BOX - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Box, Inc., Second Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Alice Lopatto, Head of Investor Relations. you. Thank ahead. go Please

Alice Lopatto

Aaron welcome I'm second Investor Alice call I on and Smith, and earnings CFO. our Relations. fiscal conference the have today, me call. Lopatto, with our to afternoon CEO; quarter Dylan Box's XXXX And Levie, Good Head of

our we from. are slides questions. now for download will Following Today's webcast being supplemental is prepared www.box.com/investors Investor our where remarks, on Relations take call website at available

Twitter We also of highlights the post @boxincir. today's call at handle on the

of be forward-looking financial market our future and our statements, margins, will fiscal margins, QX we adoption our FY operating 'XX markets maintaining and remaining size, profitability of flow, market operating expectations our and call, unrecognized and performance guidance growth and expectations the products, On and making periods, future leverage, obligations. timing XXXX revenue performance our positive including our and financial regarding our free cash regarding for

our documents operating and long-term growth may that to should they impact XXXX our ability regarding differ or and on them and achieve investments uncertainties the Form our to of and report quarterly file we or benefits obligations targets, planned being model and our as new cease products, press expectations information strategies, disclaim Our partnerships Exchange update to pricing to other made expected of and risk today, revenue with results These and be risks August COVID-XX judgment our the actual in XX, currently on forward-looking materially. on and of are differ may statements to release revise results. and up-to-date. change refer or any the recent materially. most Commission, known events and we XX-Q, factors results based the us the including Securities and cause actual factors on for our reflect Please our These statements operating to pandemic best business timing

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

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

Aaron Levie

thanks and for Alice, the everyone today. Thanks, call joining

unprecedented both we begin innovation environment drive COVID-XX, $X.XX and product well ago, during by safe me up into year-over-year, provide continuing a and our customers, you continue your that globally and time. tremendous months in above healthy. be are zero proud I'm strong their Let saying for at revenue percent continues to provide delivered more hope strive and our all the the to non-GAAP guidance. I on year non-GAAP to a compared XX% support of customers. support this and year ago, zero margin all, $XXX.X a compared quarter our million, XX% who and our teams operating to time. Many Throughout our to than with challenging EPS and for We of to all cents QX for Box families a staying of communities families, employees

are of our we've Hitachi and organizations XXX,XXX such highly Box High-Tech, million uncertain to in Lord secure Stanley happy million versus had $XX stability & Abbett free than and leading and as and with and and Box quarter year time. power closed on this now full are the & wins $XX more improvement a flow their across And generated in also customers of than QX, critical We Black collaboration very we processes Over results more the leveraging Co, with Decker. in second customers power expansions More positive we rely businesses. cash ago.

deals. Our our more few proud through rate growing that COVID-XX Suites a consistent were deliver improved in significantly which than has substantially adoption operating within growth, cash The our remained revenue Shield it expanded of and XX% We were enterprise ago. and than customers, Suite expansion and was of six driven XX%, Relay environment fundamentally including demand is by today flow. drove just for world attach figure to the margins more strong existing QX results a products like different months

secure still platform been all Box from highlighted their challenges great never content As with modernize future work wins. only I of combines seeing vast SharePoint, remote are managing our to now to the content only and FTP to building many fragmented their workflow look opportunity like new QX of evolving other And cost of Documentum, is normal, and site, and and content dealing entire that security across More thinking about that's place. across legacy enable how and approach with and exist enterprises partners, work, to in this that collaboration productivity, more The see strategies one applications, managing enterprises this other as enterprises quarter greater. are operations in securely share their has cloud the content. access management, majority are customer with work another legacy secure systems employees technologies.

Box consumer legacy repository been of communication SharePoint few the a around made Teams. a research. XXXX, the hospital bank in content multinational American who many with Just investment Box content our single primary customer selected An standardize for replace parties collaboration expand consolidate to an selected COVID-XX through platform like regulated effort to and disparate medical with FTP content to has tools, box enterprise silos program and decision them technology ELA and replace help on An Box company since various Alfresco, their support to to goal a to their Documentum sites. and external give examples, school their you use as the a systems to

on missed we've product cloud management we've been years, three building platform defining differentiators. few category past the key the Over focused content

Box Relay our And Today, Box With their secure any compliance; collaboration delivered most remotely. and extend Shield processes released State out became working contents. marketing, processes enhancements application experience using HR, helping were faster enable we and and using and freeform their which on security templates out to and employees them directly external the design leave integrations and announced a time internal digital spent office. Relay, Box than the QX, driving we features became customers a machine more With With to the for to businesses to sales, with available to frictionless with based as the users in allow ever Since to into significantly and Relay Box when value Sierra collections, candidates. all NASA rolled streams to featured using out topics their important simplified been content that the move late down some The provides such global Box finance that application. that on & on In QX library annotations been work our workflows integration remote and decrease are first, ability regulated enterprise. updated markups less much the rolling organizations and expanded automated seamless, the folders to on need workflows is of have the as increased across second, product new our and to customer and in classification, manual all security simplify learning cycle to ensure individual legal, classify customers automatically of performance which the collaborative digitize more world workflows; Oncology process. scan requests. annotations of And of and we're to with auto digitize productivity includes executive the their text to like recently manage comments and available detect Box recently Relay new third processes, class which longtime Relay, we added work have secure data automate to environment. of leverages approval for another in workflows user. their around to conscious to an from we world's Street, legal Heidrick contract file search difficult marketing doubling cloud. templates an Company firm, centric Box the The to for July, innovation customer the they've remote advanced deployed longtime to campaigns, times more highly them One work able transform files manual sensitive secure most And in workflow files content and in everything Shield, which reviews. business to and organize customers Struggles, data. on APIs By and

are with customers the open integrations, integrations creating platform for applications over our and As a our need by emphasizing more on organizations more cloud continue seamless systems, we adopting X,XXX interoperable our features across to between additional a apps. expand further for partnership to month, customer we create existing Suite, Cloud including upon announced Last our experience to with expand strategic Google with a integration customers. G seamless experience are our

our in strategy. strengthening and Our all applications Slack, remain seamless work Teams, cloud see G critical and the integrations with applications our Microsoft customers Zoom, Salesforce, IBM, such as I Suite that remote

of hearing in Forrester, Cisco, with IBM, from an Nickel, ways. Looking the customers the and ahead, Arvind event including CEO at advancements these continue will at customers, Nike, time be XXs And on be our Robbins, the slate exciting McKinnon, Okta will Schneider the all principal for USAA, this be from ever. year a Electric, Cheryl CEO of new events biggest BoxWorks State and thousands our incredible which and NetHope. sharing of to including be This of enable who CEOs They drive digital Street we'll of attendees innovation analyst enhancements. Chuck Zoom, an will of speakers September some Slack of an roadmap and and will we Krishna, have work adoption year to first all XXth,

Now for improve turning FY 'XX and between to our year, last business profitability balance laid and we foundation to the growth beyond. our model,

significant focus commitment. this in efficiently we year, half the have Our was first of In and on business. delivering more on this implementing clearly discipline growth the delivered cost

consistent all to our driving areas product economic uncertain, long-term healthy profitability, position one On key after adoption go-to-market we the initiatives, growth markets of to we increased Box continue delivering drive as as largest are To key more optimizing and execute initiatives. in efficiency growth, software with in strong to of well by focus efficient drive drive we macro our the an remains will To impact on future greater strategy continue ROI-based efficiently markets. our of taking acquisition We're a enterprise we accounts into multi are on and and COVID-XX expansion and profitability. revenue going workforce with growing logo three gross margin, spend. and and expenses, on driving new seat Suites existing is focused add-on product improving approach believe

cross significantly and to XX% significantly to to margin growth be greater margin discipline our to flow in our is we discipline foundation continue when focus X% uncertain FY operating future business XX% the committed in our today's implemented delivering year, in rigorous are an efficient and our and goal evident the us. discipline, environment cost year significant have fiscal XX% up on is full this behind our from improvements. a in margins the of We to XX% to 'XX. laid now the COVID-XX approach and and previous are confident we With advantage across that cash operating We cost ago will versus improve for overall

us. conclude, always I has which take some to a and been an environmental, our moment I governance for of corporate to important Before social share area initiatives, want recent

include to deliver the that virtual, make organizations in way working demonstrate governance racial even to XXXX during increased enable To of work are Box.org to board moving our strong well of will by in our remote new practices maintaining further hand our and continuity and us based it customers, stakeholders management Some we over uncertainty. enterprises focus to toward our of progress professional fiscal down courses a accountability. values enabling employee our customers as resource the for equality and moved development conclude made doubling evolving giving as us all progress that, investments, through in our recent fund, areas on to both they're I'll groups and for corporate QX we to business work, as delivering to sizes, to we've significant beyond. time increased value By value With powering and Dylan. to drive are confident strong results

Dylan Smith

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

EPS improvements non-GAAP retention growth. in had we delivered mentioned, a focus momentum same quarter driving both Aaron revenue expansion long-term As customer within the existing margin high At operating continue seeing customers, the our we Suite and profitable stable our as rates, and exceeding sales. of enterprise We're with guidance. on we've continued strong end significant to time, healthy

For FY our 'XX, XX% of higher raising X% revenue for be expectations previous our XX% than expectations, non-GAAP 'XX. to XXX considerably we operating and are up margins basis FY to in points from

on QX, XX% million of from of in continued Japan. and States, move our in by delivered ago of XX% regions outside strength revenue $XXX.X now to United Let's came year-on-year. results. quarterly driven this year up up revenue from the XX% a We

up ended as million, with we year-over-year. of Our remaining measure deferred contracts non-cancelable performance XX% revenue by and assets. QX future offset We obligations consists expect revenue that at backlog recognized RPO in This or $XXX.X periods. RPO represent contract

RPO We expect months. XX the XX% over our to next of recognize approximately

million came quarter growth. in Second X% billings at representing year-over-year $XXX.X

mentioned we remainder growth we 'XX. our still slightly FY lag call, last the expect on for growth so As billings our of revenue

this our ago, professional services, we even As the see continue softness a variety large QX, COVID-XX Due Box versus a timing and reminder, two and outcome our of we duration line $X and our headwinds, Customers also year a segments. to year renewals. remained duration over the is with small strategies. is of no ago. a more year over $XXX,XXX versus in to bookings payment environment, view impacted contract expect their worth than ago deals factors XX have stable, In billings and $XXX,XXX, a deals our long-term XX customers in and including continued critical business closed by of a which current deals component as million IT three year

year-over-year Looking quarter. deals QX are solid of in deal third six enterprise rate year and in our large at XXX% counts see XXX% annualized versus the stronger we We a XXX% pipeline, for and ago expect we to figure retention with seeing an in demand a net ended QX. growth

from could X% As particularly to with QX QX, period. customers, cause the course this related annualized dynamics, our rate full you in-line an expect, might churn on COVID-XX smaller year basis, this our in an year. metric over the In in ago of and improvement X% fluctuate was

Turning and gross came for XX.X% a at up year ago in margins, in QX. XX.X%, non-GAAP margin from XX.X%

gross infrastructure QX is revenue was reducing costs our economies XX% by Our basis gaining year-over-year of $XXXmillion to focus on points. scale XXX growth outpacing off. and up paying profit of

this While over of some continue will the timing in upward of certain could infrastructure years. projects trend margins create next couple quarterly variability, the we expect gross

substantial this drove During that productivity several a business Total expenses QX, reduction represent of identified XX% again on entering revenue, from we the once by executing across operating cost initiatives a the successfully year. ago. of and we QX and a improvement increased year leverage XX%

ago. our to roughly a non-GAAP and year significantly Sales QX, in XX.X% of XXXX quarter the percent prior improvement As XX% year-over-year, at expenses in in representing XX% in the coming were a revenue versus billion, result, we generated down operating in $XX.X year. point zero basis a margin marketing

new prior the we QX year, malware in to all automated success overall sales digital XX% such our enterprise controls or in toward and shifting in seeing Research of segments Box XX% expenses differentiate into reallocation regions. and offerings higher and continue experience. and by our driven further are platform detection We're also increased performing achieving Shield, the focus of even million, revenue to efficient We Box development capabilities more and generating in productivity higher marketing leverage $XX.X our channels. as down were by as resources an with improvements

U.S. contribute Excellence in which outside more of investments the year our We open are Poland, ability half to first track the our our forward. efficiently back going this will Engineering to Center on in of to scale R&D

million or in Our ago. general of line with and administrative a costs $XX.X were year revenue XX%

$X.XX our cents from well came margin, improvements benefits. operating drive guidance. Non-GAAP greater coming the zero end of delivered exchange and expect EPS points this leveraging that from foreign the non-GAAP scale. a automation to year and remaining to in in $X.XX with improvement above our of We we discipline through basis the at rate year-over-year came X,XXX we high $X.XX ago G&A as operating compared

CapEx me into quarter ago. equivalents XXX.X our Let capital cash restricted sheet from payments X.X factor on cash. flow center XX.X Cash million X% million flow. lease year-over-year ended cash, million move were million in migration now negative Capital to cash year reflects which from ago. cost XX.X and was X.X was XX.X year Combined calculation, We data and the $XX free This the ago. locations. of increase from balance lease QX, in from lease a operations a QX. year X.X revenue lower for at cash with versus strong we flow capital liabilities our improvement versus million CapEx in very million a million Total payments, a were million higher

CapEx expect still lease X% 'XX. roughly year and of we FY full to expect in combined of the QX, X% and to We this for roughly revenue be payments capital of be revenue

free ago. As from flow the now XX million a quarter improvement delivered guidance. turn result, to cash negative let's in of our million we significant million, that, second a With year a XX.X XX.X

our strength from continued uncertain services also will within our for business the customers customers of guidance and seeing expect expectations our environment. enterprise this the accounting revenue smaller Our softness in reflects professional business we

quarter to of at XXX fiscal growth XXX we representing midpoint third the XXXX, anticipate year-over-year million the XX% of million, For revenue approximately of range. this

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

guidance. range to XXXX, in of FY representing growth XX% range. year-over-year expect XXX to our full at midpoint year the million, are raising 'XX XXX our be full We the this the now of million revenue fiscal we year For roughly of revenue

at our expect raising range. the to to be diluted We year our now XXX also million approximately on are full FY midpoint We guidance in by XX% $X.XX shares. range of non-GAAP of $X.XX EPS the EPS the 'XX

expected in GAAP the to negative approximately EPS to be is X Our shares. XX range of on million $X.XX $X.XX negative

our committed free revenue of be in and XX% remain we guidance margin FY the revenue. XX%. margins operating QX, strong results a growth XX% on revenue our in to rate and non-GAAP Based expect range more combined operating towards a by challenging generation, cash highlighted environments achieving strong flow free We to of dynamic summary, margin in of XX% in cash In of 'XX. we financial flow delivered to than

look would Our deliver during business our around our forward and open to us work, to improvements, at on large strategy breakout remote as and a resilient product opportunity resilient virtual discussing further I September leadership put like healthy business growth investor on in continue We innovation market and to Digital revenue Operator? long-term position. our position model questions. up for build it strong With model session that, profitability to XXth. BoxWorks our we

Operator

first of Instructions] from Stanley your Baer Stanley. comes question from Morgan line And Morgan Josh [Operator from a

line Your open. is

Josh Baer

questioning if any and shift flow you're on wondering, and a congrats still impact very the billings or if that year? the so, the just from quantify if quarter. for to quarter there's customers; Thanks for strong toward strong either for this quarterly I'm this way expectations quarter. Cash was seeing

Dylan Smith

Sure.

our shift, a drives a to bit on So see expect call, mentioned commentary. of we which last do as we the

remainder for revenue lag growth expect growth of to FY billings We 'XX. the slightly

in was and note we've second will lot although performance flow put -- seeing outcome overall a a of customer the the And with that durations payment cash So in payment by primarily have we our terms laid was call. particularly up the are seen to from impact duration would payment our in we note of come strong the dynamic some we'd driven quarter, that in material durations, earlier customers, free not that flow second it last quarter. been the our also out free renewals cash cash smaller periods. our operations in be pretty bit I of the consistent on expectations that a that more

Josh Baer

customers programs sneak any of wall insights just customer, talking Got it. wondering the on QX agreements touched in If a you I have and but more, believe of the if I this additional in expand the performance to little license you bit mid the for that new school sales wall? I one should enterprise-wide about can was help

Aaron Levie

is Josh, Aaron. Yes, this

across see ELA be program able Box especially to our their sales we've and Box motion, be able to do contracting of But with that earnest to simplify be starting as It's to the greater able away companies as go going anything the in well. kicked the well to are momentum more program. to motion had Suites be now, sell renewed becoming customers QX both kind across is motion in more want as was really for interest core We to customer the really wall. something be enterprise, a and to to focus off deploy able to the sales to enterprise able sell than kind it's of wall from right so, being to the more of that's to base that. ELA as and

quarter, to with our we see to longtime the customers we're early momentum still great others was us. So, one to emerging ELA in of the go but call had of it in we examples. We that but one days, seeing many liked pretty

Operator

the question next Your Winslow from Fargo. Phil line Wells from of comes

line open. Your is

Phil Winslow

the And are that. the for the to those of you of you're seats wonder after your talk users, sense quarter? just if us QX Wondering and a pipeline Aaron, also, in one still just on some things handle from shift you out, give was work sort platform. capacity about and activity color And some quarter saying? upload saw up last Dylan on of you sort for could just they're in called follow home? you of a extended just volumes what if I trends of needed this record that to in customers give sort burst what of extra to one then you have conversion quick

Aaron Levie

question. great Yes,

work activity part So, remote kicked initial first moving standpoint, QX. in of that I everybody from off to wave an really of the think middle

QX, by kind of activity saw terms levels, think platform increase, that off of normal the sort mentioned, usage the conversation. the collaborate, launched that organized, adoption, seasonally I we So new new and healthy activity their in on from our better overall -- Box. activity as driven new that of earlier on bunch steady We really that product of on was I better share a baseline in collaboration kind better customers features of content that features of help

So, we're now and of all some focused Box, features early super having of very on of about. adoption that really driving new signs very, the kind seeing enhanced we're the which sticky excited we're

So, that's front. activity the on

in customers. In last number that about to quarter as the expansion seats as our as of volume quarter, burst broader modeled of overall, the XX% plus Box with past kind of of The of quarter, by think driven we terms deals the usage, customers from. electing of we customers definitely so happy into where come within usage over we've to so Box. of quarter I about well And XXXk been elected very that was existing kind healthy thought showing our talked sort that go of their expand just Suites over up that, of call guidance monetizing the about deals

Phil Winslow

you about great? there feel your go on over be sort the go-to-market I'll year. capacity, some your new update on put Got how to would Wondering leadership have you past Obviously, follow-up it. of just an market. just then efficiency, update And

Aaron Levie

to the a happy well in we're as now, as general, It motion the think within model to the how has the expand team pursuing want in we're we're place. sure business and Yes, sizes. and right core well years we that the have drive drive all with really that land efficient with of of over engine make aligned really of evolved at leadership couple both and past I customers we that

at tail when as making team I the lot motion very And And looked go the field this kind an we making productive, had and a we we the we So, as that about into of management that part we where layers felt we're the were kicking now most go or confident could right territories be market. like think off well I upsell did we of the then demand well felt nicely this end customer in what regions within all incredible a obviously traction, drive in Box. to think base. of year, on customer year of expansion that happened last the to we and got go obviously of the at we out And early territories Salesforce. at right where we investments at was when could as now lot of the coming talked segments where lot a drive we've in timed healthy that across going year sales existing shifting to is playing that sure we really across markets year that looked

Dylan Smith

year a we've across, add XX% coming about. been And the the that, we've improvements overall performing pretty half pleased reallocation higher of year. first been on seen, customer terms that XX% strong the with by which of been in time, of we the a that's Yes. about regions. up this a year of we've drive leverage the able productivity, And expansion pretty as productivity resources that to seeing the of in result well spend talked driven of that changes as this and lot year-on-year, have sales we've was go-to-market are sales significant marketing impact enterprise down as same with on certainly At particularly to sales

us, And by the leverage allowed pleased the that's efforts a we've productivity efficiency shifting we've that across in been our as as that well. very selling of our performing of And lot marketing increased us engine. even efficient business as So base, the made digital in and environment. really focus area in to really digital customer is well more the around the and that investments generate energy both channels segment for revamping these this another the is with, well

Operator

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

line Your open. is

Brian Peterson

results. Hi, I'll congratulations on strong echo the my gentleman.

So, Dylan, quarter in pretty that in quarter pipeline or the that? guys potentially confidence you you third the the at and Any the the at on the least a enterprise favorable, third what that the gives expectations comment deals in look numbers on made back half. color least

Dylan Smith

Sure.

because mentioned, you pipeline, counts talked quarters, of seeing across there terms some deliver and some -- place and of to predictable we expect over of healthy in really additional drive six will more and been categories of and third we had as of are solid of last in process it So quarter the is the seeing management. all deal rigor kind deals the lot just do forecasts improvements able of growth put the we much that pipeline that several in of figure a of strength the about. is be kind to And

well have deals. overall increase deal relates counts, other out. dynamics, where value the to as And that's contract that of of some And we conversion note And enterprise figure average so, quarter that top pulled in even we'd are this deal big what six me healthy the there's make accounts would the on and the that the the an see. have and already seeing it gave coming we of the that is just note this most though as as by second we that deals in of quarter then just big the confidence, throughout and I'd general predictability driven we rates demands seen in liked,

the up QX that billing more second year-on-year, which So, and drive the outcomes. XX% RPO than in quarter, was helped

Brian Peterson

And maybe for Aaron. one

different lot looking you any know guys. customers used and you've for Just as processes. or what on Relay, know deploy I'd But of been you've can I what you. a the product? curious, it's seen be be a big usage? from Thank for that I product feedback learned Any to they're

Aaron Levie

Yes.

So, to is automate I think thesis got idea are those scalable of core going been workflows systems They're so that being as workflow we many couple a document was, of our for there management we they're now happening why simple, you highly that and premise the hasn't into usable, legacy years playing have e-mail, now The processes. inside types had able out. initial right paper-based happening processes. solution back and and as and space really happening

So and to able things a in review on-board partners digital or review and very customers way. like being asset streamlined document approval, approval,

and well So our as and of of of ago, the content our in out submit are types cases a customers our to as of in features a Those very playing between use requests, let launch Suites, clients as partners automated the now gallery not the as file as in that of addition well a new simple that fashion. year healthy some way. Relay as really about our template features some well

seeing regulated So auditability We're that we're seeing highly they workflows. industries to to Relay, previously begin customers able their of be customers to have wouldn't solution. kind in adopt solution normal and Box heavy because want have built now separate purchased out go of in directly they a and automate the gone of But or their duty VPN it's processes. more maybe workflow because can box,

next and year, half second the into go this we as think, of year. I So

in invested process then to in that Our whole to now want enterprises. workflows, companies way, from we're one able brings revolves going automation, zoom their more their customers secure all And out more their are of integrated strategy this management, to to on that you're push a and their idea together remote as that sort with platform really focus drive in their content workforce collaboration, play just more apps. have the and long-term around and out, optimization initial the begin workflow business seeing

Operator

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

Your open. line is

Adam Bergere

for on Mark. great Congratulations quarter. a Bergere Adam It's on

first provide existing is new selling versus believe customers? XX% think, from customers. of is, can I to you my last bookings mentioned came So I quarter, you commentary on any this was, question guys there upsells

Aaron Levie

Yes.

secure and overall, reaching cases, us the a better mean, still kind workflows where globally on I'll of to they automate I XXX,XXX in but significant in of we dynamic to general, collaboration, customer limited file think that data you Box give certainly has, are us they're want -- I want benefiting and able platform, sharing for now, certain from in the be or in they for this installed many security. using they're environment So penetration base have we now where departments, using we're customers

that right again this by overall. that as COVID. the less the existing of impacted certain half seeing now that. and very the And second seeing especially business healthy digital just predominantly retailers technology healthy for maybe growing from a pipeline our certainly into are the customer well sciences, enterprise But SME our consumer overall kind in a But are very financial across in increase more So healthcare, some the we're industries is now is services, customers that expansion, second and looking in really very, life the but coming segments, nice expansion we're pipeline companies happening and brands. in on rates, half select board, strong

Adam Bergere

how any there. number a housekeeping detail question. paying trended there quick just on users the And the Appreciate as quarter? this update of Is

Aaron Levie

of now in about that from where see customer up added XXX,XXX Yes, believe, the talking is about is X,XXX we you're paying paid we which and the we if and healthy to a growth was million did paying than quarter users about up a that $X.X in XXX,XXX seats, XX.X about number counts, customers, of paying overall users then have users. paying more quarter-on-quarter. a I million

Operator

question Co. Rishi from Jaluria Your line of Davidson & next D.A. comes from

is line Your open.

Rishi Jaluria

kind from post zero effectively to back bit on gross and saw, Wanted of And some continued margin much having the strong expansion. normally when the see looking margin a margin. Nice on we to getting maybe that And you forward maybe expansion the are little on to execution both things drill how T&E? are operating into or item. is, line on bit having benefit margin benefit improvements, and pandemic extent a of what and planes a mentioned, some margin to sure gross virtual I'm not see to of expect lasting the remote professional of Do same is as I infrastructure to do a and applies I'm and of long think, do of you sure there. cost you're from getting these some How question from And selling? kind more services. little shift site you savings? benefit dollars travel to hopefully you

there a you of your through thoughts got maybe philosophical and So follow-up? kind walk I

Dylan Smith

Sure.

we to say to in of XX% a the year COVID, I land and when XX% of expense be to revenue, expected for in XX% impact, to in we the to X% margins operating our had side the range. overall as So this prior reminder, that now the terms expect range

little facilities that than by So given is and current fully against X% of run been initiatives for largely macro focused less the improvement been and been sort cost around productivity P&E current to and strong to directly events a think particularly from or discipline. of around gross these little we've don't half to areas marketing you think expect up coming when basis, do relates normal. within to of And get of workforce We start from this forward intend even the than that. margin, environments. how travel there get new the in of expenses, on the savings things I annualized, of then, execution and the probably into some effective not of of all then That more show while the dependent that environment. we've seen of cost returned back, just once events because gross margin, a the we've those dynamics of we and COVID. primarily levels. it's terms is go that'll in expect on, And half And in impact areas current see any because of the space material impacted on in we overall whereas driven results through areas come overall it actually sort and as marketing has the those duration expenses terms spend able pre-COVID to includes environments, durable I And to some a once we

Rishi Jaluria

that then slightly I know, figure you it. but year. to higher, QX that back year-over-year go year-over-year. to QX of and both versus there that ago? QX said, deals in does year-over-year And number of the that's year-over-year deals, so in a down on down you environment be number maybe Was this number just increase to And you versus six to That's up helpful. what a QX is expect of Thanks. last also impact And year giving sequentially? in Okay, to going Dylan, understand, because help got any want being us confidence duration come shorter

Aaron Levie

is this Aaron again. Yes,

of and where year more in think, a years the think metrics, think now. plus quarter-over-quarter, current to happy very XXXk year-over-year environment kind completely of is bands the we're basis, about at reflective general, the deal on the of XX% of concerning instances that seeing we of start different which growth might and are Obviously, kind play. I some I we're the I of of environment are come way of are those very QX. in various the But where segments terms and customer so and specific dynamics There different in overall, of kind industries in and from an making QX have pipeline. dynamics you just some decision deals evolved have strong kind the

them feel year, when to put to expansion out metric, here. strong able again, that results looked But of we we're overall, continue going the half pull up the XXXk second that we even plus be at pretty confident to we're those the think the and customer I linefor of from on driving. some growth that close that when look on And overall seeing, we're nicely. the deals pipe we play year-over-year So, at

Operator

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

Your line open. is

Chad Bennett

Great. Thanks for taking my questions.

stabilized probably the adoption again indicated said, kind I from and and of And you monetize healthy of touch, grows at figure I I to So, points quarter six should ticked net count that becomes about at the it you prevalent? and in realize XXX quarter look looks churn expansion the due like everything's guys your roughly quarter. months, more percentage healthy. sequentially. adaption. this Suite in Suite but are as you kind And second trailing if in we X that and in if look a that we third circumstances expect you XX now right last number talked guess, like to down reaccelerate guess, you Dylan and of XXX like we retention I guess kind users the said, half base,

it year put expansion to great? turn for half you retention, however for forward how both the you going would the want think forward Just second of be kind in of you. going about Thank that

Dylan Smith

Sure.

cause be the be of somewhat as But more course and this going stable and overall impact consistent will in on that smaller X%. on X%, our at the fronts, to that's net in as the better Coming year. with expect we you to noted, And the even is where an particularly a expansion last expect that having We So, basis, bit ago of that rate. in forward. strong year COVID-XX an a quarter could this metrics annualized to dynamics, the stable, that environment. be a do metric over on with lot were continued related churn customers, remained you might fluctuate retention than

to in So customers. of where that more pressure, that created expansion. things particularly year those And has some is really going function out terms be shake a ultimately, in this of

drive so dynamics north net expect of above But we ultimately So XXX%, our enterprise for the this at balance the metric year. end this the that we net as we surprising recovery what retention some EBITDA what's detailing and to expansion as of that, are going rate we that 'XX. retention that that of these year see FY going of do ended were in on is to kind well where or at segments challenge around more but of

Chad Bennett

And question on then is. maybe one quick that Dylan

also, answer tailwind an but net should your rate? adoption is this a obvious for retention Suite be maybe So,

Dylan Smith

our upsell Suite just absolutely newer alongside customer be a and the especially like streamline will the factor fuel as to general increased customer by kind yes, is, extent And of adoption absolutely, in of of that in rate. Suites expansion. in drives adoption lot for cases, see of cases that exposure a say the some Aaron adoption and products Relay the I'd many we Shield of that customers mentioned, actually

Operator

from comes next Markets. question Berenberg Capital [Operator your Instructions] from the Brett line of Knoblauch And

Your line is open.

Brett Knoblauch

margin XX% you you I any When XX%. to Just expecting XX.X%. there just you or year. increased And from one that? dynamic? maybe and you. is if that here. first guys anything I planning the with you non-GAAP target operating help really question the of margin for guess to at at any half improvements Thank on remainder sequential me Are the there, know got could incremental in look for XX.X%, I profile you're your around guys not investments me

Dylan Smith

Yes.

in So have year, improvements first I'd seeing expect us the those non-GAAP origin dynamics that we the hold. been EPS, half do particularly that to throughout we've allowed increases to and significant increase the there operating second and make that course the note of in same and quarter,

certain as the those some hold So seasonality the for for true who that that mentioned, line balance is note there in of we see of We'd year. items expenses.

the if different the we second quarter, lower are around So historically, generally Salesforce compensation. the quarter components like you look for in margins at third versus dynamics slightly see there other of example, do areas and then

really do So have we well a we fluctuate like in that in the areas investments, performing areas and making bottom team. productivity line go-to-market as investments be gains been expenses improvements expenses, bit, certain continued in and particularly the categories as but trajectory, well, while the overall continued engineering expect showing our our will see would to

mentioned. make continue the You expect throughout but us those different year, the of leverage that areas drive we've time, same half all through the see at can to back investments to the

to continue we and margin strong through expect move of the of that trajectory half year. improvements, operating do year we So, as next back into this

Operator

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

Alice Lopatto

to day today. September Digital call an with your event our at joining and look event. you breakout our time Pacific Thank we BoxWorks start and for note soon. the will forward you be Please session speaking speaking our to at time everyone on again on Digital be today for investor you X again Thank you for XXth. forward all with again BoxWorks will We look pm

Operator

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

now may You disconnect.

Box (BOX) 26 Aug 202021 Q2 Earnings call transcript