Earnings call transcript Q1 2024

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Operator

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

First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

of Head IR. Hiponia, Cynthia

your You may begin conference.

Cynthia Hiponia

first afternoon am ‘XX year welcome Cynthia Box's and to quarter earnings Vice Investor fiscal President, Good Hiponia, Relations. conference call. I

today, Co-Founder and Co-Founder, call On Levie, CFO. have Dylan Box's and Box's the Smith, and we CEO; Aaron

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

website. be audio at for only, however, also are of slides highlights available our the Twitter will supplemental download now today's from webcast We'll @BoxIncIR. on the post Our call handle

and this forward-looking our our investments, margins, other revenue rates flow, gross of the obligations, quarter guidance second On retention and targets. revenue, planned performance our will and operating performance and we offerings, XXXX our free to operating our achieve cash leverage, and call, XXXX margins expectations be including our financial statements, model ability including financial of periods operating exchange our regarding fiscal net our full-year making margins, remaining billings for the our profitability, regarding size future and growth future foreign expectations opportunity, currency fiscal strategies, and operating future and rates, product market impact

on for stock. adoption savings from of our business our our pricing and models, customers, potential ability allocation repurchase The impact of and our and strategies, timing cost our our capital the and the partnerships, and operating challenges to market benefits new common environment macro deliver including products, results address and of enterprise

Commission, actual forward-looking we today statements or currently our to Form uncertainties XX, or press events most we made on today, of to this Annual are factors on information and on should These May materially. risks our filed Exchange and risk and any up documents earnings them from recent they statements including Securities file our made or actual us factors XXXX, be the that Please These best differ update statements date. the and on reflect obligation based differ earnings to revise to refer the cause Report to with change materially as call. judgment for to results release may in may known and XX-K results cease disclaim

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

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

With me Aaron. that, hand to let it over

Aaron Levie

thanks and everyone joining for Cynthia, you, us Thank today.

the macro year-over-year deliver operational testament our revenue guidance. includes from a growth strong as improvements. pleased is on above quarter value of and Content X% to Cloud constant to Achieving on operating year and in profitability results bottom first are our operating results This in our the XXX XX% We of discipline of XX%, to environment a focus a challenging we basis margins up a in resulting basis, points line a year-over-year, currency substantial deliver platform, these addition ago. of Boxers

customers, most to and businesses the we’ve seen continues While the message we growth smaller to in platform and in today. in trends dynamic the to well-aligned expectations continue headcount strong seeing and facing macro stickiness spend notably from customers, of are challenges economy our U.S., is also out our they pressure IT our EMEA traction and are play

businesses, on that and our today of the are business simplifying aligned productivity to dynamics opportunity leaders they all nearly are transform to environments, technology quarter, and out that of their quarter are my their last their in clear conversations underpin it’s even get leverage protecting IT with looking fully most data. the work, business across pillars and the focused value last help speak across AI face Over the the their everywhere how to more And XXXs data. the sensitive leaders, and I’ve driving power enterprises had strategy. of with Enterprises

new defense Cloud government positioned A mission platform QX who Box’s critical how portal. and streamline Content wins to to is also to agencies, include: them. layer for realizing in solve customer, collaborates a Box customer FedRAMP to underlying power is management, wins help tech will compliance global their who its content and in instance customers company QX order these Box that challenges, with the compliant remain for illustrate for customer stack These our integrate and its best purchased value with the meet and federal Salesforce these ITAR content manufacturing we

information critical TAM of agreement to A product license purchase to of our identifiable product enterprise our innovation. multinational its retailer, with new continued of adds core and expanded expands that protect execution in And stored use amount value success is to is our Box which six-figure and our ramped Box. personal Box a vast with the of roadmap, our Shield platform

we’re their included emerge Box security, customers we announce powerful workflow and ideation the and to Box. new delivers across now a access creativity level, amazing customers. to disruptively market, the enterprise-grade pleased to availability use-cases which general which to leveraging were of of a this Canvas, Canvases new unlimited have way QX teams to to take for compliance, In plans, their Box while unleash in already us seeing capabilities our enter automation and enables brainstorming

advanced subject dedicated costly taking seamlessly end-to-end to ability are Shield QX in e-signature that access the enables to Box have e-signatures with released enables specifically signatures we documents the and Box We our Box Content such to build customers features Sign-Relay their use be as users and provide Box from a workflows Sign, launched post-signature Shield's policies. included e-signature incumbents. on Since unlimited to we launched a cases request for policy migrated integration actions customers In in orchestrated Cloud. Box plans over advantage Sign of Box to

into now the the process, Box Box can sizes We all also organizations Admin the advantage Box’s Console. Cloud has content and next of accessible Content directly take features Box content many is capabilities and migration offer. of announced generation that simple, With migration full solution, of a built the Shuttle, Shuttle, to

integration Salesforce, technology Asana, Malwarebytes, we Finally, the extend Zoom, CloudFlare. technology an integral in Webex, including strategy and QX, In integrate addition a partners our ability and part of of to Workspace, Box, to the including is and deeply Notion, number landscape, that and ServiceNow, Microsoft of Teams products our much with more. new enhancements SaaS product delivering announce like Office, across pleased to IBM’s solutions, Slack Google were value the

continues forward look to beyond, we our of accelerate. pace and ‘XX As innovation into FY

how at opportunity AI are of change software. to beginning a completely landscape has We cloud gets and era technology done. new to the of the the Similar mobile forever, stages work how changed

meteoric Models As highlighted capable reasoning in LLMs, bringing of breakthrough by or Large which to the a tasks. of we've are ChatGPT, recently the now rise number Language large begun potential see to of huge of a human-level

to with you AI your these models own data power set. real intelligence their use when of you securely help the new work is proprietary However,

ask the database, in to system. able information questions or CRM a system, data, ERP about that's been we've years our For structured like

value our like the limited levels, You chain supply which results, data, data, ability By But now can can those questions truly models for we content. is had of ask details, systems enterprises forecasts, enterprise we’ve corporate and unlock of to leading bringing unstructured XX% ask financial sales that AI inventory in data. content, their more. can. And pipeline safely lies to

models securely, to do To a and safely, content. this, these our we need enterprise to compliantly connect way

their As and models initially leverage GPTX this month, the and them information we leveraging OpenAI’s Box announced ChatGPTX.X their or content new can questions generate content. Box ask Box just the AI of AI, we're securely letting earlier power leading world's for with enterprise with customers Notes. AI With starting taking customers of

Imagine at to report would or quarterly can please on an this you automotive ask able in like days take? customer earnings document. on looking a five industry product key pitch HR document I parental to summarize provide being a when product things and overview how document or of the leave this how many instantly a takeaways

variety data able of to beginning. will of to platform providers, the extract of our platform to automatically content a how can the used being imagine classify in ways, AI a just content in use be able with throughout work ways. a topic. specific being even using more set variety product specific in use continue this AI core and But a workflow, a transform from on models AI larger documents a the interact a question as Box ask future is we to We to capability, with automatically Relay to Ultimately, of APIs

we’ll vendors of technology bring also will be emerge we as position be in as platform-neutral to a AI their more Box which And customers. time, breakthroughs power from full new vendor, a our AI-neutral, and means over to the

addition with we work strategic Box with into customers partnership are to our we new with smarter building In on ways more and that for to to AI AI. our recently models collaboration Google’s Google joint announced AI integrate advanced generative Cloud OpenAI, productively create to

capitalize on with Program innovate this excited updated approach be keep degree granted we to you opportunities technology on access exciting and execute product a customer a are continue Design is of created. Box thoughtfulness. Box area, we Initial the shift new Partner to this AI to opportunity any Like has through with AI our with will to high new technology as

see discussed Day higher in and packaging initiatives process. gross to us optimized go-to-market, account net pricing efficient turning a a have higher more our retention, at we as value, allowed greater total Now, sales and Analyst our to March, margins,

time, of to Cloud. new strategy the Content launching multi-product bringing continue value to Our our full increasing the customers them power by over offerings the is

Our in continues over Suites in large deals QX. of of to attach all across well deals sales XX% of latest over geographies. Suites Plus, consistent Suites comprising be large multi-product Enterprise deals, We in our our $XXX,XXX rates saw XX% offering, with

develops building expansions of with QX Plus include: that to Our purchase customer use Enterprise materials renewal produces Enterprise and Box expanded U.S. its new of Plus the A benefits and services and of six-figure Box Shield and company wins gain and Governance. a with

As more implement from advanced migrated it security Box compliance necessary that old provides. company Enterprise for to data servers, the the and is into sites and was more SharePoint controls Plus and file

Box Box’s technology Enterprise is expanded in hospital posture component institute, U.S. enable upgrade their also clinical with in to and research of use to their leading plus a A QX for Box its critical Sign order ecosystem. an security to system trials.

to AI been the AI In our efforts, to summary, of quarter of guidance transform securely for a we’re the our they a our is work. deliver result content with execution as Box value approach platform have we latest direct compelling companies powerful, platform-neutral Content to building and their and bring Cloud company. first how driving our ability above results And a

I'm innovate customers at work globally, our that employees to our do proud successfully the are serve rapidly. of ability and Boxers critical and Box, our to our

Best to to work in being number GlassDoor Box recognized addition to was named the Best XX number XXX in Companies two Place last by the Work quarter, In Fortune as magazine recently for XXXX. by

along very in dynamic market, with culture, remain committed Finally, growth a the Box with balance continued steadfastly profitability for a of we while strong out investing build drivers to this and driving growth increased future, continuing like AI. to in

new while, revenue results and to lead headwinds operational a doubling IT focused through improved excellence growth. for drive putting development long-term and on increasing are discipline topline results pressure our spending of currency the to continue line this us down we spend year, that bottom culture will on on While product our environment

And hand Dylan. me with to that, off it let

Dylan Smith

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

EPS QX high-end revenue, with of despite quarter Box, operating another the strong the and results was above margin challenging all macroeconomic guidance, environment. for

optimizing in continued We long-term structure, a our profitable in growth, model. financial cost resulting investing while resilient underlying

Box to AI, model products consistently operating in Box generate and margin to shareholders. our continued as return Our balanced new gross business invest innovative capital allows leverage, and and such us Canvas

customers revenue year-over-year. paying of on We guidance, representing XX% nearly currency a QX annually, above have growth and million, basis. up of high-end more In constant increase of X,XXX than we $XXX an year-over-year $XXX,XXX the now our XX% delivered total X% year-over-year,

environments. they our of attach deals now QX point of rate value customers, as Box XX% environment, in XX% ago. and is Suites to Suites Content revenue secure XX year large Cloud is IT this with Platform from a Our simplify is to proposition demonstrates the XX% dynamic value large attributable customers delivering our our in to significant a Even resonating to transform, Box’s look increase their customers.

by in customer currency to contract QX basis. durations, growth ended continued RPO, our performance We of was lengthening quickly in or recent customers value constant a remaining uptick increase, look billion, of This with the XX% growth offerings. obligations, adopt Suites volume the more $X.X driven quarters, a renewals as strong or an as on full well as year-over-year early of in XX%

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

$XXX XX% growth our QX XX% guidance year-over-year, a in representing rate, ahead of of and grew currency. mid-single-digit billings million of growth constant

QX of had to Our early to that the roughly in strong high outcome billings volume part was large in due scheduled billings of forward been year. renewals, renew pulling million a later $X in

Our rate at expectations. QX of in-line our net retention end XXX%, was the with

year, X%, full current environment. offerings of annualized demonstrating was versus prior Our the criticality stickiness churn the our in and rate product even X% the in

at roughly churn full remain throughout expect We to X% year. this

XXX%, we resulting lower to expect rate particularly U.S. EMEA we For range our the net the FY of environment macroeconomic stabilize to customers. in the our in seat XXX% through expansion rates, Commercial manage in retention of remainder as and ‘XX

in XX.X% QX, well basis the expected and we Gross from in the year. up a XXX XX.X% for of year at came this XX% margin had ago range above points first-half

Our QX execute the delivering on we as reflects we’re gross migration our cloud optimizations public strategy. margin

cloud public in expectations to expenses data in XX% the range gross duplicative to our for QX. QX, center and margin expect leading peak our We

of As we the expect the to high we the to second-half rebound look to gross margins XX’s. fully year,

in $XX up XX% of delivered our year-over-year, to entire X% million in gross was across million. income, XXX rate We a QX basis once revenue with $XXX the points. growth profit business by leverage again increase QX operating exceeding

up was the year from margin ago. we points XX.X% XX.X% basis operating a XXX delivered Our

which impact profitability. up diluted non-GAAP consecutive GAAP in full QX, negative a from $X.XX delivered $X.XX QX an $X.XX delivered third of ago high-end We and the I above from of of our a in XX% EPS which marked also the year FX. note $X.XX quarter guidance, would that we includes

million sheet. and the ago I’ll QX year delivered from now Capital cash $XX $XXX million, include from in turn XX% We year period. operations ago balance in free $XX lease generated cash in cash a free a flow of increase XX% In of increase flow $XX last million, to calculation flow our we QX million $XXX from flow our year. cash in were we million, of million from $XXX payments, down which period. the

equivalents, million $XXX QX we to now Allocation our in and cash, turn restricted investments. million. Let’s $XX the cash, with Capital million Strategy. approximately short-term ended for We In cash X.X shares quarter repurchased

we very had current repurchases, remaining to QX. repurchase in additional XXXX, to $XX approximately of XX, repurchase April through shares capacity expect shareholders buyback our and of As committed capital million under share our plan. stock we remain to We actively returning

The QX FY I our fiscal year that, to FX to like U.S. and continued strengthen would of dollar resulting second-half for the to a for guidance. in headwind guidance With turn XXXX. and QX initial our larger-than-expected has versus the ‘XX

expected guidance revenue our generated the third includes Yen. As exchange approximately following Japanese the The headwinds, assuming of current one rates. a in primarily of impact of U.S., reminder, is outside FX

For to the currency. XX% year-over-year We the of $XXX in revenue range representing X% high $XXX range, growth in million, quarter this the million at of of end or anticipate XXXX: fiscal constant second

exceptionally We strong expect of revenue our be QX the our renewals result. an that QX QX billings range to growth to again FX, growth impact QX from as to point the low-single-digit We growth basis, higher as than be contributed headwind basis reflecting the as once our in an our rate well rate. expected expect reported anticipated early XXX billings RPO on

point XX%, representing increase to operating expect XXX We our basis improvement year-over-year. to a margin non-GAAP approximately

representing and to EPS high-end GAAP increase of to a be the in expect in $X.XX. to range $X.XX at year-over-year range of XX% range, We of to our the $X.XX be $X.XX, the the EPS non-GAAP

shares million, expected diluted approximately to Weighted-average are XXX with be flat QX.

$X.XX, Our QX includes primarily in EPS previously. fluctuations headwind approximately the GAAP to guidance from as expected yen and an non-GAAP discussed due FX of

spending $X,XXX the million basis. For or the representing and negative recent growth to points. versus We we basis our FY IT point the XXXX. yen dollar constant range XX% discussed XXX This growth, full million, rate now FX ending have year-over-year expectation prior on of a fiscal of basis We environment earlier. now revenue year our U.S. impact in ‘XX strengthening FY the revenue reflects range January expect a the XXX versus both revised expect to to of the X% currency $X,XXX ‘XX XXst,

‘XX We expect XX.X%, FY our basis previous gross margin XX be to points roughly above expectations.

public continue we be cloud in and additional margin leverage to we As model, to profile. our the important on our stronger transition an FY exiting ‘XX will execute even with gross unlock

XX approximately are our from XX.X%. by operating to As year’s points result guidance point a of raising XXX FY last XX.X%, a ‘XX basis improvement we non-GAAP margin result, representing basis

also in EPS increase at We we raising prior are the to expectations our to to XXX the a to of the FY in $X.XX $X.XX. EPS be $X.XX GAAP representing expect high-end are the to Weighted-average shares range range range of the ‘XX non-GAAP versus of approximately and $X.XX, ‘XX expected XX% FY be diluted be $X.XX in million. year,

Our EPS impact annual FX of approximately expected non-GAAP FY and $X.XX. guidance ‘XX an includes GAAP from

the we than a For of headwinds full-year basis anticipate to rate billings FY by our more ‘XX, growth points. little impact XXX now currency

FY our reported as be mid-single-digit basis. on billings rate the range expect ‘XX an to in growth We

costs. in margin revenue Cloud need Box cash dynamic target this disciplined transform with achieving and the margins. flow free our QX. that expanding the platform execution constant ‘XX of summary, balanced macroeconomic are both investing for their to XX% once growth demonstrated business free We FY our is pleased to cash enterprises Content remain In and we model flow while in or again We our XX%, environment, growth In plus operating lowering while long-term their committed currency. of

Operator? Aaron your be and happy to questions. I will that, take With

Operator

today with [Operator Enders line Steve Instructions] first comes of Citi. the from question Your

line open. Your is

Steve Enders

Great. just that here. I I I And what the guess EMEA maybe changed Thanks guess for just guess, specifically we're a has couple on ask want and that’s seeing you're there? out being bit quarters? the more here. in versus macroeconomic taking I of how impacted And to questions seeing the it what and SMB of a business, is what the

Aaron Levie

Yes. that. I'll This Aaron. is take

U.S. to were an already QX kind of kind QX But we call year. of in as overall, the in the and of in to element the well what at the can tail just see EMEA. guidance, the note of on we of as that. end want front of and really we're seeing trends impact, kind but of SMB you because last did is to seeing similar think incremental, kind the pretty were did want what We incremental general general I out of softness as it FX

deals, fewer Overall, I think in of incremental there's of did environment, the scrutiny this healthy we're on general call business, kind think be especially would is as larger as quarters, in but that of past about would and you sort when maybe think come we'd an $XXX,XXX previously, QX of results, the see we want in seeing example. that to I under couple the just some where of today's But level deal, trends be QX talked it softness. overall, the across would guide, those maybe seats I that kind you transacted look that that doing at and dynamic be we've just the business segments more a

Steve Enders

about you And of in know, guess helpful forward? funding with kind the you're how thinking of how I on the potential there. but think AI the should that I AI you've that you're and, thinking side terms I about and strategy? aspect about anyone for Okay. the how we read of asks come maybe going what's of, early the think out kind monetization announcements and, already, That's guess, on

Aaron Levie

Yes.

understand we I potential what the the while with want unbelievably language of the about, it's product as as note, we're cases a taking use been to pretty large in of is of seeing measured kind Box our latest use early drive that frontier kind excited models for do kind packaging, are are and we've still we of out. wave in space which the -- our a want efforts. right the of make a right UX, So and we kind new to Obviously, we roll obviously, But with overall journey with sure pretty deeply why this approach AI pricing cases. that in of we the

think way table going company fundamentally internally philosophically, and I the a be use for about think from that of just are a kind standpoint some it we ours. that like product is product cases are stakes we there believe to

those generating AI. table content might be Some with stakes of

questions of And can AI. our and ensure be of some want programs, that. obviously, that Some through of to continue try those evolve of and might beta we go data available. in design we amount make That's set that them cases, asking broadly we partner leveraging program to we'll philosophical as capabilities

are And or of platform capabilities to especially our that some will then design maybe partner suites some either have them often kind or through and use customers, see where monetization driven business we or related multiproduct through by the really maybe will cases of be incremental from program. via to again, high we that in either a packaging this through our that more have workflows want there capabilities platform advanced consumption dynamic our API

going I are data out you've of of model. we're kind our either our in we about and with beta companies right ultimate be trying say as the companies pretty seen what's two, quarter evolve I the doing peer as of can technology pricing they force, and think the same. this shown basically that content. coming already packaging thing tuned programs we we've -- to roll -- stay full other transformational and are or it's dynamics big now done figure in pricing products, decisions, and public work to we building very the I'd unstructured out So But tech in of is We're kind kind how similar think continue their we to think or the

Steve Enders

questions. the taking for Thanks

Aaron Levie

Yes, you. thank

Operator

question of next Baer Your the Stanley. Morgan Josh line with from comes

open. line is Your

Josh Baer

a question any or on and ask wanted of Are for a cutting cost today? environment. use resonating the few positioning that are around for Box, I whether themes for some to congrats for nice really there these cases AI cases on use it's quarter. this Box Thanks in

separately are to wondering your customers talk in of could Box way just that partners about like with And related, or using the you a or external then case collaborate clients? little mix or some or if bit externally, suppliers customers the use

Aaron Levie

Yes.

It's going our just So of degree or There's value government so of our kind with on you I'd order, industry, our maybe manufacturing of to product. the in internal in deals, of make significant revenue. is especially propositions that reverse our larger -- with and -- the of percentage collaboration heavy one of say bulk the other collaborate need up key increasingly our partners. our external defense kinds the defense a you're

in secure, You kind something of boundaries that data allow for, outside and be way. compliant to have and is going FedRAMP, move need very your both of the to a compliant, and organization security let's controls you reliable say, in advanced

So whether part it's our the value financial is kind external services, collaboration core a life of overall sciences, of care, certainly industry, proposition. defense, tech health

of and industries the seeing And collaboration of even retail In in that broad-based helping of better think sciences life we're around care, across from platform, improving terms deals and sector, the important protecting deals, great of tech, data, everything terms workflows in it's organization most of some in drive pillars I the seeing in software. well. content the centered use health our then kind core connects deals posture cases some of as our their security which and healthy all to business are their the three pretty near-term the really by of around

that and content really Salesforce and Microsoft more hub and Teams So being Slack applications. for many and Office ServiceNow into a connects

those core think of I extremely So alive three areas well. kind remain and of focus

our it's And then deals and what customer having given AI we're Box any the conversations seen have increasingly some out any conversations driving and about certainly I trends. had a than now in wouldn't to even of I've lot AI technology tied about enterprise been in this, of necessarily kind attribute major AI, in is QX we've but cases, around the CEOs conversations, CIOs of kind prior reach more which strategy our of in strategy

how figure kind cases, AI think of requires of a between I their -- is cloud infrastructure, which the that's AI abstraction going customer in is bring of to their models, trying generative And building everybody we're layer substantial do amount data out they to enterprise out. exactly to work and strategy use and which what

So we to we're really strong in position with a that. think customers help

Josh Baer

If I sneak Dylan. Thanks, Aaron. in one for could

wondering renewal in of what does more some QX then could the I provide assume early million early you on renewals, What's in if on regard that Just $X type the guidance, color to that trend customers? stops? guess, driving that behavior? And billings

Dylan Smith

Yes.

customer be what and for want able get into So driving cases those to in of and that would typically to is terms of to to example, in dynamic QX, the adopt in we customers, to support natural suites larger than, into cycle following move and to renew of capabilities. tends what's a the early some similarly those cause that suites early and renewals, the main to use higher-value they to be renewal be decide a saw quarter newer for waiting the rather handful

So that on. proposition more from move the tends we quickly to see the just and to understanding what be buy-in wanted take to and just clear customers is value those

customers of renewals kind expect same $X of of see approach the and the expecting did in would see baseline maybe in that's we renew in of a necessarily And million and the quarter baked of billings any come to that out into quarter to to the to QX, but the we our we we early kind most type volume conservative of given that see, we tend always take fairly that in tend to QX, expectations we're so quarter. as elect not early see second saw some

Josh Baer

you. thank Great,

Operator

next of line question Your comes from the with Morgan. JP Pinjalim Bora

is line Your open.

Pinjalim Bora

what at AI, really Great. you point. talking this so the much questions. Aaron, quarter. customers, you're Congrats on medium uptake to do the monetization maybe for taking of the understand And kind can't in you talk I terms you as your in of term? functionalities. on growth AI rate to as hearing overall the the Hey, these you of from an accelerant see them thank are But about area

Aaron Levie

Yes.

would amount conversations probably probably that with standpoint. of from an of that topic the the fastest one Box energy this half IT in say seen I decade on with I've certainly doing is So concerted single and customers,

the at until they the on So get and for across of another years was cloud. was doing from the very then of mean had you useful base. what cloud cloud enterprise of enterprises I adoption mainstream five least, cloud could why really kind just computing, we still it the worked basics decade the And educating efficiency

have have think AI, alignment trying customers rapid new Obviously, and cases, out With a on things use products new like capabilities. been and I ChatGPT of you testing such center. front

that. are banning companies fully Some

-- to going going Some come is are companies Is to an customers in enabling reasoning out cases. interface trying from is from? becoming companies then most it back? just use like a and And figure that. AI come an it to and are going going think question are boost a asking what Or kinds some AI a I into and productivity ChatGPT where and and for gain from getting to of data those existing answer existing productivity over workflows is come an enterprise the

have. existing generate going ask do we content you'll products Box able that to help be be directly AI instantaneously Box questions future with with with to With model and Preview from haven't Notes, you'll Box start of yet, data to customers AI, to able and you because both the the announced we're actually,

early types overall. are kind saying, it or of of I'll having understand want hey, be to thousands sciences to of want we're specific topic, research ask actually be across documents have or of kind I what's the incredibly we have thousands trends it. they're We And for customers just a of of so all inside where questions content through a through to be tens could be we content. you but in to could life both meet it. of hundreds be could of use of cases, set. think And types it's understand We companies this go this to data, we of we able to bespoke saying, manually contracts, industry. conversations a kind a content can sense data to give those of metadata We specific And what's want reason and now, right humans this have in kind apply it. correlate able and to have of very

the they super And exciting or often are to that don't use have be so humans too because don't either they enough would it cases costly. just actual get

it. to around get never they so And

starts more it of with value. if so of unlock they certainly and more of even actually move already box, of the this Box data inside AI, they to tap into value into all kind underlying -- And that provide or it data have can

kind with of are those we're customers. conversations so the And having that

identify kind advertisers. individual their the that believes what that their in We have organization, advertising the some would breakthroughs can companies of generate to hey, if more all inside across we correlate advertisers for we collected that to they quickly multiple documents are if they projects have we would we saying, if research what put only single be understand think on industry that by revenue known wouldn't any new company could sciences organization certain work of research a or across make sense they could it projects identify could life certain data actually

the so drive revenue And for our kind of are really They new productivity. can use cases which customers. can these exciting opportunities drive

on. pretty to focused And so be that's where we're certainly going

that think our I is, we because In thoughtful terms of of to early about it want accelerating really revenue, dynamic. be how

think I all for table become software. of to stakes extent, AI modern is some going to

amount driver one And cloud. a think be to net we'll and architecture, get bring of from legacy logical good a their trying really fragmented the new that the going to budget into in But that companies data their kind same we We off of and content stand we fixed general that's systems. a to the that that's huge compliant, it's so the AI. of the one to of think in secure, is that one benefit companies will certainly moving time, at have can they recognize

there's that lot And of for be going so budget. kind a of volume to

to And on too that. thoughtful about so hard leaning we be want

Pinjalim Bora

through of to upon And you beginning. towards the kind How EMEA. kind Is maybe macro in the Dylan. And the quarter? the it. the SMB Maybe very softness the for can three the and Was Got it if that revenue fall one Consulting? Box about in decline. of that helpful. towards the months did the quarter? touch end, the Very, situation, also, Dylan the sequential because largely talk linearity of of

Dylan Smith

Sure.

pretty the like well both mentioned, enterprise normal the segments. segments those We as the saw So in first starting you linearity. linearity of rest quarter our a in the as with business,

nothing So then which we QX. that QX, $X quarter's the by had And from primarily the are a in standpoint. to versus terms impact about decline, QX revenue there million that unusual days sequential number the that of has in versus of was revenue driven that

million in there from quarter. the then revenue strong Consulting And a Box of a fourth was dollars outcome very also couple

way those, the So a those of todays add a of revenue. the up to first is we volume about fourth main that But up in something the chain higher usually that. stronger to driver bookings show but not sequential of million. the quarter was combined that year, the pronounced offset as have in this then $XX of that's unique typically as to doesn't And of dynamic, and

Pinjalim Bora

it. Got you. thank Very helpful,

Operator

from William comes question next Your of Ader line Jason with the Blair.

Your line is open.

Jason Ader

wanted Thank thread the AI to continue Aaron, down you. I shockingly.

at two it I just in ways. look let's -- guess, to I wanted First, different

worry knowledge a you high what for that? about at does First, this seats? level, And mean worker do very

been go talk more can structure cost monetization, does or risk of Microsoft the forefront And has of this on change on -- does then just lot this stuff? kind just not, competitive Secondly, of Microsoft positive because of more kind how the the at side, side, advocate when a on devil's how the about thought what well. sure your there, in that. to a lot of and don't some but I chime want to I'm there? your you internally Dylan, are thoughts as maybe you this you've you about there how are improve using

Aaron Levie

try those. cover and great. Yes, We'll

So a kind and philosophical sort on seat clarify, question I one, that just over changes the was like of meta first on time. so of

Jason Ader

growing a otherwise. it have fast as not would pool as knowledge potentially just Yes, workers of

Aaron Levie

I'm is And this what of a of of kind Box knowledge be potential standpoint, opinion. a that in corporate going for to kind impact productivity opposed even as overall. personal just to terms would But to well be work. a I -- financial positive view net large that net corporate from Yes. is worker our this of we're replacement swaps knowledge population so this a the total strongly a to as believe in early seat is

look actually the employees you of one with, our jobs across of roughly kind If is us at require the many any of any a in a sort X,XXX maintain. of degree hundreds, actual we're interact that do vast that that that we we context to of anybody work kind our that of kind of large tasks thousands subtasks of subtasks; of majority or doing of have collection us

or faster AI kind is that if of just into with I some more grow be making productive those as Maybe of future And more I we productive. do and make us more in think that the company that productive, to they want employees roles be net but faster subtasks of a XX% will really think subtasks, a to work accelerate collections just productive. roles AI in is going we may their opposed overall. some like that individual after could and But cases, way result some X% less will the wouldn't more

be I in overall whether over be can time, then sales companies it's more people So more to there'll be be be demand to and either we'll those reps our more produce and more designers more see skills and will there'll that customers. because be sign efficient we'll engineers I globally, more in will able graphic a able do working general, efficient. jobs with -- only there's for think those

maybe information, sales getting engineer building doing of more with customer their code or find rep a parts of having time and to trying an a the of be fun or can released a waste feature. working job search Instead or they productive

population. that's And kind think so the of impact I knowledge total worker on the

things in so the what leads So broadly in One, X Azure. I'm to we're the camp you on well, terms optimist given On Microsoft, one it firmly more note. does models OpenAI Microsoft OpenAI jobs. partnering virtue running to generally to time with by on this as which partnering over with of

to exciting So on potential collaboration a that cooperate going lot we pretty that we're there's, think, with and think, meaningfully. I of them, an area

leverage that basically any would AI within products, the Box so but same seeing And Microsoft customers well. exact will able be they in as be to

benefit with has to So the kind already software. integrations relationship a of bit a of drive to of there CoPilot that adds bit ability third-party CoPilot. our with

at Box those as a last week announced high And conference of so integrations. kind at Build was the one of level

And various endpoints so we're to going CoPilot the that create. they deeply across integrate in API

or or maybe So Inc you'll where you salesforce products. ask to supported see a and a you data question pull of from lot any CoPilot to the Atlassian and of go Box Box interoperability needs that

integrate. content out standpoint. what go we And player we to us do deeper see overall, in than other that clear think is be be can AI believe to very from will so an specifically any that we what going is way And going of strategically, kind a building I you're think

our cases and AI our the proposition is use understanding value so And to content core expertise.

the And up our benefit element then customers. being ends neutrality I think huge a is secondary for

a models. others. technology. So today, obviously, leading with announced Google, with be OpenAI has many in market partnership of great we'll We certainly other where players Google There's and working the like the

Our ability customers coming the are as some breakthroughs various wherever kind strong can we to leverage of in to where very neutral position of be from. those us a think, battles, put well

want it. in terms as to employees and of want I'll are to to general, leverage Dylan then about our in that. productive certainly we we let being as cost And possible But do ensure talk structure, technology

Dylan Smith

being overall impacts But internally how dynamic, similar the think pretty various to tell it's early worker absolutely a up we use approach we described a and boost tools exactly how way to broadly, as on Aaron just Boxers. ends this on our productivity. and is that, knowledge AI the embedded view I to that as everything it what in build And to bit

example of that one answering is an that assistant mentioned. to that, the will Aaron basic be questions automating so And subtasks Boxers

can Box to flag just supercharge identify response able our And there's security really other where, for be the specific cool of activities of capabilities certain functions of instant and then to kind a ways anomalous example, on team earlier. lot threats for

I are going but in as more jobs value supercharging productivity of the possible. as out different much we're be different view using we So a impacted to think of really as different lot it getting that it's ways, tools and

Jason Ader

Great, thank you.

Operator

question the Tom Blakey next KeyBanc. with line from Your comes of

open. line Your is

Tom Blakey

A question, just given you questions could comment you happening, in current my why Hey, might longer it actually Just be whether this the strategic bolted of even few everyone. macro, on reasoning maybe duration be if highlight or just the interesting, for great, taking Could thanks deals? just kind here. possibly discounting?

of you XQ. quickly that on fiscal Secondly, and bookings mentioned fiscal fiscal booking into Could helpful. maybe end doing XQ on the there you just trends and QX, comment would at weaker be

very margin. just would be and helpful helpful. my some over comment -- look it get from gross my a gross taking on Dylan And you as from impact margins regard to would questions. seen It your third be AI to an impact longer-term be model. impact question to least a there would at model margins you on and time modeled AI on the the maybe of on business could on the lastly, and I've company's some around usage Thanks gross have with modeling seen consumption-based margins or the more especially for we've --

Dylan Smith

Sure.

try then but -- all something or and start miss we'll So good. and if no, I the question

component, several our challenging long-term macroeconomic customers a a viewing I seeing we've pretty duration for Box now is would seeing So that consistently on is while the the strategic that are say it as of something all, environment, we for partner. actually increasing first where quarters been

Plus Enterprise suites multiyear deals, to be so with especially tend and customers, our larger those And renewals.

renewing, kind growth. out durations contract of And you the of extending the combine led as customers so early with the average That's to -- what's backlog when there. that outsized more dynamic

us. So that's to any more just or and that having and contracts we're with XX% that of discounting because unusual pricing approach confidence or long-term electing to sign year-on-year up longer It's different is doing. not customers

generally most booking year of describe it in as QX terms similar and our trends expectations. last delivering the In steady kind parts year, of comparing pretty of business of kind the saw this versus against QX what with we of of would

see customers. were areas where I business how commercial a the question The to in we our baked that was guidance U.S. that margin, that the would it's the QX, did we to is about into incremental seeing the softening EMEA we're specifically. And early called then that expectations on we and AI and some we bit comment out, then certainly, say but what provided. more gross clarify on will And think impact

Tom Blakey

AI we've regard a their some functionality for comment customers impacted -- gross model offering example, With that's from to on a companies, No. make seen you want to if perspective. adversely where that. was business margin I wondering

Aaron Levie

think one. of and we first to less customers make And available, see want broadly for to models being higher or them we tier kind some either the part, expect of that. I'll kind of of a of Aaron. virtue try the we more back basic more do to just up platform. then that charge the higher goes of of end impact meaningful use on by those is we This use kind our cases, and moving margin weight, in consumption via advanced gross on plans to lighter in and cases, jump Yes. through It

our we counteract some not as overall, And a way to the will these working we're reporting. show to that built based margin will in up believe a any we're of we capabilities improvements. general, in baseline. in of the But pressures. in confident gross so think in long-term just that We're get potential -- very And numbers

Tom Blakey

you. Very thank helpful,

Operator

Your from Chad comes Craig-Hallum. with question Bennett next

is Your line open.

Chad Bennett

Great, my questions. thanks for taking

the So just a duration question. follow-up on

intact or with deals point laid uplift of product else. kind a So over than suite out more of think Enterprise kind deals? lean just and longer out whatnot still Days, duration those assuming the in how of terms kind you've of to we Plus from a anything that about of the in Analyst seat longer-duration these laid the economics single they I'm of economics kind you've moving on are driven are couple suite

those on commentary out? are any playing economics Just how

Dylan Smith

those higher to customer -- sized including difference a the typical customer stronger kind customer bottom, a the economics, comparing of just plus using uplift Yes, top economics, specifically of and basic similarly you're versus suit/enterprise pricing kind the service. if the

a it's We longer rolled Enterprise those contract are roughly be in then since out And the tended to the still have that per and price we seat. multiyear always seeing doubling actually, on Suites been duration, case deals. Plus

those of as coming that's durations. our contract the from and of part And average is shift it's driving more more it's customers, higher that mix actually just revenue

the backlog some even we have than last or a big not recently, or time for So been deferred very revenue in quite faster quarter revenue now. change growing seeing

Chad Bennett

a of of on Okay. retention, considering maybe in rate your churn just look just net better back way. a continues continues And kind then record get little just to to -- for churn levels at bit or full stay a good

you seat to kind of growth or XXX can Just suite from main adoption? of Or said net retention the today, you just from of XXX that I order deceleration? it's -- rank kind of think drivers really kind whether what's

Dylan Smith

sure. Yes,

seat that attributable two set comes us, maybe virtually a all There's There's in pretty expansion. everyone's pricing So the in stack rate of churn And really levers. the case expansion. this for the full the level straightforward is it there rate. expansion -- then lower components it's net is are three to changes of of seat pricing and out benefit, improvements retention those impact for rank of and -- our the actually historically

consistent, we've remained stable of And in suites price impact the So then customers point, at improvements churn seats, driven more to by into moving point. and full see per has more as well. a largely to continued steady and strong price higher very your

expansion is by it the rate. driven on being the pressures So entirely really seat

Chad Bennett

Okay. how billings -- comment, hop to year then if Thanks. quick. Did And about could, Did missed it. I'll you on relative you Dylan, I I revenue growth real think last growth? to the then one, one maybe have might off. And for

Dylan Smith

Yes.

point that expect the XXX more a than little in include to and basis headwind FX. our mid-single-digit does we be So from percentage growth reported billings range,

range X% how describe revenue our we general growth the expected in is that. of So reported of

Chad Bennett

much. so thanks Great,

Operator

Jaluria Rishi question comes RBC. from next Your with

Your line is open.

Rishi Jaluria

Aaron, hey, taking Dylan. so Wonderful, much Thanks questions. Two hey for my for you.

cross mind question are sector, many a of for verticals AI, you you top financial to it's public for care, because especially health to about targeting are services, want I'll maybe another opportunities so everyone. just the record. verticalize cases, generative gen First, of given where, a you But of I lot AI system in think like

got potential maybe like feels But if benefit there. a some then thinking us you would about be there's through it So verticalization quick you're could helpful. walk And the opportunity. I've follow-up. That how

Aaron Levie

Yes.

you're insights to business the the but and right go you authoring. look to increases are general we review So and you them being to, and health that say, take that talent kind AI where closer productivity to going a finance value can to can business When to exciting, can the a when agent on value care very automate read agency health process reports get elements being we record of you business kind of can can real certainly get critical the and routed earnings go super in have workflows the reviews key movie say, of talent or the -- and spot and come or flashy, pulled domain to a at scripts the is you to out. horizontal provider go

being might time, our capabilities, the And customers or organization like either think AI through where over adopt like, Relay it there's we we'll specialization I try time, in and approaches on of of Box that easy kind make of sort motion, then for customer through our leverage vertical based or make repeatable really sales either patterns services for partners per instance, find over see heavy workflow cases things basis. on templated of and So that concentration. to or those use kind critical sense pockets establish, that professional through a

stages the will to of I vertical that scratching really kind one the of the this use within the be think lot that up But early delivered I think up. ways show a from standpoint. service cases you just of of this the product gets do that we're a have will at start value ways

Rishi Jaluria

year? of in Really apologies I color Any about going momentum helpful. Wonderful. be missed we then if should Japan this. thinking and how the forward for on rest that And really quickly, the

Aaron Levie

Yes.

manufacturers A be everything we're services, think think, for in results year. I is very agencies lot in the color just and of financial so Japan. reasonable strong wins kind expectations for still us. to of a have, would quarter of high-level we still And quarter the great kind across the we -- government resilient this healthy to from

Rishi Jaluria

Thank Wonderful. much. you so Right.

Aaron Levie

Yes, thank you.

Operator

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

Your open. line is

Brian Peterson

Thanks shocking LLM I guess, high be it's a movement like it for But one Thanks, it that in megatrends guys. terms your There's significant changing? on I'll way, mentioned facilitating these valuable view security, you solutions. level solutions. keep to than it's an a cetera. in XX-year many the five more but want cases for is how growth of cloud understand I And off just of a of point content business, know are you question. or How one, outlook? et past early, you, content it AI -- legacy on as that at in the use to a is Aaron, do of guys. taking lot tipping Is driving I legacy these Box could game of this to maybe

Aaron Levie

Yes. Great question.

get probably -- a product is So can't it's that it's and architecture legacy or GPTX on-premises like element. drive of any work ECM legacy or operable imagine where share architecture experience that -- One value I be could from. to somehow reasonably connect components. would legacy you the and kind technical actually of would customers a sort two system the network that take file

should nail be the the on-prem coffin the that to delivers. is management they cases of of infrastructure in AI extent standpoint, that it on and want use it So totally legacy the -- content kind

that solve questions to incrementally and starting element incrementally, exciting just legacy product wanted is -- really a -- reps for about as understand And problem but and on data sales to companies of well of push as another start more your we'll catalog. is, say, to we're this answers your much instantly to be content want is all is this you systems. which just There's see to reason able your just pretty obviously problem of customers let's as that get you the fragmented

pricing the your a product. you if this to access might be And it you information. be bunch the of to for data a just and want makes of to is systems, are very, access data will totally lots of of across ask run that The with Well, that them what's different able different to go interface to and reason challenges, that that an which latest permissions ensure each content for question different be is into product, through going hard to interacting which for then across right those have data. that individual products interfaces very people the

problem helping at And scale. content or you your so you understanding the solve through unstructured understand of -- just want to reason be able to

spot a controls a content of access bring into works really managed? attention to to How they element, to they privacy the their going how and fragmented pay managed? increasingly AI modern How even legacy And way so this is a to of of couple and that going lot to the is significant CIOs up is attention about challenge content Fortune security having were we today architecture, cause across architecture. we a And They that get run with kind the to more see the customers. think to with could enterprises can do start these is hundred content Where were sort it? it are fragmentation to to? so companies, just portion element beyond And couple of content in it a their think with of industry. customers so or they're to of you XX Box about two sessions eyes there's not groups customers pay a from that and do into of light

content infrastructure questions, on. to first is have at that the their because this much get data the on time their and course out will was of the they running that how ask value in realized for you don't And that architecture speed exact all based both unstructured of same simultaneously time, current let could value and start them data they that the

conversations think pretty table AI. come it's the sure working to the we And So we have going for the then to bring make hard a to exciting really for with on going message companies. up compelling, content we're platform and that in best

Brian Peterson

Thanks, color. Aaron. Great

Aaron Levie

Yes, thank you.

Operator

Cynthia call This concludes now for like today. to session I the turn to back question-and-answer would our Hiponia.

Cynthia Hiponia

call. everyone, Great. our Thank for you, we this on and forward updating look afternoon, you to next joining earnings

Operator

today's concludes This conference.

You now may disconnect.

Box (BOX) 30 May 232024 Q1 Earnings call transcript