over-year, were $X.XX break-even X a ago operating we a to able QX FX compared at represented expenses of QX operating improvement was an point with from on our $X.XX, margin in XX% EPS line percentage negative gross result the year ago, negative shy XX% in Non-GAAP improvement drive Total impacted year pressure and of year to revenue a by a our came guidance. despite This headwind just temporary negative X% an in versus $X.XXX. non-GAAP

more initiatives previously basis. full to show X.X% on In year. beginning will QX of in our the mentioned results annualized an that in next profitability our was fully Note QX, improve rate churn up

in As over or time, a purchase either significantly customers cross-sell increasingly they initial additional their adopt products become stickier. as

rate basis. an was expansion net on Our X% annualized

quarter. from such, retention with net ended an XXX% QX annualized As last of rate XXX% we down

metric. As XX a month a trailing reminder, this is

impact the on year-over-year the consecutive So seat per QX in we footprint incorporate We that this saw sixth have improvement to in basis. now fully in users. respect single With the customer paid large year. will its of reduced it pricing QX, a XX.X our an of price million for quarter,

cash was year our flow million compared million free $XXX.X We and and a our $X.X which Cash now into a with a to million restricted cash ago. year million total ago. $X.X equivalents payments, the lease year $X.X $X.X million operations In capex million quarter factor versus $X.X versus ago. Let Capital $X.X move flow. cash, on QX, balance were me to flow sheet from cash. ended we in million cash calculation was

payments lease roughly of capital and QX. capex expect combined in be to We revenue X%

As QX, contract to year a public million as will our was With prepayment be cash that, ago. for $X.X $X.X compared million making a negative result, provider improve Note that million, in part $X a now free cloud flow to our revised efforts of we turn negative our a guidance. margin. a to to future gross let's

fiscal XXX be year and the of non-GAAP delivering $XXX.X to we $X.XX first million non-GAAP to our full the We For million. this expect we expect committed year of revenue 'XX to diluted year XXXX, shares. our on EPS to of range $XXX.X FY approximately be remain positive approximately now in profitability million

be to approximately negative shares. EPS Our on is expected GAAP approximately XXX million $X.XX

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

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

expanding and and In made renewing our and adoption significant across suites, past momentum focus to key rigor successfully Shield, summary, growth. in our customers of This this increasing we long-term included the our strategic on quarter, sustain amplifying progress launching initiatives. existing

FY term. develop leadership enable going to to continue initiatives foundational for the 'XX to clear profitability. building profitability drive effectively significantly on continuing These growth are our and we more position long addition, In both and deliver changes will us that higher will into

I questions. Operator? open for that, it up like to would With

Operator

line comes from from Winslow Fargo. the question Phil of Instructions] your [Operator Wells And first

is open. line Your

Rich Hilliker

this Hi that note, with add-on Box going in on goes Congratulations you that business suites for details quarter is you particular, on both to products. and that the primary Hilliker Phil. initiative it's way outlined. focus Dylan, you three-pronged for future. guys, so thanks be mentioned on more Rich mentioned in And a be a market will the similar of kind to on on an that Aaron, efficiency, from increased the

to two are deals how initiative of in should impacting have So things quarter. putting think I'm Thanks. a how efforts because the customers, then light a in customers land and wondering on forward, just of efficiency. these kind we and your in there win And feeling of this sales was suite? expand about about this I Wondering wondering, you moving an follow-up. sounded couple related particular also And suite A, like emphasis highlighted new together, it three-pronged add-on

Aaron Levie

so. Yes,

complete started and because the to they right because in of customers with get using beginning that full because and to full has Relay conversation to power be to with So new having, elect the of customer able the Box in right complete now firstly, of and conversations quickly, full value of we're and start initial more more package really the the really it positioning our their Governance but platform of of feet and maybe we're at platform not Shield, wet conversation get get our see are, suite upfront want of suite. some the to the complete CCM really customers, position the we able and obviously customers who

market, really win to about going that. and upfront. in rates Box get going happy right value improve of we're because to It's the the So, our you're competitiveness full

call, further on into sales that force, that base in installed of the as and are of and go be expand when sure of forward we the opportunities board, noted to driving XX,XXX land customers kind we we drive really to we the going a same on going we're customers current great which focused and significant do on and new greater making bring see our efficiency motion. At Going terms that. on up-sell, focus across cross-sell obviously, really to sales pushes amount really time, just of our

growth or segments to in or or So But then on see board. you're new segments, going of where of end logo bring still customer of markets potential, upsell lot we our regions a base. to mature going existing lot have clients see new of markets more in lot of, to a a you're

Dylan Smith

installed focus build Dylan. from be result any change driving of on Yes, that That within greater emphasis combined and base. structure is a will to proportion be around have bookings expect driving that of and not installed were And rather real our mentioned to our more reallocating of regions, with but Aaron growth a productive this to that go-to-market footprint that tend that larger a greater customers. base, work from more our coming incentives to and our resources which existing

And just next about so new we'd existing north XX%. put from little to two-thirds overall expect historically, year, our and to context, of customers, to it the a tend of for come in bookings be that

of we're seeing. not because been shift but focused, dramatic certainly So difference a where versus we've what a

Rich Hilliker

for helpful, that's statement? one Got you your on then call here like confidence align I'm I last revenue executed it, if really think and you case pretty second And with the QX, better mentioned that on wondering quick. I'm should bookings half guys. what Thanks. wondering last Dylan, growth. that that still that looks regarding Dylan in the one given that's

Dylan Smith

Sure.

year-on-year a showing expect certainly developer year in reminder, did versus QX. of billings much QX. see in growth we of ago, did year But compares the we the final So And revenue still we QX overall have closer in pretty correlation enhanced fee still to first as align closely up half. to a those in this the our impact our growth do

been that quarter. higher for the in even have you slightly would normalizing reported than So saw

Rich Hilliker

Awesome. you, much. guys Congrats. so Thank

Aaron Levie

Thank you.

Operator

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

Your line is open.

Melissa Franchi

sales Dylan, to us looking you're growth a your the taking have and good you question, outlook headcount for revenue giving flat do But for all my Thank for growth, productivity. sales. in thanks Great. of amount the thanks for detail. improvement if at in you assume

is seeing the in you're in you're So that you that or wondering for QX seeing if that? gives there something QX I'm already just pipeline what in confidence

Dylan Smith

Sure.

sales Investor year-on-year. Day, we highlighted see productivity our we to at recent expecting XX% improvement an as about overall are of blended So

that we've while things more of momentum around improvements because to through more execution add-on our we're in mature regions. and drive coming as and of that of to markets time, allocating sales to is the improvement about Some the and performance at some like, through turnover related where we about, continued increased expect some those we've the our management. the outcome that we talked of same work And talked products, blended we've resources that as as force productive of well the strong seen

and a our driving confidence driving factors we're that. few So different what's in of of newer seeing is line growth. kind But higher around there and kind overall, are suites pipeline adoption products particularly the the that top that

Melissa Franchi

you this And just then the wanted seems wondering just happening us on improvements got believe I very any your EMEA feel make said to need underperforming doing do seeing particularly to just on it. Japan from there perspective. up update well, you international in that if whether you execution a could was some but Thanks. sales to or business. quarter. Okay, what's like macro I in comments impacts again follow you EMEA, be you're

Aaron Levie

Yes, we're the front. seeing on much macro not too

of broad region. just within more own and we our the to So this productivity kind performance attribute

on I think is impact basis. sub-segment a of more the

in we're some performance than higher So regions, other way within seeing EMEA, areas.

about that what that areas with of Dylan consistent terms global talked productivity a so reallocating we to will highest investment take. And be the view our in very

where are we'll we're we one UK consistent on EMEA, less global more and areas performance. And in seeing basis decisions really investment invest making places in seeing like performance. lot, maybe the pretty going consistent on So of so allocation more and a some improvement US and where space in then in in Japan Ireland

Melissa Franchi

Thank Got you much. very it.

Operator

from question line Murphy from the And JP your next comes Mark of Morgan.

open. is line Your

Unidentified Analyst

have to to going for is guys. Mark Hey, I kind has is if that rolled just any could one did for two quarters? This been changes thanks talk on the our you introduce, Or some about that taking see wanted questions. you. take you to wanted you out? or of Wayland to Pinjalim related making, on of it Mark, And [ph] Thank dig sales that? disruption the that changes already maybe

Aaron Levie

question. We not related that. see any good Yes, to do disruption

Mark he past few areas we've that BoxWorks, our, our at on that laid continue key building has been or As out at the year so. Investor framework for focus at a really Day the

First is and degree of on a greater velocity. repeatability

So really plus expand more making driving of this motion land customers our reach on $XXX,XXX and can that level. sure

So of size in the installed expanding and total our base really of a current the lot upsell happening customers.

So that is a huge focus very motion. and that's repeatable again driving sales a

of area big kind centricity. customer Another of focus is really

existing I that sure the making driving get overall, that to and want fairly we aggressively. on improvements that and has think is sales and land see team we been motion. So he And across and sales all focused on already really then productivity productivity accounts driving expand finally

So board smooth with and how a no taking It's to but the we're on really about improve came very kind happy been is baton transition whatsoever. really of Mark. he quickly disruption execution, our continuing and

Dylan Smith

Yes.

highlighted board as areas the other in much cycles, that and been This earlier better accuracy, and have really that. of had deal come Dylan. quickly forecast we to management now and greater as really seeing Most stabilized. which are up and and changes driven add underway really deal such in already to We're the that's in, efforts So Mark's already challenges EMEA. is than showing these effectively those across

clear. are, the put hasn't been some for that well underway. such the are but start we're our next into as are plans making place Mark initiatives year, has these of tweaks will been of effective There kind as most yet those still already go and these part, at the driving most that sales comp things been of through fiscal of has that So the that's some the force rolled

Unidentified Analyst

Good.

of in plans, plan into incenting basically next the the year more comp so as the terms mean suites approach, as a big selling and comp should such? in more more change the we lean I of you And expect suites

Aaron Levie

within driving be to suites will of well incremental products expansion plan base. to improvement like as It add-on and comp as things the to the customer more an align

selling, obviously that market, going customer sure just base. -- So and on you're we product, see disruption greater there's expansion we to make retention to multi-product that no expansion current both the more to want of add-on emphasis of go how but driving to the and greater

Unidentified Analyst

kind it Understood. exactly? a RPO seems like seems sequentially QX, And you causing that lastly, what of bit unusual. number the is which declined Dylan, know Do in

Dylan Smith

Sure.

RPO, communicated rebound So we previously, on some QX. in pressure to expected saw we as which expect and QX, we in had

has components two both we of a which and up a in saw notice. of main is which bit of RPO making So had half each that given why roughly quarter, kind of the outcome that headwind

impacted durations is seasonality which of by first backlog, The large which contract is the and of deals. multi-year

QX, have in we rebounding. in deals those current gives a do higher which but FY renew which that volume us period, deals a high confidence So 'XX, what of in volume headwind in we those saw is creates a the of large multi-year set to

$X of we the RPO XX% developer that had the where X% year-on-year. was of balance deferred mentioned. fee term long-term the down million was component short the about actually up revenue was deferred impact total second year-on-year enhanced XX% then up of and previously is about because revenue And But or

So QX. at should be into a we that level factors of healthier move 'XX FY normalize those both outcome as and to and expect in

Unidentified Analyst

Understood. you. Thank

Operator

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

Your line is open.

Brian Peterson

taking question. Hi, for thanks the

different making, if about model, high structure. farmers are but sales typically level some on different athletes they maybe pay hunters you're oriented with sales a typical changes here we in So SaaS think very that of question and the

to the those as an to potential any customers. going and changes sales like sounds changes? expansion is changes existing with increased significant through the see go about plans and how comp hunter we the there do Are it on emphasis we So to be to we force think retention going

Aaron Levie

in especially so Yes, model, Mark a primary Investor land and our of Box Day, SaaS oriented mentioned mentioned what very more Investor deployment expansion Day equally also your expand your reps driving at Mark but Wayland he seats. component as with Salesforce customers a business close a product sales at is possible as being experienced the our as at are really and products of in to sure continuous new making existing that

this SaaS as and very So we've sellers after able going already is current making of are go a sure with to of significant that expansion hire to feel installed portion we consistent sales base. individuals really within like that. been the the cross-selling We drive our that our model and think forces are able

get across into our products sure drive make full share change So, add-on have force sales expansion we compensation More product align using close we'll the as go and call. major and go into we to no year. improvements we to how philosophy to more suites the we again continued customers, that QX our that will as to next do the our

Brian Peterson

Got on Aaron. Thanks commonality obviously suites for years? pretty expectations the just that as what especially and guys. it any Any over in into it, Maybe hearing you're lumped thoughts customers gets ramped product, up on quickly next from that Shield thanks here. few

Aaron Levie

Yes.

So Shield -- we've for on been working two is now. nearly years this

collaborating you're corporate organizations fundamentally there is as of that really and the more information, other critical external into long works data. because particular, was Box as been data internal people security to or for and cloud has sensitive on mission other data role an put protecting they're it strategically highly essentially more model customers about this and need in and and and going all-new for ways with that better a their that So of into there, us and thinking of the collaboration thesis they're especially

manufacturer global that clients. or it's a institution sharing financial financial documents collaborating a is their their is IP supply this that's whether around across if with sensitive So, chain

built around see breakthrough we on really So to and frictionless security really is security new workflows, those Box. deliver category Shield natively collaborative a

have to built-on technologies. customers So these don't have

sales seeing the customer all across the in industries, healthcare, we're And high. the in in conversations the seen sorts energy, deals is It's financial and -- great is already already that thing we've it's repeatability motion of very in services. so

to a of all with So need And really already the is platform. where be any built Shield you're data all kind it's going solution. you collaboration outside really doing then automatically that obviously and that data be Box of in the on problem, security you that's given able to going and of of to that where tailored it pan-industry organization drive to flowing an Box product works have within adjust the use case but it's

budget think their able level go to think to going But be user from to after security right this we about. experience existing really of of customers might be importantly not of some more are getting carve also security out So both I is where the excited customers that vendors. new going be a the category

Brian Peterson

Aaron. Thanks,

Operator

from Berenberg line Capital. Your Knoblauch next from comes question Brett of the

open. Your line is

Brett Knoblauch

for thanks my question. guys, Hi taking

looking and as maybe expect Just to headcount what per compensation And fiscal the given now on you then price next we one year that be you seat of based for percentage be going be just to that what and for on should revenue that stock XXXX? maybe a maybe flat? expect for

Aaron Levie

categories, mind -- spend you question. repeating which sorry Do

Brett Knoblauch

time. more one Okay,

Aaron Levie

We curious of the area your were part you just on were first question of referring spend which to?

Brett Knoblauch

compensation. Just overall stock-based

Aaron Levie

at down so very That peers where a time they've Okay. said, would and then, profile in company. to mindful of down recommendations, been of everything pretty the overtime. getting the as of line and around out are more headquartered, we and we're volumes we our in head location kind see, over growth we're look expect take to terms we efficiencies yes, steadily the and doing of certainly given count see that, of the our equity generally in gradually ISS Sure. scale, in And relative as leverage particular combined that combination trend here we comp strategy those where our to we well just with expect all Bay bring factors Area, because tend overall would but to of highest workforce stock-based of

Brett Knoblauch

just looking price seat year about on for follow-up XXXX? fiscal guys should at or And you Okay. per think how what a think we then,

Aaron Levie

we've we've year-on-year Yes, with put our expect we'd mentioned, really driving suites improvements. that pleased only same at product six been continue expect term. are least through and overall the I medium the seeing, trends say offerings to robust been to customer would quarters getting more in as now and have of near the been as that a row with ripple to in trends the capabilities we up base, beginning that And we'd

Brett Knoblauch

we on rather Is that new safe focus than given it logos? to think existing accelerate that should could the customers assume

Aaron Levie

upsell it an of in because I'd say that in to of some fact that, Don't know kind customers should built accelerate are of it's off cases, that, what paying.

whether So a necessarily existing the to changed our or improvement be overall, selling shouldn't new I significantly customer. seat think

Brett Knoblauch

thanks guys. Okay, great,

Operator

Your from line of Jaluria Rishi comes next question from the Davidson. DA

Your open. is line

Rishi Jaluria

taking much so questions. Thanks guys. my for Hey,

on at look want just if at kind be I that short-term you I billings, maybe the our First, guess deceleration. of the if that bit but standpoint, pretty have bookings pointing back towards to least seemed to on kind billings to because our big look I RPO equation, from right, or access all questions of circle of the RPO been we deceleration. have side up do you sequentially to parts on current little right basis, forward-looking bookings, asked think a moving at metrics current an And it was if you RPO a

that those, us help the given gives kind further not on of and what continue retention And follow-up. here. to got decelerate your that a perspective sequentially, that at from you from maybe you Just are things rate pressure stabilize just given understand I've very is again the to then confidence to least the can going point

Aaron Levie

Sure.

RPO indicators both that a what numbers -- would this I and you to and flows well down I So say growth. both our were say at bookings think should which actual revenue revenue, lot are through meaningful comes is billings pretty that relates it of model future the asking leading how as the and would And be to normally about. of

the noted, from that fee downgrade that component. to there to were year. items you this handful large single developer As of enhanced customer Everything a multi-year tough of kind comparison prepaid

terms we've forward-looking of those, growth you that fairly with would leading normalize when expectations see those So, the could indicators laid some in and traditional of for more for revenue I being line following in disappointing fairly also ago, our reminder, to just QX a a the outcome. for note a year we biggest growth business, tends had driver as year, and QX, of be the that of year. you next out in

that the line the the top growth about in seeing And we're what's both next year. we've and so QX previously which we've for driving most forward given around of commentary for going is talked everything business

Rishi Jaluria

model the we've SaaS got from in thanks. high-profile seen it, companies customers, think Okay, a if changes to customers few it buying do buying behavior apply, go on especially other any annual your to seems to versus quarterly. list would I really I may about have a places behaviors. that annual quarterly instead wanting trend like talking wanting not you just doing know you. price, apply that's least mean, from about then discounts for seen I not And other where you're kind at of in to and prepay

that can you commentary around really us any maybe helpful. Thanks. would give So be

Aaron Levie

Yes, numbers I that quarter. have we given the any the we mean show necessarily Overall, a seeing business the volume repeatability, in do, high of least don't in motion. I at sales think past velocity we're that really up high healthy of

consistency we're so seeing customer that our And pretty across pretty, -- across strong base.

of in in So, no behavior. buying the impact, or kind change quarter customer the

Dylan Smith

durations. for payment contract and both this comment durations that And our holds. so Dylan, our Yes. that, to add is To

has outcome, customers. pretty either which as seeing to no we're kind a years higher year. We or not payment force not longer advance our do billings we calculated seeing been this And trend prepay highlight to of but any pressure sales in for we're multiple So incentive in give has gone minimal those on outcome, than That's that's of factors more our because prepays. previous And from adjusted that durations. of function any billings of either levels customers that multi-year measures. the down to our

Rishi Jaluria

great. right, so All Thanks much guys.

Operator

of comes question next Chad Craig-Hallum. from the line Bennett Your from

open. is Your line

Chad Bennett

thanks Great, question. my taking for

on be I clear to commentary. the just billings So QX guess

sequentially upper year-over-year, order understand in a get over take. give is say that's to underperformed. in roughly seasonally, to In first deferred but a the mid seasonally, to range of have look revs at I increase revenue there the from quarters, order norm deferred So to for midpoint billing what years, just or standpoint, -- it's couple bit has let's would of if XX%, three last revs the the XX% they've been been, and XXs we growth

to deferred you want up just make the need to billing sure we're revs I to where about XX% So on sequentially get side. be to thinking being

Aaron Levie

Yes.

QX of seasonality even year revenue growth We of was. in in So without that. commentary the the pretty expect a expect on pronounced we that the any jump from deferred in specific outcome business but more deferred with where this of year significant and versus to because line do getting a into last our to reminder, year year billings growth last and as kind year, of the be this versus in of revenue roughly are the kind touching around then kind see of kind We QX. to of outcome revenue because do pacing

Chad Bennett

characterization? on Got I suites And the more then in metrics I sell churn those terms should going above, cross of improve guess all it. since that be of in secondary Is a sell, net like we're on to the net QX, start rate base sorry the retention based and or fair focus. go-to-market expansion, to assume and new retention focused and starting up the

Aaron Levie

Yes.

move way. the model in work focus come will our by expansion you're its robust customer, as That that do to reducing should way seen thinking think, of we've of be net its The into your expect through now more tailwind and next back single I renewing has footprint QX. the year, expanding it the point, on aided from kind largely customers due right the product which to So and capabilities a we existing we then also that about pressure we and set see have. to large that

we of the end laid next about right that seeing definitely retention Investor the out of think to rates Day way an the and So, net by that terms Mark that and our ties in thinking impact improvement that commitments that comment I made you're year. in at back

Chad Bennett

If is years? hop where revenue you guys percentage marketing sales growth of how about do the business, be over real a maybe yours. I'll even believe, This below we not maybe to in Okay. scenario quick. long revenue and And last one Thanks. low-teens that off. term, this my words as one then maybe and a next is slightly think that should three

Aaron Levie

Yes.

our -- but Day this, we was on articulated build what at Dylan let I'll Analyst Financial So Analyst that. not at

look kind analyst So is on focused next I years of we're what more significantly, we delivering very mid-teens put currently from our subsequent to presentation those or and in over numbers numbers driving out margins years like, the would operating but that growth say operating happy certainly here. margins over that few then improvements the and reiterate obviously at few higher what so the

Chad Bennett

Great, thank you.

Aaron Levie

Thank you.

Operator

line Eric Suppiger the Securities. your of question And comes from next from JMP

Your line is open.

Eric Suppiger

Yes, question. taking the thanks for

the restructuring head seen First the magnitude you've since what has How nature any through been off or have turnover changes? voluntary the some on change then count? of And you gone these you can restructuring? of of having in discuss the had -- much layoffs

Aaron Levie

of taking or Yes, higher very focused some that region our approach a investments again a segment. about maybe pulling year dollars underperformance think areas, great We're sure those we're productivity and into we're at looking question. in and or going as in seeing output. specific making areas in we We're next investing back

degrees approaching greater execute this taking three we're now, we that Call. ROI the see really drive and laid in on efficiency that business approach. how the you're as in this we right think us out And Analyst in so categories to again we're of that's across going And I focused

highest impact So we're the areas. into is the area putting really streamlining the making again total first dollars headcount, sure that the

in marketing Second sure then from is approach we massive focus technical ROI-based more an operations. our campaigns, infrastructure event on really -- on our finally travel efficiency driving expenses. to everything take making that and And total and

Dylan Smith

And that and next to able to talent bring very an at retention been of to in improve sales strong on very pleased performance seen engineering Yes. areas been and our us the stable Dylan have of This in as management efforts to question. through year example, we've retention also transition is a as for been of on we've this time year uptick for with the our That and has to same or the speak we've seen force productivity such we've and us phase this turnover. focused attrition said, part then growth. lead question the been

for aligned about, So our on think certain or you that increased talking depending the we're has performance see need change a expectations. with been area but overall how closely differences management pretty I much based on

Eric Suppiger

then And Good. question. last one

you looking you're assume think that fair that for fiscal any longer that would type said well? looking flat not in I to you're looking expect 'XX Does think you Or growth given had growth it as apply range? term. count, I disruption. you're to head Is that mid-teens mid-teens at for

Aaron Levie

around what that for range Investor at timeframe we on and be so you model you're that that provided may outcomes referring 'XX. Yes, was -- if talking and Day, FY about the and that commitments different

from half free and relates cash to think flow half to mathematically just from And growth XX.X% that you revenue half years so had that three about growth it flow said is come of next mean now. that. we're margin of that year we the is that other FY on as a each committed margin, And So in 'XX, cash achieving combination would I at can of exceeding metric. free from and what or XX%. revenue roughly

Eric Suppiger

Very Thank good. you.

Operator

First question Kiwala your comes line Analysis. Terry the next from And from of

open. is line Your

Terry Kiwala

but for model and business. want ask, taking afternoon the wanted understand the to on expansion ask about emphasis question. the clearly to Good thanks I my I new

larger some see up just sequentially? for to we now be In the should of could for the pipeline, make million the that and if $XXX,XXX of $X health whether tick relative you on to the timeline over terms pipeline deals has of you and start some over comments looking relatively these stabilized,

Aaron Levie

Yes.

addition are product improved of we The improvements to addition story of and the definitely the us to compared existing robustness customers. has summer. dramatically, definite the pipeline seeing giving then years this conversations Relay of team and for or overall, new Shield lot sales two the So more, and out to have maybe both ago a year our especially and go with it's a really ago with

improving sector, going deals life that's And I substantially. and in really public healthcare So health talking only pipeline, of has across the be board forward. continue services, to financial of been to cases the the use that kind sciences, the about we're think the case going

on emphasis deals, an of larger and this And where really is six the we're ideal range figure that area definitely greater putting driving up. in terms

breakout less then maybe some into a to maybe of out years six-figure possible. of think points of important that ago of than is six-figure And on I a driving just gave deals. the as couple the our little bit than really our importantly velocity are more as getting category that base high that much we plus us customer

us of be X,XXX this have metric over a customer. this, is customers That's include call it important a a what So over might we broke might paying upsell to we $XXX. $XX,XXX in $XX,XXX out that really because

we growth reaching And -- customers that want and going to that our rates drive more And going make threshold. to drive more continue so sure that's are strong of obviously forward. to

million So up I metric deals. plus the of and definitely you overall will still over show on think business, six-figure the the that focused $X $XXX,XXX then in look shape But very at of things pay like $XXX,XXX. the it when the customers or number the total

Terry Kiwala

That's great. Thank you.

Operator

and gentlemen, call. conference you this Thank concludes for participating. Ladies today's

may You now disconnect.

Box (BOX) 26 Nov 192020 Q3 Earnings call transcript