Q2 2024 Box Inc Earnings Call
Speaker 1: Good afternoon. My name is Emma and I will be your conference operator today.
Speaker 1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Speaker 1: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press the star 1. Thank you.
Speaker 1: I will now turn the call over to the Box Team.
Speaker 2: Good afternoon and welcome to Box's second quarter fiscal year 24 earnings conference call. I'm Cynthia Japonia, Vice President Investor Relations. On the call today we have Aaron Levy, Box's co-founder and CEO , and Dylan Smith, Box's co-founder and CFO . Following our prepared remarks we will take your questions.
Speaker 2: Today's call is being webcast and will also be available for replay on our IR website at box.com forward slash investors.
Speaker 2: Our webcast will be audio only, however supplemental slides are now available for download from our website. We'll also post the highlights of today's call on the X platform handle at Box Inc IR.
Speaker 2: On this call we'll be making forward-looking statements including our third quarter and full year fiscal 2024 financial guidance and our expectations regarding our financial performance for fiscal 2024 and future periods including our free cash flow gross margins operating margins operating leverage future profitability net retention rates remaining performance applications revenue and buildings and the impact of foreign currency exchange rates and our expectations regarding the size of our market opportunity our planned investments future product offerings and growth strategies
Speaker 2: our ability to achieve our revenue, operating margins and other operating model targets, the timing and market adoption of and benefits from our new products, pricing models and partnerships, the timing of our public cloud migration efforts, our ability to address enterprise challenges and deliver cost savings for our customers, the impact of the macro environment on our business and operating results and our capital allocation strategies, including potential repurchase of our common stock.
Speaker 2: These statements reflect our best judgment based on factors currently known to us, and actual events or results may differ materially.
Speaker 2: Please refer to our earnings press release filed today and the risk factors in documents we file with the Securities and Exchange Commission, including our most recent quarterly report on Form 10Q for information on the risks and uncertainties that may cause actual results to differ materially from statements made on this earnings call.
Speaker 2: These forward-looking statements are being made today as of August 29, 2023, and we disclaim any obligation to update or revise them should they change or cease to be up to date.
Speaker 2: 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 substitute for or in isolation from our GAAP results.
Speaker 2: 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 supplemental slides which can be found on the IR page of our website.
Speaker 2: Unless otherwise indicated, all reference to financial measures are on a non-GAAP basis.
Speaker 2: With that, let me hand the call over to Erin.
Speaker 3: Thank you, Cynthia, and thanks everyone for joining us today. In Q2, we delivered revenue growth of 6% year over year, or 9% in constant currency.
Speaker 3: Our 25% operating margins were up 310 basis points from a year ago, reflecting our operational discipline in a continued challenging macro environment.
Speaker 3: Over the last few months, I have spoken with customers across nearly every size business, geography, and industry.
Speaker 3: While customers are still facing various macro pressures that impact IT spend and seat growth in the near term, Fox is still being prioritized in the areas where our unique value proposition is aligned with the IT decisions they are making in the near and long term around digital imperatives and the role of AI.
Speaker 3: In my conversations with CIOs, it's clear that they're looking to advance their digital strategies to help drive growth in their business, improve productivity across their organization, leverage integrated platforms that can provide them more value, and keep their enterprises secure from threats.
Speaker 3: At the same time, they have more content than ever before and are looking to leverage AI to accelerate their business processes and how they work.
Speaker 3: The Box Content Cloud is in a unique position to enable enterprises to drive productivity across the business, simplify IT environments, and protect an enterprise's most important data.
Speaker 3: And with our platform neutral approach to AI, we're bringing the full range of large language models to enable customers to transform how they work with their data in the cloud.
Speaker 3: Recent customer wins in Q2 that validate our strategies working and that we are aligned to the key trends facing our customers include a federal institutional system who purchase box with a six figure deal to enable the organization to move to the cloud for secure document collaboration and workflow.
Speaker 3: With Box, they will be able to conduct necessary audits and exams of other government agencies by collaborating effectively and seamlessly internally as well as with external parties while also securely managing documents in a single platform.
Speaker 3: an international law firm that expanded its use of box with a seven figure upsell,
Speaker 3: As the company adopts Box Enterprise-wide as its single content layer, it will eliminate storage costs from other platforms, remove costs from legacy file servers, as well as eliminate e-signature solution costs by moving to Box Sign. And a large global video game and digital entertainment company, who has been a Box customer for more than 10 years, expanded its use of Box with a six-figure upsell to Enterprise Plus for access to Box's Shield capabilities. In Q2, we delivered meaningful updates to our platform to help customers drive their productivity and automate workflows, secure their most important content, and integrate Box into more of their IT stack. To advance Box's security and compliance capabilities, we introduced a new retention policy integration for Box Shield classifications, added zero-trust 2.0 enhancements for admins, and Box governance reporting enhancements as well. To streamline workflows and productivity, we delivered new advanced signature request management in Box Sign, continued rolling out Box Canvas to all customers, as well as launched new enhancements to our end-user app. And across our platform, in Q2, we released updates to Box Sign for Salesforce, Box for Slack, anything from the
Speaker 3: As the company adopts Box Enterprise-wide as its single content layer, it will eliminate storage costs from other platforms, remove costs from legacy file servers, as well as eliminate e-signature solution costs by moving to Box Sign. And a large global video game and digital entertainment company who has been a Box customer for more than 10 years expanded its use of Box with a six-figure upsell to Enterprise Plus for access to Box's Shield capabilities. In Q2, we delivered meaningful updates to our platform to help customers drive their productivity and automate workflows, secure their most important content, and integrate Box into more of their IT stack. To advance Box's security and compliance capabilities, we introduced a new retention policy integration for Box Shield classifications, added zero-trust 2.0 enhancements for admins, and Box governance reporting enhancements as well. To streamline workflows and productivity, we delivered new advanced signature request management in Box Sign, continued rolling out Box Canvas to all customers, as well as launched new enhancements to our end-user app. And across our platform, in Q2, we released updates to Box Sign for Salesforce, Box for Slack, Box for Salesforce, as well as Box for NetSuite.
Speaker 3: Finally, we launched additional enhancements to the Box for Microsoft 365 integrations, including new enhancements to Box for Teams and Box for Microsoft Office on the desktop. And consistent with our platform neutral approach to AI innovation, in July we announced Box AI for Microsoft 365 Copilot, a new plug-in for Microsoft's next generation AI workplace tool. The plug-in will enable our joint customers to use Microsoft 365 Copilot to make the Box files inside of an organization more useful and valuable than ever. Now, looking forward, we continue to drive substantial innovation for our customers to deliver the best way for them to manage their full lifecycle of content in the cloud. In security and governance, we're advancing Box Shield to help customers stay protected against their most daunting threats around losing sensitive data.
Speaker 3: And in our platform, we're advancing our integrations with leading external platforms, as well as delivering enhanced experiences and reporting for developers building on Box.
Speaker 3: And with Box AI, we're bringing intelligence to enterprise content. We've seen an incredible response to Box AI in the first couple of months since our announcement. We know that AI is going to transform how enterprises work with their data, and organizations are going to need a secure way to connect their most important data to leading AI models.
Speaker 3: And with Box AI, we're building the leading platform neutral approach to connecting enterprise content to AI, starting with OpenAI's leading large language models.
Speaker 3: In our early customer conversations, including in our design partner program, we are hearing valuable feedback on use cases from customers that are looking to automatically extract metadata from their documents to drive workflows, ask questions of large sets of documents to find things no human would be able to answer, or intelligently protect their content with more advanced data classification.
Speaker 3: And this is just the start of what's possible. Our customers are excited about the new possibilities for productivity and insight they will gain from using Box AI with their content.
Speaker 3: We'll be sharing even more news at BoxWorks around how we're advancing Box AI and bringing it into the hands of even more customers.
Speaker 3: At BoxWorks this October , we're excited to share updates from across the entire product platform to our customers and lay out our vision for the future of work with AI.
Speaker 3: This year's BoxWorks is set to be our best one yet, and we just announced headliners like Sam Altman, the CEO of OpenAI, Dustin Moskovitz, the CEO of Asana, and Lydianne Jones, the CEO of Slack.
Speaker 3: all discussing the future of work in AI. Further, we'll also be hosting our first in-person CIO Works post-pandemic in Palo Alto on October 24th, where we will host our top customers with some of the key leaders in AI and technology.
Speaker 3: Finally, I'd like to note a critical milestone that in Q3 we will be fully running our production environment in the cloud. This has been a major multi-year effort to move our infrastructure from our data centers to the cloud to gain better performance, scalability, and gross margins.
Speaker 3: Dylan will discuss the impact to our gross margins more fully in his comments, but given the complexity of this migration, I'm incredibly proud of our execution on this critical initiative.
Speaker 3: Now, turning to go to market.
Speaker 3: Our Salesforce and go-to-market programs delivered continued results in the quarter including healthy new logo growth as well as key customer expansions.
Speaker 3: We also continued to see the successful adoption of Enterprise Plus, our multi-product suites offering that brings the full value of the Box Content Cloud to our customers.
Speaker 3: In Q2, Enterprise Plus was well over 90% of Suites sales in large deals, and Suites comprised over 78% of deals over $100,000.
Speaker 3: Notably, in Q2 we achieved record suites attach rates in large deals in Japan.
Earlier this month, I spent time in Japan speaking with our largest customers, and those conversations reinforced the continued upside we have in this market.
We have never been more excited about the opportunity available to us.
Our Q2 Enterprise Plus customer expansions and wins include one of Japan's largest institutional investors who expanded its use of Box with the purchase of Enterprise Plus to enable secure content sharing and collaboration with external parties for the entire organization.
They also plan to integrate Box with their existing tech stack including Microsoft 365 and ServiceNow.
And one of the leading hospitals in the United States, who has been a Box customer since 2013, signed an Enterprise Plus upsell to get access to additional resources needed to support the growth and expansion of the hospital and School of Medicine. They'll be leveraging Shield to protect the sensitive content that they have stored today, which includes research content, and they plan to integrate Box into their Microsoft applications to help with consolidation efforts.
Overall, we're focused on expanding our go-to-market programs and leveraging our land and expand motion to drive the progression of our customers into higher tier product plans and enabling them to leverage the full breadth of the Box platform.
We remain focused on building healthy pipeline across the business, and this year we have doubled down in our field marketing programs, digital marketing engine, system integrators and distribution partners, vertical sales efforts in key markets like life sciences, financial services and the public sector, and much more.
Before I turn it over to Dylan, I'd like to briefly comment on the current business climate we're seeing.
It's clear that the macro environment has resulted in lower seat growth than anticipated.
Despite this, our best-in-class full churn rate remains at 3%, as enterprises are prioritizing use cases to areas where the Box Content Cloud delivers the most value in delivering secure content management, workflow, and collaboration. I'm confident that with the strongest product portfolio and roadmap we've ever had, a world-class go-to-market team, and a healthy customer base of well over 110,000 customers, is choice-designing and creating best quality products.
that we set the stage for future accelerating revenue growth as economic conditions improve. And we remain relentlessly focused on operational excellence, allowing us to deliver year-over-year gross margin and operating margin expansion in FY24.
The opportunity in front of us is massive. We're going after a more than $74 billion market with the leading content cloud platform to power the full life cycle of content in the enterprise.
In a joint report we recently released with IDC, IDC found that 90% of a company's data is in unstructured information, and that number is growing by 28% to over 73,000 exabytes in 2023. And with Box AI, we will transform our customers' ability to gain productivity and insight from their data.
The need to manage, secure, automate, collaborate, and bring intelligence to this information is more important than ever before. And Box is uniquely positioned to help enterprises solve these challenges and transform how they work. With that, I'll hand it over to Dylan.
secure, automate, collaborate, and bring intelligence to this information is more important than ever before. And Box is uniquely positioned to help enterprises solve these challenges and transform how they work. With that, I'll hand it over to Don. Thanks Aaron.
Good afternoon everyone and thank you for joining us. In Q2 our balanced business model allowed us to invest in profitable growth while continuing to optimize our underlying cost structure.
Revenue landed in line with our guidance and we delivered operating margin and EPS above our guidance despite a challenging macroeconomic environment.
We are also pleased to have delivered innovation across our product portfolio, generated significant operating leverage, and continued our prudent return of capital to our shareholders.
In Q2 we generated revenue of $261 million, up 6% year-over-year and representing 9% year-over-year growth on a constant currency basis.
We now have nearly 1,700 total customers paying us more than $100,000 annually, an increase of 11% year-over-year.
Our suites attach rate of 78% in large Q2 deals, a notable improvement from 72% in the year-ago period, demonstrates the value that our Content Cloud platform is delivering to our large customers.
Suites customers now account for 48% of our revenue, up 20% from 40% of revenue a year ago, and after introducing Suites just four years ago.
Our suites value proposition continues to resonate with our customers in this dynamic environment enabling them to transform, simplify, and secure their IT environments.
We ended Q2 with remaining performance obligations or RPO of 1.1 billion, an 8% year-over-year increase or 11% growth on a constant currency basis.
We expect to recognize roughly 60% of our RPO over the next 12 months.
Q2 billings of $233 million were down 1% year over year and up 1% on a constant currency basis.
As anticipated, our Q2 Billings result was impacted by a particularly high volume of early renewals in Q1.
Q2 billings were also impacted by incremental FX headwinds from the US dollar to Japanese yen exchange rate of approximately two million dollars or a hundred basis points.
Our net retention rate at the end of Q2 was 103%, slightly lower than our expectations.
This was driven by heightened budget scrutiny putting pressure on seat expansion within existing customers.
However, in Q2 we continued to achieve year-over-year price per seat improvements driven by customers continuing to convert to Enterprise Plus.
Additionally, our annualized full churn rate remains strong and stable at 3%, demonstrating Box's overall stickiness and criticality in our customers' IT environments.
We expect both our full churn rate and our net retention rate to remain roughly flat with our Q2 results throughout the back half of this year.
As seat growth returns to more normalized levels and as we continue driving pricing improvements
We're confident that our best-in-class full churn rate and expanding our suite of innovative products will enable a higher net retention rate over time.
Gross margin came in at 76.9% in Q2, up 70 basis points from 76.2% a year ago, and above our guidance of 76%.
As Erin mentioned earlier, our public cloud migration strategy is a critical driver of gross margin expansion.
We began this complex undertaking several years ago and we expect to be running fully in the public cloud by the end of Q3.
As our data center expenses wind down and we continue optimizing our public cloud architecture, we're confident in our ability to continue expanding gross margin in the back half of FY24 and
Q2 gross profit of 201 million was up 7% year-over-year, exceeding our revenue growth rate by 100 basis points.
We once again delivered leverage across the entire business in Q2 with our ongoing efforts around infrastructure optimizations, low cost location strategy, and overall cost discipline all paying off.
This resulted in a 21% increase in operating income in Q2 to $65 million.
Our 24.8% operating margin was up 310 basis points from the 21.7% we delivered a year ago and 80 basis points ahead of our guidance.
As a result, we delivered diluted non-GAAP EPS of 36 cents in Q2, up 29% from 28 cents a year ago, and one cent above the high end of our guidance.
On a constant currency basis our underlying profitability improvements are even stronger as Q2 EPS includes a negative 4 cent impact from FX.
Importantly, Q2 marked our fourth consecutive quarter of achieving GAP profitability.
I'll now turn to our cash flow and balance sheet.
In Q2 we generated free cash flow of $21 million, a 15% increase from $18 million in the year ago period.
We delivered cash flow from operations of 33 million, a 15% increase from 28 million in the year-ago period.
Capital lease payments, which we include in our free cash flow calculation, were 9 million up slightly from 8 million in Q2 of last year. As our public cloud migration will be fully completed by the end of this quarter, we expect capital lease payments to wind down over the next few quarters.
Let's now turn to our capital allocation strategy. We ended the quarter with $446 million in cash, cash equivalents, restricted cash, and short-term investments.
In Q2 we repurchase 2.2 million shares for approximately 62 million dollars.
As of July 31st, 2023, we had approximately 35 million of remaining buyback capacity under our current share repurchase plan.
Our Board of Directors recently authorized an additional 100 million common stock repurchase plan.
With that, I would like to turn to our guidance for Q3 and Fiscal 2024.
As a reminder, approximately one third of our revenue is generated outside of the US, primarily in Japanese yen.
The following guidance includes the expected impacts of FX headwinds assuming current exchange rates.
For the third quarter of fiscal 2024, we anticipate revenue in the range of 261 to 263 million, representing 5% year-over-year growth at the high end of this range or 7% in constant currency.
We expect our Q3 billings to be roughly flat year over year which includes an expected 200 basis point benefit from FX and accounts for the continued pressure on seat growth that we anticipate due to the macroeconomic environment.
I would note that in Q3 of last year we delivered a billings growth rate of 20% in constant currency driven by unusually strong payment durations including one large multi-year customer prepayment.
This creates a particularly difficult year-over-year comparison.
normalizing for payment durations and FX
expected Q3 billings growth would be roughly 3%.
Q4 of last year had more normal payment durations and we expect our reported Q4 billings growth to be in the mid single-digit range.
We expect our Q3 RPO growth to be higher than our anticipated Q3 revenue growth rate.
As data center expenses and capital lease payments trend down, we expect our Q4 gross margin to be roughly 79%.
We expect our Q3 non-GAAP operating margin to increase to approximately 25.5%, representing a 150 basis point improvement year over year.
We expect our Q3 non-GAAP EPS to be in the range of 37 to 38 cents, representing a 23% year-over-year increase at the high end of this range, and GAAP EPS in the range of 3 to 4 cents.
Weighted average diluted shares are expected to be approximately 149 million, slightly lower than Q2.
Our Q3 gap and non-gap EPS guidance includes an expected year-over-year headwind from FX of approximately 4 cents.
For the full fiscal year ending January 31st, 2024.
We now expect FY24 revenue in the range of 1.04 billion to 1.044 billion representing 5% year-over-year growth or 8% on a constant currency basis.
This revised range reflects the impact of the challenging macroeconomic environment, which also results in lower professional services revenue versus our prior expectations.
We expect FX to have a negative impact of roughly 300 basis points to our FY24 revenue growth rate.
For the full year of FY24, we now anticipate currency headwinds to impact our billing's growth rate by approximately 200 basis points.
We expect our FY24 billings growth rate to be roughly 4% on an as reported basis.
We still expect our FY24 gross margin to be roughly 77.5% up from 76.9% in FY23.
We are also reiterating our FY24 non-GAAP operating margin guidance of approximately 25.5% representing a strong 240 basis point improvement from last year's results of 23.1%.
We are raising the low end of our FY24 non-GAAP EPS expectations to be in the range of $1.46 to $1.50, representing a 25% increase at the high end of the range versus $1.20 in the prior year, and we expect FY24 GAAP EPS to be in the range of $0.17 to $0.21.
Weighted average diluted shares are expected to be approximately 150 million. Our FY24 gap and non-gap EPS guidance includes an expected full year negative impact from FX of approximately 17 cents.
As a result of the FX headwinds we've experienced throughout this year, a revised FY24 revenue growth outlook and the impact of billings on free cash flow, we are revising our revenue growth plus free cash flow margin target for FY24 to be in the low 30s on an as reported basis.
which includes a roughly 400 basis point headwind from FX.
We will continue to maintain a rigorous approach to cost savings while investing in long-term growth and navigating the near-term impacts of this difficult macroeconomic environment.
We remain committed to delivering against the long-term financial targets we outlined at our most recent analyst day.
We are reiterating our revenue growth target of 10-15 percent.
our gross margin target of 80 to 82 percent
our operating margin target of 32 to 35 percent
and our revenue growth plus free cash flow margin target of at least 45%.
Despite the challenging macroeconomic environment, this year we continue to deliver against the core initiatives to achieve these long-term financial targets.
We are making significant enhancements to our innovative product offerings, expanding both operating margin and free cash flow margin,
are consistently returning capital to our shareholders.
As we capitalize on these initiatives and as the macroeconomic environment improves, we are well positioned to create significant long-term shareholder value. With that, Erin and I will be happy to take your questions.
on these initiatives and as the macroeconomic environment improves we are well positioned to create significant long-term shareholder value. With that, Aaron and I will be happy to take your questions. Operator.
As a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad.
Your first question comes from the line of Brian Peterson with Raymond James.
Your line is open.
Hi, thanks for taking the question. So, Aaron, I just wanted to double down on the cost savings component. I know that's come up in the past as a value proposition to the platform. As customers may not be looking to expand seats as quickly, are they delaying cost savings for themselves, or is there a functionality dynamic there? I'd just maybe love to understand a little bit on the cost side and if that has any correlation to what you guys are seeing on the seat side of the question.
The customer conversations we're having, I think, would definitely lead us to still making sure we're driving the top line growth side. So as we just think about these toggles, whether it's our product roadmap, the strength of our suite offering, the momentum we're seeing as a result of the AI conversations that are all be it early, I think we're certainly much more focused on going into next year, keeping a healthy level of driving demand. So I would just make sure that we're thoughtful about that. Okay, and then just maybe a quick follow up. So just in terms of, we've had a lot of transition or cross-sell up sell the enterprise plus, it's now kind of approaching the majority, almost 50% of revenue, I think. It's seen a huge improvement year over year. So I'm just trying to figure out from a driver standpoint, if we believe this is potentially a double-digit growth, revenue growth business again. I don't know if there's another enterprise plus plus there. So to speak ahead or another kind of packaging price uplift, but it seems like we've monetized a lot of that already. And now really that growth acceleration will be dependent upon seat growth. Is that a fair characterization? I think what we've called out is, as we've...
think about the maturity of the Enterprise Plus tailwind coming to a head, and we are still seeing healthy growth year on year as we have called out on customers matriculating to that plan. But as we see that stabilize at a certain rate, and our product portfolio expands, we have called out that I would anticipate additional higher tier plans in the future. So we haven't exactly talked about timing, because some of that relates to our product roadmap of unannounced products and whatnot. But we are very thoughtful about making sure that we time that with a point where we have a strong new or multiple new offerings that we can bundle for customers. And again, that will I think be another driver of price per seat growth when that happens. And then obviously seat count growth becomes an additional lever. And then our platform kind of API consumption is another growth driver. So we are extremely confident and feel very, just overall bullish on the portfolio of growth drivers we have between seat platform consumption, price per seat, kind of the vertical expansion efforts, and various kind of go to market engine optimization, so multiple levels of levers of growth going forward.
Appreciate the colour. Thank you. Yes, thanks. Your next question comes from the line of Jason Ader with William Blair. Your line is open. Thank you. Good afternoon, guys. Just wanted to try to make sense of some of your commentary on macro and maybe what can we look at it as historically just how it has changed from let's say end of last year till today. Do you feel like it has changed?
But if we just look at the <unk> contribution to total revenue and a 100 K deals obviously, it seems like theres a bit of broad based pressure as well. So I'm. Just curious are there any particular aspect of <unk>.
Suites that are that are harder to sell in this environment or anything you'd call out there.
I think I wouldn't cause suites in that sense I mean, I think there is.
Suites is maybe maybe.
Hi.
And the converse is actually.
The driver of our sales motion because customers get even more value when they purchase from box. So so I'd say overall, it's actually one of our primary differentiators if anything yes.
And maybe also just to clarify can you talk about some of the other impacts.
Like on the on the large deal growth.
That is not separate from but is actually directly related to seek growth. When you have customers who are not expanding at their typical rates.
Especially existing customers.
Two are actually pretty closely correlated so that's not a separate dynamic, but actually largely a function of the seat growth dynamics.
Got it very helpful. Thank you.
Yes. Thank you thanks.
Your next question comes from the line of Steve <unk> with Citi.
Your line is open.
Okay, great. Thanks for thanks for taking the question.
Just wanted to ask a bit more on the AI.
As youre talking to customers about it.
No.
I understand some things I guess.
The Rachel Raney within.
Some of the use cases, youre going after and I guess, where would you kind of.
How are customers thinking about their own AI investments to this point and utilizing box versus other other players out there that are talking about AI.
Yeah, So I think.
I think this won't be a surprise to anybody on this call, but we almost have to assume if you are an enterprise software Youre also NII. So.
So at this point you kind of have to think about AI is almost it's mobile it's cloud.
Its pervasiveness. So it's a platform architecture that is going to exist in all technology and then there is kind of almost like a heat map of sensitivity of what kind of data and workflows does that enterprise software company have and how much does AI relate to.
That set of data and workflow and so.
We've talked about this in the past, but by definition large language models do really really.
Powerful things to large amounts of text and youll see large amounts of text and documents and so so that kind of right to win question.
We house.
Tens and tens of billions of files that are very ripe for AI, helping customers understand within that content, helping automate workflows around it helping extract metadata from those documents and so I think our right to win is extremely strong in anything that is our content related from an AI use case standpoint, and so just to rattle off a <unk>.
Few of the examples just in the past maybe two weeks of customer conversations you can have a large.
Real estate organization or a private equity firm or insurance company, where they have invoices are contracts are leasing documents that come in those today have to be read by a human process by a human somebody have to extract all the data in a very manual way and large language models, either again through our interface or API as can.
Do a lot of that heavy lifting automatically.
Using that using AI and so so just by the nature of our business model, because we already manage that content and in many cases orchestrate the workflows around that content.
We became the natural place for plugging in the AI models to that content as well as opposed to.
Shipping around that data to other platforms. So I think in that sense right.
Duane it's sort of like.
And the very center of the target zone.
And now.
Now the journey of getting customers educated on how to implement it building out all of the platform components necessary and then ultimately having a business model, where we can share some of that that upside in the performance with customers from a pricing standpoint.
Okay helpful context there.
I do want to have.
Also on some of the investments it sounds like Youre, making in go to market with our expanded marketing initiatives, maybe some more vertical focus in.
Hello, Vanessa partner the partner side.
It's a very strong signal that youre seeing out there.
Adding to this incremental investment or.
Or how are you viewing that.
Efficacy.
It has expanded initiatives at this time.
Yes so.
I think.
Yes.
To add to that macro color now down on the.
Into the daily conversations that we tend to have our customers. If you kind of look at six or nine months ago.
And customers planning their budgets and their cycle, maybe maybe.
At the start of this year, that's where you saw.
Again that initial ramp up of pressure of customers not having as much.
As many strategic initiatives because they didn't know where the macro is going to go.
And how it was going to affect their industry or business I think you've had the past six months of starting to see.
Some degree of stabilization.
From again like capital and macro like we're talking inflation rates and interest rate dynamics of where is that going to trend.
So now I think the customer conversations were having have the ability to to be.
Be more long term oriented where customers are talking about okay. What is the right strategy going to look like next year not dollars necessarily but what kinds of programs and initiatives are they going to do that gives us a signal that okay. We can now put more.
Emphasis on really making sure. We're in every major city with the right kind of field events driving the right kind of digital marketing campaigns to drive more conversations and it's been a steady ramp up throughout the year to be clear, but I think I was calling it out because this is going to be a continued focal point for us I mean, we're planning on having the biggest digital work.
Yet, we're bringing back box boxes CIO conference <unk> in person.
This October and so I think we are seeing enough signal in the conversations that that warrant, making sure we're driving the right level of demand and pipeline.
Okay perfect. Thanks for taking the questions.
Yes. Thanks.
This concludes today's Q&A session I will now turn the call back to Cynthia for closing remarks.
Great. Thank you everyone as Aaron mentioned, we're holding box works on October 11th and will be hosting a virtual investor product briefing at one P. M Pacific time, we'll be sending out more details shortly.
Again, thank you everyone for joining us today.
This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
Sure.
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