Q1 2022 Box Inc Earnings Call
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To the box, Inc. First quarter fiscal 2022 earnings conference call.
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Got you here on the conference over to your Speaker today, Chris Foley VP of finance and Investor Relations. Thank you. Please go ahead.
Afternoon, and welcome to box as first quarter fiscal year 2022 earnings conference call on the call today, we have Aaron Levie, our CEO and Dylan Smith, our CFO.
Following our prepared remarks, we will take questions.
Today's call is being webcast and will also be available for replay on our Investor Relations website at Www Dot box dot com forward slash investors a webcast will be audio only.
However, supplemental slides are now available for download from our website.
We will also post the highlights of today's call on Twitter at the handle at box, Inc. I R.
On this call, we will be making forward looking statements, including our Q2, FY 'twenty to financial guidance and our expectations regarding our financial performance for fiscal 2022 and future periods.
Timing of end market adoption of our products.
Our markets and the size of our market opportunity and our expectations regarding our free cash flow gross margins operating margins operating leverage future profitability unrecognized revenue remaining performance obligations and billings, our planned investments and growth strategies, our ability to achieve our long term revenue and other operating model targets.
The timing of and benefits from our new products pricing and partnerships.
The impact of our acquisitions on future box product offerings, the impact of the COVID-19 pandemic on our business and operating results the impact of the KKR led investments in box and any potential repurchase of our common stock.
These statements reflect our best judgment based on factors currently known to us and actual events or results may differ materially.
Please refer to the press release and the risk factors and documents, we will file with the Securities and Exchange Commission, including our most recent annual report on form 10-K for information on risks and uncertainties that may cause actual results to differ materially from statements made on this earnings call.
These forward looking statements are being made as of today May 27, 2021, and we disclaim any obligation to update or revise them should they change or cease to be up to date.
In addition, during today's call we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from our GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and in the related <unk>.
Powerpoint presentation, which can be found on the Investor relations page of our website.
Yes, otherwise indicated all references to financial measures are on a non-GAAP basis with that let me hand, it over to Aaron.
Thanks, Chris and thanks, everyone for joining the call today I'm incredibly proud of our team and box and our strong start to FY 'twenty 2 delivering a 200 basis point improvement in our revenue growth rate versus the previous quarter, 24% billings growth and 20% growth in RPE Oh year over year.
With the strong momentum we're driving we are confident in our ability to achieve accelerated growth and higher operating margin now and in the years ahead.
As a result, we are raising our revenue guidance for the full year.
<unk> will go over the financial results and guidance in more detail, but before I hand, it over to him I'd like to talk about our strategy the value that our content cloud brings to our customers and the positive impact we are seeing in the market as a result of our strong execution.
Our strategy is well aligned to 3 major trends that are driving the future of work first work is being defined by hybrid work environments and a recent Gartner study more than 80% of company leaders surveyed said they plan to allow employees to continue working remotely at least some of the time.
Even as offices open back up traditional physical boundaries will continue to blur and enterprises will need to empower collaboration both internally amongst virtual and distributed teams and externally with partners customers and suppliers to get work done from anywhere second we know that.
The future of business will be cloud and digital first customer and partner interaction will increasingly be executed digitally from the onboarding of employees to automating workflows with partners. These workflows must function using multiple cloud based applications.
Access to content in a single unified platform across a multi cloud environment is critical to ensure productivity and business success.
And finally data security compliance and privacy remain more important than ever governments across the world are enacting new data privacy requirements and as recent cyber attacks such as the solar winds and colonial pipeline events have shown cyber security threats are affecting all enterprises.
And creating significant business disruption.
Content integrity is an absolute requirement.
<unk> is the lifeblood of our company and any breach that threatens the security of content can cause irreversible damage to the enterprise.
At the heart of the challenges is how companies work with their most valuable content.
Great content is how the best movies get made her the best sales pitches are done on marketing campaigns drive customer engagement and how the next new product breakthrough is idea aided and ultimately delivered to market.
Today enterprises spend tens of billions of dollars every year, just to store and manage content and fragmented legacy systems like network storage and document management systems. There is simply no way enterprises can get the value of the content that they have with these approaches.
That's where box comes in.
Our platform offers more critical functionality designed for the multi cloud hybrid work environment and a seamless secure user experience than any other solution in the market today.
We are building the leading content cloud for enterprises, our strategy is to power automate and integrate the complete content lifecycle from the moment content is created through the entire continent workflow in a single platform that enables our customers to thrive in a work from anywhere.
<unk> highly insecure world.
Our content cloud moves beyond legacy content management systems by automating workflows between cloud based applications through integrations with the apps our customers are using to get their work done like Salesforce and Microsoft teams.
We're building deep functionality and the key areas of the content lifecycle, such as our advanced workflow solution with box relay and E signatures with box sign we are natively built advanced security into the platform. So that our customers' content stays safe and compliant and now we're making it easier than ever.
For our customers to move content into box with box shuttle combined with our cloud first approach box is the only platform that enables customers to work in and across cloud based applications without fragmented content architectures box provides a seamless simple and intuitive experience that drive.
Productivity for users every time wherever they are.
Our vision for the content cloud is resonating with customers.
More and more our customers are recognizing the strategic importance of consistent content availability and integrity, whether they are collaborating on a project and zoom closing a quarter using sales force or building a new product with Autodesk. This is illustrated in Q1 by the 48% year over year growth in enterprise deals over 100.
Additionally, our multi product suite sales are gaining strength with our customers adopting and leveraging more of our content cloud functionality.
As proof of this we have experienced a record 49% attach rate of our suite this quarter and $100000 plus deals and we anticipate the growth of our multi product plans continuing in the future.
In Q1, we continued to build on our leadership position in cloud content management and transform how enterprises work.
First we expanded our product portfolio with the acquisition of sign request, a leading cloud based electronic signature company to develop box sign.
Box sign is expected to be available. This summer it will be natively embedded in the box and included an all box business subscription plans with additional levels of functionality being available and our enterprise plans and suites. This will enable all of our customers to have access to the value of box sign while also on EBIT.
<unk> us to monetize the higher end esignature use cases that leverage advanced functionality and Apis.
Another exciting announcement, we made in Q1 was the availability of the all new box shuttle for many organizations moving to the cloud has been a priority, but the cost and complexity of content migration has been a major impediment to cloud adoption.
The new box shuttle can migrate some of the most complex and large scale content management environments at a lower cost and faster than ever.
We also announced significant updates to our security products. This spring box shield, which helps customers reduce risk and proactively identify potential insider threats or compromised accounts remains the fastest growing product in box is history.
We continue to rapidly innovate on box Shields advanced machine learning technology to help protect our customers' most important IP.
Finally, we announced updated partnerships with both Microsoft and Cisco, we continue to enhance our integrations with Microsoft teams office and Microsoft's information protection suite.
As customers adopt a multi cloud strategy they need to access and work with content across a range of applications and box helps bridge content management between Microsoft and other platforms.
Similarly, we've updated our partnership with Cisco Webex to make it even easier for users to create workflows that span our 2 platforms.
Turning to our customers we have seen some outstanding examples of how organizations are utilizing box to run their businesses and drive productivity such as a global leader in the financial sector, who embedded box deeper into its business with a 7 figure expansion in Q1 for this leading enterprise box.
<unk> manages its business critical content and powers encrypted document sharing between clients and financial advisers at scale, while adhering to the highest standards of data privacy protection and security.
And a government agency, who selected box in Q1 to power secure collaboration for their hybrid work environment as well as drive critical processes for the delivery and sharing of public health research.
Over 100000 customers rely on box to power secure collaboration and critical business processes across their organizations in Q1.
We closed wins and expansions with leading organizations such as D. A Davidson companies IQ via Isuzu Motors and Penguin Random House.
Our strategy is working as demonstrated by our strong results, including the improvement in our revenue growth. This quarter. In addition to the very strong billings in RPM growth.
We are committed to our FY 'twenty 4 targets of delivering a growth rate of 12% to 16% and operating margin in the range of 23% to 27%. We are going after 1 of the largest markets in software attacking a total addressable market of over $55 billion in spend on content management collaboration.
Storage and data security annually.
And with the addition of esignature capabilities, our market is only getting larger we're on.
Also confident that we have the right team and board of directors to take full advantage of this opportunity and drive significant shareholder value going forward.
With the addition of John Park, who brings significant software growth investing experience and the expertise and resources of KKR we.
We have 8 independent directors, who are former or current operators of high growth and highly profitable SaaS and enterprise software companies, including 3 former or current public software Ceos and Q former public CFO.
Throughout this year, we will continue to build out our industry, leading content cloud, we will expand data migration and workflow automation and go deeper with our data security and compliance offerings enable new ways to collaborate and publish content on box and enhanced insights and analytics so customers can get.
The most out of their content.
With over 100000 customers on our platform and exciting roadmap and a strategy that is already yielding results. We are building on our leadership in cloud content management and driving the next phase of growth with that I'll hand, it over to Dylan.
Thanks, Aaron Good afternoon, everyone and thank you for joining us in Q1, we are pleased to have exceeded our guidance across all key metrics, our acceleration in revenue growth billings growth or <unk> growth and the operating profit clearly demonstrates the strong trajectory of our business as a.
A result, we are raising our full year revenue guidance.
We delivered revenue of $202 million up 10% year over year, a 200 basis point improvement from the 8% growth we delivered in the previous quarter.
Our content cloud offerings are increasingly resonating with our customers as demonstrated by the strong add on product traction and large deal growth we achieved in Q1.
As Aaron mentioned, we're excited by the early customer response and demand for native E signature capabilities and box and we're on track to make box signed generally available this summer.
As our customers are increasingly adopting products with more advanced capabilities, 60% of our revenue is now attributable to customers who have purchased at least 1 additional product up from 54% a year ago.
In Q1, we closed 59 deals worth more than $100000 up 48% year over year.
Importantly, 49% of the 6 figure deals included 1 of our multi product suite offerings, a new record for us and up significantly from 28% a year ago.
We ended Q1 with the remaining performance obligations or <unk> of $865 million up 20% year over year exceeding our revenue growth by 1000 basis points and an acceleration from the prior quarters, our <unk> growth rate.
Q1's, RPM growth is comprised of 15% deferred revenue growth and 23% backlog growth demonstrating box is stickiness as we continue to sign longer term agreements to support our customers' content strategies we.
We expect to recognize more than 60% of our RP over the next 12 months.
Q1 billings of $159 million were up 24% year over year, and a significant improvement from Q4's growth rate.
This result reflects the impact of a few early renewals from customers, who had been set to renew in Q2 shifting roughly $5 million in billings from Q2 to Q1.
Our net retention rate at the end of Q1 was 103% up from 102% in Q4.
This result was driven by strength in customer expansion and a stable annualized full churn rate of 5%.
Based on the strong momentum, we're seeing in customer expansion and retention, we expect to deliver additional improvement in our net retention rate over the course of this year.
Turning to margins.
Our non-GAAP gross margin came in at 73.1% in line with the same period a year ago.
Q1 gross profit of 148 million was up 10% year over year consistent with our revenue growth.
We expect gross margin to increase over the course of this year and for it to covenant roughly 74% for the full year as we continued to deliver infrastructure efficiencies.
Our ongoing efforts to improve profitability are paying off.
In Q1, we delivered significant bottom line improvements through our continued focus on profitable growth and disciplined expense management.
Additionally, our investment in building out our engineering center of excellence in Poland will help us drive additional operating leverage and efficiencies over time.
Q1, operating income doubled year over year to $34 million, which in turn drove a 760 basis point improvement in Q1 operating margin to 17, 8%.
As a result in Q1, we delivered 18 of non-GAAP EPS above the high end of our guidance and a strong 8% improvement from 10 a year ago.
I'll now turn to our cash flow and balance sheet.
In Q1, we delivered record cash flow from operations of 95 million up 53% from the year ago period.
We also generated record free cash flow of $76 million a year over year improvement of 91%.
Capital lease payments, which we include in our free cash flow calculation were $13 million versus $17 million in Q1 of last year.
As a reminder, we expect our capital lease liabilities and payments to continue decreasing steadily in the coming years as we continue to drive infrastructure efficiencies and leverage our public cloud partnerships.
For the full year of FY 'twenty, 2 we continue to expect Capex and capital lease payments combined to be roughly 7% of revenue.
Cash from investing in Q1 reflects $57 million and M&A related payments, primarily driven by the acquisition of sign request.
As a result, we ended the quarter with $612 million in cash cash equivalents and short term investments.
Before I turn to guidance I'd like to discuss the accounting impact, resulting from the preferred stock issuance that we closed earlier this month combined with our anticipated repurchase of common stock via a self tender offer which we expect to launch next week.
Due to the required accounting treatment for these transactions based on our current expectations. This will result in the following EPS impacts.
First on a quarterly basis until conversion of the preferred stock into common stock of roughly 2.5 reduction due to the non cash accounting impact related to the preferred stock dividend, which we anticipate settling in shares of common stock.
Second for Q2, and FY 'twenty, 2 a <unk> reduction due to a temporarily elevated share count during the period between our recent preferred stock issuance and the completion of our anticipated share repurchase.
Combined these items will result in a force reduction to EPS in Q2, and a 9% reduction to EPS for the full year.
This preferred stock dividend will appear below the net income line in our P&L and in the earnings per share note accompanying boxes financial statements note that this will have no impact on net income.
With that I would like to turn to our guidance for Q2 and fiscal FY 'twenty 2.
Based on our strong Q1 results and forecast we are raising our full year revenue guidance.
Our underlying profitability expectations for FY 'twenty 2 are also now higher than our initial expectations.
For the second quarter of fiscal 2022.
We anticipate revenue of 211% to $212 million, representing 10% year over year growth.
We expect non-GAAP operating margin to be in the range of 18 to 18, 5%, representing a 150 basis points sequential improvement at the high end of this range.
Including the <unk> impact I, just discussed we expect our non-GAAP EPS to be in the range of 17 to 18.
And GAAP EPS to be in the range of negative <unk> 13 to negative <unk> 12.
On approximately $167 million and 160 million shares respectively.
We expect our billings growth rate to be in the mid single digit range, which includes the $5 million impact from early renewals that I mentioned earlier.
Combined with our strong Q1 billings results. This would result in year over year billings growth of roughly 13% for the first half of FY 'twenty 2.
Ahead of revenue growth and an acceleration from our billings growth in the first half of last year.
For the full year ending January 31.2022.
We are raising our full year revenue guidance and we now expect our FY 'twenty 2 revenue to be in the range of 845 million to $853 million, representing approximately 11% year over year growth at the high end of this range.
We expect non-GAAP operating margin to be in the range of 18 to 18, 5% above our initial FY 'twenty 2 expectations.
The high end of this range represents a 320 basis point improvement from last year's results of 15, 3%.
Our stronger business performance drives a force that improvement in our EPS expectations for FY 'twenty 2 versus our initial guidance.
At the same time, our full year EPS guidance incorporates the <unk> reduction for the preferred stock accounting charges that I mentioned previously.
As a result of these various factors, we now expect our FY 'twenty 2 non-GAAP EPS to be in the range of 71 to 76.
On approximately 161 million diluted shares.
Our GAAP EPS is expected to be in the range of negative 50 to negative 45 on.
On approximately a 154 million shares.
We continue to expect billings growth to be slightly above revenue growth for the full year of FY 'twenty, 2 and for the back half of FY 'twenty to our billings growth should be roughly in line with revenue growth.
We expect <unk> growth to outpace both revenue and billings growth for the full year of FY 'twenty 2.
Q1 was an excellent start to our fiscal year fueled by strong momentum in large deals and suites attach rates.
Our results, most notably accelerated revenue billings and our PEO growth combined with significant operating margin improvements clearly indicate that our strategy is working as customers are placing more emphasis on the value of their content.
As the leading content cloud box is uniquely positioned to solve a wide variety of high value use cases for our customers.
As we build on this leadership position, we're very confident in achieving our FY 'twenty 4 targets 2 years from now of a 12% to 16% growth rate and operating margin in the range of 23% to 27%.
With that I would like to open it up for questions operator.
As a reminder to ask a question you will need to press star 1 on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Your first question comes from George Hill on it from Oppenheimer.
Thank you for taking my question, so Aaron with the success Youre showing with selling suite can you give us a sense.
How you feel about your sales investment and whether you think you are at a point, where you can maybe be.
A little bit more.
Breath with hiring and kind of focusing on particular verticals and regional expansion.
Yeah.
Thanks for the call out we are definitely seeing really healthy acceleration on things like our multi product selling and and as we called out with the $100000 plus deal stats nearly.
Nearly 50% growth year over year, which is which is I think the highest metric that I can at least recall in the past few years. So it's a really great start to the year on that front as it relates to our sales investment and Don called this out last quarter, we're going to be definitely investing incrementally in sales capacity in particular in key regions.
The segments, where we're seeing high productivity rates, we obviously want to drive efficient and profitable growth now on but we do see an opportunity to invest more and obviously that's in the.
In the guidance from a top and bottom line standpoint.
As you look at verticals. This is another area of increasing focus for us. So we see really tremendous momentum in areas like financial services life Sciences public sector, both at the federal level and even state level.
And and then kind of any business doing.
Kind of large global collaborations so global manufacturing professional services. The technology sector has been very attractive for us. So I think youll see us continue to incrementally invest in in these high growth verticals, where data security matters.
We're protecting and enabling the collaboration and workflows around content is incredibly critical so we will be making further investment in those areas and this is Dylan and just to build on that a bit we do expect to continue improving sales force productivity for the trends that Aaron mentioned as you said before that was up overall <unk>.
18% last year, and while we have more modest expectations for the rate of sales productivity improvements going forward. We do expect to continue making those improvements even as we grow our sales force and in Q1 for both enterprise and SMB. We saw a strong increase in the percentage of Aes, who achieve their quota as well.
The year over year improvements in average sales force attainment.
Alright, and just 1 quick follow up to that as you see that productivity kind of tick up.
On your retention rate kind of also ticked up.
With the growth that you're anticipating in the later part of the year do you feel that that's something that can maybe get back to the 105, 6% type of level that you saw early last year.
So I would say that we are based on the trends that we've been seeing from a customer expansion and churn rate. We do expect to deliver continued improvement on our net retention rate this year.
So we've set the expectation that weeds and this year, making a year on year year over year improvement of a couple of points.
So to a 104% and certainly if we do continue to see these trends playing out.
Then there could be some upside to that certainly overtime.
That's how we're thinking about net our net retention rate currently.
Thank you.
Yes.
Yes.
Your next question comes from Josh Baer from Morgan Stanley.
Thanks for the question I was hoping to double click on on the hiring actually.
I think the.
The growth in sales force that you were looking to do this year.
From what Dylan mentioned last quarter. It was low teens. So I'm just wondering if theres an update there if that's still the right number how thats been tracking and we've definitely been hearing about challenging hiring environment in some companies seeing longer time to ramp there. So just looking for an update on your hiring efforts.
Yes. This is Aaron.
We still intend for that that metric to be the goal that we're executing on and that will be throughout the year. So.
Overall.
Definitely it's an environment where.
Where there's really great opportunities for our sales talent and we think we have a very attractive opportunity and we've been ramping up on the on the hiring side pretty pretty aggressively on that front. So so we do intend to hit that metric.
Got it and with the commentary around RPM growth to outpace revenue and billings growth.
This year sort of.
Setting up for to see an acceleration in those revenue and billings growth matched metrics on the following year.
Yes, I would think about that overall as being a leading indicator of top line growth and to piece it apart and as we mentioned on the call deferred revenues up 15% year on year backlog up 23% year on year, So we'd say that backlog because most of that is <unk>.
Even from the long term backlog and a long term arpaio doesn't necessarily have an impact over revenue over the next 12 months, but the overall trends that we're seeing.
Apio, including healthy growth on our short term, our Po of 14% year on year.
Does definitely indicate a lot of the momentum that we're seeing and part of what leads to the confidence that we have in improving our growth rates over time.
Great. Thanks.
Your next question comes from Alex Sklar from Raymond James.
Great. Thank you Aaron you touched on return to work at the outset of your prepared remarks as being a potential driver for the business I'm curious what you've seen so far in terms of either late stage early stage pipeline with from your existing customers in terms of propensity to buy newer or incremental solutions from box.
Yes, so I think the way I would capture the 2 periods that we've been in would be at the kind of first half to some extent bleeding into Q3 of last year. It was really this.
Work triage mode that customers were dealing with with the backdrop of obviously a lot of economic disruption for most of the businesses globally, and that's where we saw things like an SMB slowdown we saw.
Lower professional services slow down as an example, and the use cases customers were coming to US. We're really just basic remote work kind of file sharing and access and use cases.
We went into Q4 of last year, and certainly Q1 of this year.
Our conversations with customers are much more around longer term digital transformation and trends that we think align to our strategy. So.
Remote work moving more into hybrid work the benefit of that for box is that companies are really going to need to look at.
Again, it at how they're managing their content as employees are working from multiple locations as they need to be able to work from the office and from anywhere be able to collaborate with their partners and employees and clients from from all around the world and so we're starting to see much longer term.
<unk> transformation initiatives emerge within our pipeline as opposed to just the kind of rapid fire triage that we saw last year. So when you look at that metric in Q1 of nearly 50% growth in $100000 plus deals that's about as good as evidenced as I think we could ever put up debt shows customers are now being much more strategic about their long term.
Strategy moving more content to the cloud shutting down legacy fragmented architectures moving more of that to box and we think we're really set up for effort for being right at the center of these megatrends of remote and hybrid work digital first experiences and data security and compliance really driving a new way to manage content.
Okay, Great and then maybe just 1 on the partner channel I know typically it's been a source of strength internationally, but as you've kind of expanded the product portfolio here from the things we've already talked about with box on coming J a little bit later does the partnership channel look incremental I'm, just curious if youre looking incrementally more or less strategic than debt.
Previously.
Yes, it definitely looks a lot more strategic for us So international.
It's been very strong in particular in Japan, where it's it's an environment, where we have very strong kind of global partners. There as we look throughout this year.
In particular as sign comes to market and there's some new functionality around platform and workflow continues to come to market I think you'll see us.
Incremental focus on investments on things like system integrators, both on a global and.
And kind of industry basis.
And whether that's in Europe, where we have a new president.
On boarding that will have a focus in that area as well as well as as we go deeper in industries like financial services public sector life Sciences, and other spaces I think youll see our system integrator partnerships be even more important to to that strategy.
Alright, great. Thank you.
Your next question comes from Jason Ader from William Blair.
Yeah. Thank you you guys did very well with the $100000 plus deals can you talk about.
What's happening with 7 figure deals and also if you've seen any recovery in the commercial segment is kind of a sub $100000 segment.
Yeah. So on so on the 7 figure deals.
This basically steady on a year over year basis, I think what we're and what we pointed to in Q4, we wanted to move more to.
Focusing the attention on the customers with a total account value of certain thresholds just because we think that's more indicative of our land and expand motion.
So as an example that 50% growth on $100000 plus deals is as it is.
On a much more meaningful metric because it moves customers into different.
Yes different size buckets of total spend so we're very excited about that do you mind repeating the second part of the question yes.
He kind of sub 100000 deals the commercial segment.
Yes, very strong momentum in the commercial segment and F&B.
I think as we noted last year there were some headwinds mostly around the economic environment. So you had smbs that were really kind of dealing with just the impact of COVID-19 not spending a lot on on kind of long term infrastructure in some cases, we saw higher churn rates in the low end of the market, but as we noted in Q4 really mean.
Full recovery starting in Q4 and in Q1, I mean, I don't think we could be happier about the momentum that we saw in that kind of SMB mid market segment of the business. So really really strong momentum obviously, we only cut out the $100000 plus deal band, but very meaningful suite sales and in the SMB and mid market segment below the $100000 threshold.
And and again really I think thats, a part of the market. That's on fire for US right now yeah and this is Dylan on the only thing I'd add is that even in that 100, K plus deal counts.
Up 48% year on year.
There was a pretty material contribution even from those SMB and mid market segments.
Up.
Very dramatically from where we were a year ago, so because of suites largely for especially the customers that are at the higher end or the larger end of that segment, where those where that salesforce serves that was a big driver of the strength that we saw.
Great and then 1 quick follow up.
Aaron.
These are growing around 10% revenue this year.
Do you articulate to an investor to bridge from the current kind of 10% ish growth rate to the 12% to 16% that you hope to get to yeah sure well first of all we did just raise guidance.
Coming in around 11% growth for the year.
So thats the first bridge second we did have a headwind that we noted on last quarter's call around professional services that was really a flow through from bookings last year, where customers didn't need as much professional services, which obviously it turns into revenue growth headwind this year and professional services.
And so that's something that obviously, we're carrying this year on on the growth rate, but when we look at our Q1 performance as it relates to whether it's billings growth suites growth customers moving into $100000 plus deal segments.
It's very evident debt.
The 16% growth rate can.
Can be achieved with our current strategy.
And obviously, we want to continue to expand the markets that we're going after on the opportunity, but we feel very very confident in achieving those long term growth rates.
Thank you good luck.
Thank you.
Yes.
Your next question comes from Steve Enders from Keybanc capital markets.
Okay, great. Thanks for taking my question I guess I'm, just wondering on a better understanding of the billings pull forward that you mentioned in the in.
In the quarter and was there any I guess, what would you consider kind of drove that was it any new product capabilities that were being up sold or any incentives that drove drove the contracts on land this quarter instead of <unk>.
Sure So no specific incentives and really the demand.
And I think just the desire to get onto some of these and adopt some of these more advanced capabilities faster and suites would really call out is the main catalyst of those early renewals, where you'd have a customer who had would've ordinarily renewed in the second quarter, but given just kind of.
Asian of.
Kind of being sold on on the value of some of the products and capabilities. They didn't yet have and then a couple of cases, just a really strong seat growth within those companies that they were an overage is what drove those customers to ultimately renew and upsize those contracts earlier in Q1, which is what drove that $5 million.
Of movement from the expected Q2 billings into Q1.
Okay got you.
Helpful and then just on <unk>.
I just wanted to touch on a little bit on on the guide on this on the on the op margin side it looks like it's coming in.
And kind of a point a point or more above that what you were expecting just.
Or what the consensus was that but just kind of wondering what youre seeing or what's leading to that uptick on the margin front.
That's providing that upside there.
Yeah. So so really a combination of the stronger revenue outlook for the year based on the momentum that we're seeing as well as <unk> been really pleased with a lot of the kind of expense management initiatives, and especially around our infrastructure and and and workforce expenses.
You've given a lot of those savings and so that's what translates into that roughly 1% improvement in our operating margin expectations.
Okay, great. Thank you.
Your next question comes from Brett Knoblauch from Bahrenburg.
Hi, guys. Thanks for taking my question.
I guess on capital allocation, how are you guys thinking about that.
The funds from KKR is going to use it to repurchase shares.
But I guess as we look beyond that.
You have a sizable cash position on the balance sheet, we think that should be more M&A, driven or maybe more repurchase driven just maybe help outline your strategy there.
Sure. So we certainly look at capital allocation through the lens of what's going to deliver the most value to our shareholders. We expect to use our capital primarily to fuel growth and capture more of the market opportunity ahead of us, including M&A when it makes sense for the business and our strategy, while still preserving a strong.
Balance sheet and flexibility.
But because of our strong cash flow generation that we're seeing we do also regularly have the conversations around things like share repurchases with the board and then as mentioned because we did raise $500 million recently on top of an already strong balance sheet sheets.
Is why we expect to launch our self tender offer next week and we will announce all of those are those details at that time.
Perfect. Thank you maybe just 1 follow up on box sign on and sign request.
I guess in the in your annual revenue guide how much revenue is coming from a final question.
On the sign request from <unk>.
Virtually nothing so very immaterial to revenue.
Certainly from box sign once that's introduced them becomes generally available in the summer we're very optimistic about the type of impact that can have especially in terms of the contribution and adoption of suites, but the standalone business you could think of it that is as very immaterial.
His box on currently in your updated guide or would that kind of just be.
An upside to your current guidance.
That is incorporated into our current guidance.
Understood. Thanks, guys I appreciate it.
Mhm.
Your next question comes from Chad Bennett from Craig Hallum.
Great. Thanks for taking my question. So just the billings from.
Your normalized billings growth you indicated it was 13% first half.
Why considering the attach rate and success you've had with suites.
Ancillary products.
Why would billings growth do you celebrate.
Second half I understand comps are a bit easier in the first half, but is there something that you're.
Yeah, I guess seeing because everything it sounds like from a secondary metric standards.
Standpoint, it seems like it would be accelerating and so any kind of indication on seasonality or comps or anything that would.
Kind of caused that.
Sure. So so nothing in terms of the underlying business and continue to be very optimistic about the trajectory that the business is on would say that to your point. There is not just seasonality, but but did see more challenging comps in the back half of last year and then also we just.
Given the timing of a lot more confidence.
And predictability in terms of the sales cycles and everything that influences billings.
And so we certainly do see upside to that growth and we do expect billings growth to exceed revenue growth for the full year.
But there is nothing in terms of the underlying trends that we're seeing in the business that drives that.
And then maybe 1 follow up real quick I think last quarter you spoke of Dylan.
Thank you gave kind of a net new bookings.
Growth metrics I think it was up something like 24% is there any update on how that performed this quarter.
Not sure what youre, referring to could you clarify which metric we don't typically talk about our bookings for the business overall, I guess trying to get an indication of kind of net new logo bookings and how that trended in the quarter.
Okay got it yes, that's been pretty consistent with what's been the past few quarters I think we did call out debt in Q4, it was particularly strong because of some some large net new wins.
And both on SMB as well as in Japan.
And it's back it's pretty normal levels, where we tend to see about 70% or so of our bookings coming from our existing customers and about 30% coming from net new customers.
Okay. Thanks, so much.
Your next question comes from Erik <unk> from JMP Securities.
Yes, thanks for taking the question.
First off you had noted the billings growth will be faster than the than the revenue growth.
Can you give us some can you give us some flavor or context around that.
The difference that you would anticipate.
Will that.
Obviously that was meaningful in the first quarter here, but how.
How is that going on as we go.
Gross forward how is that difference is going to evolve.
<unk>.
Yes, so let's say that debt.
For now I would think about the billings growth in the back half of this year to be fairly consistent with our revenue growth in the back half and so the slightly higher expectations that we're setting are based on the first half 13% year on year growth that we've seen and then certainly as we move in and had any.
Next quarter, we will give more color into how our billings expectations are shaping up for the back half of the year.
Okay very good thank you.
And that was our last question at this time I will turn the call back over to the presenters.
Yes.
Great well thank you.
Again very excited by the momentum in Q1 and looking forward to following up with all of you soon.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music] net.
And then momentum.
[music].
Okay.
Sure.
Okay.
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