Q4 2024 Box Inc Earnings Call

Operator: Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience.

Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time your lines again will be placed on music hold thank you for your patience.

Operator: Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Box Incorporated fourth quarter and fiscal year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

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Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one.

Okay.

Yeah.

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Cynthia Hiponia: Thank you. I would now like to turn the conference over to Cynthia Ponia. Cynthia, you may begin your presentation.

Cynthia Hiponia: Good afternoon, and welcome to Box's fourth quarter and full year fiscal 2024 earnings conference. I'm Cynthia Hiponia, Vice President, Investor Relations. On the call today, we have Aaron Levie, Box Co-Founder and CEO, and Dylan Smith, Box Co-Founder and CFO. Following our prepared remarks, we will take, Today's call is being webcast and will also be available for replay on our investor relations website at box.com forward slash. Our webcast will be audio only, but supplemental slides are now available for download on our website.

Krista: Good afternoon, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the box incorporated fourth quarter and fiscal year 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a key.

Cynthia: <unk> and answer session, if you'd like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question again press star one. Thank you I would now like to turn the conference over to Cynthia Tonia Cynthia you may begin your.

Cynthia Hiponia: We'll also post the highlights of today's call on the X-platform at the handle at boxincir.org. On this call, we will be making forward-looking statements, including our first quarter and full year fiscal 2025 financial guidance and our expectations regarding our financial performance for fiscal 2025 and future periods, including our free cash flow, gross margins, operating margins, operating leverage, future profitability, and net retention rates. Remaining Performance Obligations, Revenue and Billings, 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, our ability to achieve our revenue, operating margins, and other operating model targets, as well as the timing and market adoption of and benefits from our new products, pricing models, and partners. The proceeds from the sale of our data center equipment.

Cynthia: Good afternoon, and welcome to box its fourth quarter and full year fiscal 2024 earnings conference call I'm, Cynthia <unk>, Vice President Investor Relations on the call today, we have Aaron Levie box co founder and CEO and Dylan Smith box co founder and CFO. Following our prepared remarks, we will take your questions today's call is being webcast.

Cynthia: <unk> will also be available for replay on our Investor Relations website at box Dot com forward slash investors.

Cynthia: Our webcast will be audio only however, supplemental slides are now available for download on our website. We'll also post the highlights of today's call on the <unk> platform at the handle at box, Inc. I R.

Cynthia: On this call, we will be making forward looking statements, including our first quarter and full year fiscal 2025 financial guidance and our expectations regarding our financial performance for fiscal 2025 in future periods, including our free cash flow gross margins operating margins operating leverage future.

Cynthia Hiponia: Our ability to address enterprise challenges and deliver cost savings for our customers; the impact of the macroenvironment on our business and operating results; and our capital allocation strategies, including 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.

Cynthia: Profitability net retention rates remaining performance obligations revenue in billings 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, our ability to achieve our revenue operating margin and other operating model.

Cynthia: Targets, the timing and market adoption of and benefits from our new products pricing models and partnerships.

Cynthia Hiponia: Please refer to our earnings press release filed today and the risk factors in the documents we filed with the SEC, including our most recent quarterly report on Form 10-Q, for information on risks and uncertainties that may cause actual results to differ materially from statements made in this earnings release. These forward statements are being made as of today, March 5th, 2024, and we disclaim any obligation to update or revise them should they change or cease to be updated. 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 will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release and in related supplemental slides, which can be found on our IR page of our website. Unless otherwise indicated, all references to financial measures are on a non-GAAP basis.

Cynthia: The proceeds from the sale of our data center equipment.

Cynthia: Our ability to address enterprise challenges and deliver cost savings for our customers the.

Cynthia: The impact of the macro environment on our business and operating results and our capital allocation strategies, including potential repurchase of our common stock.

Cynthia: These statements reflect our best judgment based on factors currently known to us and actual events or results may differ materially.

Cynthia: Please refer to our earnings press release filed today and the risk factors in the documents, we filed with the SEC, including our most recent quarterly report on Form 10-Q for information on risks and uncertainties that may cause actual results to differ materially from statements made on this earnings call.

Cynthia: These forward statements are being made as of today March 5th 2024, and we disclaim any obligation to update or revise them should they change or cease to be up to date.

Aaron Levie: With that, let me turn the call over to Cynthia. Thanks, Cynthia, and thank you all for joining the call today. Our fiscal Q4 results were in line with or above our guidance as we continue to see signs of stabilization in IT budgets in several of our core markets. We achieved revenue of $263 million, up 2% year-over-year, or 4% in constant currency. Operating margins of 26.7% were above our guidance, and EPS of $0.42 was $0.03 above the high end of our guidance.

Cynthia: In addition, during today's call, we will discuss non-GAAP financial measures.

Cynthia: non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from our GAAP results you will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and in related supplemental slides, which can be found on our IR page of our.

Cynthia: Our web site.

Unless otherwise indicated all references to financial measures are on a non-GAAP basis.

Cynthia: With that let me turn the call over to Aaron.

Aaron Levie: In fiscal 2024, we surpassed a billion in annual revenue, with operating margins of 24.7%, up 160 basis points from 23.1% a year ago. And despite the macroeconomic pressures on IT budgets, which persisted throughout FY24, we are pleased with our ability to deliver margin expansion, reflecting our execution of the strategies we put in place to lower our cost structure while still investing for long-term durable revenue growth. In FY24, we continued to bring advancements in our category-defining content cloud platform to the market. We launched Box AI in beta, a new suite of capabilities that natively integrate advanced AI models into the Box content cloud. We unveiled Box Hubs, integrated with Box AI, which transforms how companies securely curate and publish content and knowledge across their enterprise.

Aaron Levie: Thanks, Cynthia and thank you all for joining the call today.

Aaron Levie: Our fiscal Q4 results were in line with or above our guidance as we continue to see signs of stabilization in it budgets in several of our core markets.

Aaron Levie: We achieved revenue of $263 million up 2% year over year or 4% in constant currency operating margins of 26, 7% were above our guidance and EPS of <unk> 42 cents was three cents above the high end of our guidance.

Aaron Levie: Fiscal 2024, we surpassed a $1 billion in annual revenue with operating margins of 24, 7% up 160 basis points from 23, 1% a year ago and despite the macroeconomic pressures on it budgets, which persisted throughout FY 'twenty four we are pleased with.

Aaron Levie: Our ability to deliver margin expansion, reflecting our execution of the strategies, we put in place to lower our cost structure, while still investing for long term durable revenue growth.

Aaron Levie: We also made significant product enhancements in security and compliance, collaboration, and workflow, while also further strengthening our ecosystem of partner integration. As I reflect on the year ahead, it's clear we have an incredibly large opportunity in front of us. At Box, our mission is to power how the world works together, and the way work happens is changing more than ever before.

Aaron Levie: In FY 'twenty four we continued to bring advancements in our category defining content cloud platform to the market, we launched box AI and data our new suite of capabilities that natively integrate advanced AI models into the box content cloud.

Aaron Levie: We know that companies are looking to digitize and automate their businesses by modernizing and simplifying workflows, streamlining collaboration, and connecting their apps together. They are looking to leverage the power of AI to generate new insights, automate their processes, and supercharge productivity. And it's critical that they protect their most important data by detecting and preventing threats, avoiding ransomware, and meeting compliance requirements.

Aaron Levie: We unveiled box hubs integrated with box, AI, which transforms how companies securely curate and publish content and knowledge across their enterprise.

Aaron Levie: And we also made significant product enhancements in security and compliance collaboration and workflow. While also further strengthening our ecosystem of partner integrations.

Aaron Levie: As I reflect on the year ahead, it's clear we have an incredibly large opportunity in front of us.

Aaron Levie: At the heart of these trends is how companies work with their most important content. And while unstructured data, like contracts, marketing assets, financial documents, and other content, represents 90% of all enterprise data, most enterprises continue to be burdened by massive legacy and siloed environments for managing this content. And with the recent acceleration of advances in AI, it's nearly impossible to get the full value of content when it's fragmented across ECM systems, legacy storage infrastructure, and point solutions. For years, Box has enabled powerful ways to securely collaborate and manage enterprise content at scale. But today, we enter a new chapter as a company, and we expect FY25 to represent the most significant set of product expansion and evolution we have had as a company. With the combination of AI, our workflow automation capabilities, and our advanced metadata-driven views, we can fundamentally transform how companies run their most important processes. Just in January, we announced the acquisition of Cruise, a leading provider of no-code enterprise content management applications built on the Box platform.

Aaron Levie: At box our mission is to power how the world works together and the way work happens is changing more than ever before we know that companies are looking to digitize and automate their businesses by modernizing and simplifying workflows streamlining collaboration and connecting their apps together.

Aaron Levie: They are looking to leverage the power of AI to generate new insights automate their processes and supercharged productivity.

Aaron Levie: And it's critical that they protect their most important data by detecting and preventing threats, avoiding ransomware and meeting compliance requirements.

Aaron Levie: At the heart of these trends is how companies work with their most important content.

Aaron Levie: Unstructured data like contracts marketing assets financial documents and other content represents 90% of all enterprise data most enterprises continue to be burdened by massive legacy and siloed environments for managing this content.

Aaron Levie: And with the recent acceleration of advances in AI nearly impossible to get the full value of content when it's fragmented across ECM systems legacy storage infrastructure and point solutions.

Aaron Levie: For years boxes enabled powerful ways to securely collaborate and manage enterprise content at scale, but to date, we enter a new chapter as a company and we expect FY 'twenty five to represent the most significant set of product expansion and evolution, we have had as a company.

Aaron Levie: For years, Cruise has leveraged Box's APIs to enable advanced enterprise content management and workflow use cases like contract life cycle management, digital asset management, and controlled documents in regulated industries and more. We were thrilled to team up with Cruise, and we will be rapidly integrating and leveraging the company's no-code app builder and metadata capabilities to help customers build out custom interfaces and workflows for working with their most important content. Combined with Box's upcoming workflow automation improvements, including the expected launch of Forms and DockGen this year, Box will be able to power end-to-end critical business processes natively without customers having to do any custom development.

Aaron Levie: With the combination of AI, our workflow automation capabilities and our advanced metadata driven views, we can fundamentally transform how companies run their most important processes.

Aaron Levie: Just in January we announced the acquisition of cruise a leading provider of no code enterprise content management applications built on the box platform.

Aaron Levie: For years cruise has leveraged boxes Apis to enable advanced enterprise content management and workflow use cases like contract lifecycle management digital asset management and control documents and regulated industries and more.

Aaron Levie: We were thrilled to team up with crews and we will be rapidly integrating and leveraging the companys no code app builder and metadata capabilities to help customers build out customer interfaces and workflows for working with their most important content.

Aaron Levie: And with the acquisition of Cruise, Box will extend into new use cases within our current customers as well as enable us to rip and replace legacy ECM solutions. Importantly, these business processes are radically enriched with the power of Box AI. An age-old problem in content management is how companies can apply structure to their unstructured data. For instance, extracting key variables from an invoice or a contract or labeling critical data inside of a digital asset like an architecture diagram or a product image.

Aaron Levie: Combined with boxes upcoming workflow automation improvements, including the expected launch of forms and Doc Gen. This year box will be able to power end to end critical business processes natively without customers, having to do any custom development.

Aaron Levie: And with the acquisition of cruise box will extend into new use cases within our current customers as well as enabling us to rip and replace legacy ECM solutions.

Aaron Levie: Importantly, these business processes are radically enriched with the power of box AI and.

Aaron Levie: In April problem and content management is how companies can apply structure to their unstructured data for instance, extracting key variables from an invoice or a contract or a labeling critical data inside of a digital asset like an architecture diagram or a product image with box AI, we are now able to <unk>.

Aaron Levie: With Box AI, we are now able to automatically label and apply metadata at a continent scale, doing the work that took humans minutes or hours, performing these tasks now in seconds for a fraction of the cost. By having AI intelligently process documents and content, you can automate tasks and workflows that would have been cost prohibitive or near impossible to do previously. In FY25, we expect to dramatically advance our Box AI application by incorporating new AI models in the box, building new capabilities to help enterprises customize AI for their business workflow needs, enabling customers to ask questions about content in Box Hub, and leveraging Box AI more extensively throughout our platform API. Not only will Box AI continue to be highly differentiated due to our overall security, compliance, and governance on Box. Our platform-neutral approach means that we can leverage tens of billions of dollars in R&D happening across tech by integrating with advanced AI models from various AI vendors to provide the best user experience for Box customers. Consistent with this open approach, today we announced a new integration with Microsoft Azure OpenAI.

Aaron Levie: <unk> label and apply metadata on content at scale doing the work that took humans minutes or hours performing these tasks now in seconds for a fraction of the cost.

Aaron Levie: By having AI intelligently process documents and content you can automate tasks and workflows that would've been cost prohibitive or near impossible to do previously.

Aaron Levie: In FY 'twenty five we expect to dramatically advance our box AI efforts by incorporating new AI models in the box.

Aaron Levie: Building new capabilities to help enterprises, customize AI for their business workflow needs.

Aaron Levie: Enabling customers to ask questions of content in box hubs.

Aaron Levie: And leveraging box AI more extensively throughout our platform Apis.

Aaron Levie: Not only will box AI continue to be highly differentiated due to our overall security compliance and governance on box our platform neutral approach means that we can leverage tens of billions of dollars in R&D happening across tech by integrating with advanced AI models from various AI vendors to provide the best.

Aaron Levie: The expanded collaboration brings Box and Microsoft's enterprise-grade standards for security, privacy, and compliance to AI so customers can realize the benefits of this groundbreaking technology. We also announced that Box AI is generally available to customers on Enterprise Plus plans starting today. Since rolling out Box AI in beta to Enterprise Plus customers in November, we have seen a number of existing customers upgrade to Enterprise Plus to gain access to Box AI. Customer examples in Q4 include a leading construction company, which expanded in Q4 to access Box AI, as they were looking to extract the value from their unstructured content in Box. Applying Metadata at Scale, Monitoring Trends and Contracts, Managing Agreements, and also improving their security posture with Metadata-based Classification Control

Aaron Levie: User experience for box customers.

Aaron Levie: Consistent with this open approach today, we announced a new integration with Microsoft Azure Open AI.

Aaron Levie: The expanded collaboration brings box and Microsoft Enterprise grade standards for security privacy and compliance to AI. So customers can realize the benefits of this groundbreaking technology.

Aaron Levie: We also announced that box AI is generally available to customers on enterprise plus plan starting today.

Aaron Levie: Since rolling out box AI in beta to enterprise plus customers in November we have seen a number of existing customers upgrade to enterprise plus to gain access to box AI <unk>.

Aaron Levie: Customer examples in Q4 include a leading construction company, which expanded in Q4 to access box AI as theyre looking to extract the value from their unstructured content in box applying metadata at scale monitoring trends in contracts managing agreements and also improving their security posture with meta.

Aaron Levie: An American multinational technology company upgraded to the Enterprise Plus with a six-figure upsell to bring enterprise-grade AI to all of their employees. With access to Box AI powered by the most advanced large-language models, this organization can leverage AI for new use cases while keeping their content secure and compliant. Finally, one of the country's leading medical support organizations upgraded to Enterprise Plus to use Box AI to securely curate new content, summarize vast amounts of data, and quickly analyze it to report out to clinics that they support. Now, going beyond AI this year, to help our customers protect their most important data, our focus remains on building the leading way to protect and govern the full content lifecycle in the enterprise. In the year ahead, we plan to advance our security offerings to deliver improved threat detection and data recovery from ransomware attacks, power more advanced governance workflows, deliver native archiving solutions, achieve FedRAMP high compliance, and deliver deeper integrations with security vendors like CrowdStrike.

Aaron Levie: This classification controls.

Aaron Levie: An American multinational technology company upgrade to enterprise plus with a six figure upsell to bring enterprise grade AI to all of their employees with access to box AI powered by the most advanced large language models. This organization can leverage AI for new use cases, while keeping their content secure and compliant phy.

Aaron Levie: One of the country's leading medical support organizations upgrade to enterprise plus to use box AI to securely curate new content summarize vast amounts of data and quickly analyze it to report out to clinics that they support.

Aaron Levie: Now going beyond AI this year to help our customers protect their most important data our focus remains on building the leading way to protect and govern the full content lifecycle in the enterprise in the year ahead, we plan to advance our security offerings to deliver improved threat detection and data recovery from ransomware attacks.

Aaron Levie: Power more advanced governance workflows to deliver native archiving solutions achieved fed ramp high compliance and deliver deeper integrations with security vendors like crowd strike.

Aaron Levie: Next our flexible and interoperable platform remains a major differentiator for box and with our open Apis. We aim to continue to connect with every enterprise app that our customers use from Microsoft teams and slack to Salesforce in service now and IBM and many more and help.

Aaron Levie: Next, our flexible and interoperable platform remains a major differentiator for Box. And with our open APIs, we aim to continue to connect to every enterprise app that our customers use, from Microsoft Teams and Slack to Salesforce and ServiceNow, IBM, and many more, and help our customers leverage our APIs to power their own applications and workflows. Now, turning to go-to-market, we continue to enable new and existing customers to recognize the full value of the Box platform with increased adoption of our multi-product offerings in Q4. Sweets represented 81% of deals over $100,000, up from 72% a year ago.

Aaron Levie: Our customers leverage our Apis to power their own applications and workflows.

Aaron Levie: Now turning to go to market, we continue to enable new and existing customers to recognize the full value of box platform with increased adoption of our multi product offerings in Q4 suites represented 81% of deals over $100000 up from 72% a year ago.

Aaron Levie: We saw continued solid suites attach rates and large deals across all geographies.

Aaron Levie: We saw continued solid suite attach rates in large deals across all geographies. In Q4, customer expansions and wins with Enterprise Plus included a financial consulting firm that purchased Box with a six-figure Enterprise Plus deal. They will leverage Box as their core enterprise content management platform across the entire firm to enable their business to go fully digital while also eliminating spend on legacy agency management solutions. Next, a top international law firm purchased Box to power how they work internally and with external parties.

Aaron Levie: In Q4 customer expansions and wins with enterprise plus included our financial consulting firms, who purchased box with a six figure enterprise plus deal they will leverage box as their core enterprise content management platform across the entire firm to enable their business to go fully digital while also eliminating <unk>.

Aaron Levie: <unk> on legacy Agency management solutions.

Aaron Levie: Next a top international law firm purchased box to power, how they work internally and with external parties.

Aaron Levie: This organization was looking for a new document management solution that provided security, ease of use, integration support, and regional data storage, which led them to Box. As we look ahead to FY25 and beyond, and as we enter this new chapter as a platform to power intelligent workflows around content, We will leverage our go-to-market momentum to bring new solutions to customers, add new pricing models and packages to drive further upsell, and extend our platform to a deeper set of partners and system integrators to deliver our more advanced solutions to customers and drive further growth. Further, we plan to ignite more demand generation and pipeline development programs to reach even more customers and prospects, doubling down in key verticals such as financial services, life sciences, healthcare, and the public sector, honing our focus on key international markets, and more.

Aaron Levie: This organization was looking for a new document management solution that provided security ease of use integration support and regional data storage, which led them to box.

Aaron Levie: As we look ahead to FY 'twenty, five and beyond and as we enter this new chapter as a platform to power intelligent workflows around content.

We will leverage our go to market motion to bring new solutions to customers add new pricing models and packages to drive further upsell and extend our platform to a deeper set of partners and system integrators to deliver our more advanced solutions to customers and drive further growth.

Aaron Levie: Further we plan to ignite more demand Gen and pipeline development programs to reach even more customers and prospects doubling down in key verticals, such as financial services life Sciences, healthcare and the public sector honing our focus on key international markets and more we.

Aaron Levie: We are focused on taking advantage of the market opportunity in front of us, and these focused go-to-market investments and initiatives are being made to accelerate the future revenue growth of Box. As you can tell, we are incredibly excited about the innovation we will be delivering on our category-defining content cloud platform in FY25. Our robust product roadmap combined with our investments in strategic go-to-market initiatives positions us well for the megatrends that are driving IT decisions and for when a more normalized IT spending environment. We will be providing more detail on our growth strategy during our upcoming Financial Analyst Day on March 19th. We could not be prouder of how the company continues to execute on the initiatives to drive continued leverage in our cost structure and drive efficiencies across our business while also setting itself up to drive accelerated revenue growth.

Aaron Levie: We are focused on taking advantage of the market opportunity in front of us and these focused go to market investments and initiatives are being made to accelerate the future revenue growth of box.

Aaron Levie: As you can tell we are incredibly excited about the innovation, we will be delivering to our category defining content cloud platform in FY 'twenty five.

Aaron Levie: Our robust product roadmap combined with our investments in strategic go to market initiatives positions us well for the Megatrends that are driving decisions and for what a more normalized spending environment returns.

Aaron Levie: We will be providing more detail on our growth strategy during our upcoming financial analyst day on March 19.

Aaron Levie: We could not be prouder of how the company continues to execute on the initiatives to drive continued leverage in our cost structure and drive efficiencies across our business. While also setting ourselves up to drive accelerated revenue growth.

Aaron Levie: Dylan will be detailing our progress in his comments, but the resiliency of our financial model has been a strategic differentiator for us as we continue to invest in long-term durable revenue growth. As the way work gets done is changing more than ever, Box is well positioned to capitalize on these megatrends and power the full life cycle of content in the enterprise. With that, I'll hand it over to Dylan.

Aaron Levie: We will be detailing our progress in his comments, but the resiliency of our financial model has been a strategic differentiator for us as we continue to invest in long term durable revenue growth.

Aaron Levie: As the way work gets done is changing more than ever box is well positioned to capitalize on these megatrends and power the full lifecycle of content and the enterprise with that I'll hand, it over to Dylan.

Dylan C. Smith: Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. In fiscal 2024, we delivered another year of strong bottom-line improvements while laying the foundation for long-term profitable growth. We generated $1.04 billion in revenue, up 5% year over year or 7% at constant current. FY24 operating margin was 24.7%, up 160 basis points year over year and up 340 basis points in constant current. We delivered non-GAAP EPS of $1.46, up 22% from $1.20 in the prior year. We also generated $269 million in free cash flow, a 13% year-over-year increase, which enabled us to deploy $180 million toward our share repurchase program. As a result, we reduced fully diluted total shares outstanding sequentially in all four quarters of FY25.

Dylan C. Smith: Thanks, Aaron Good afternoon, everyone and thank you for joining us.

Dylan C. Smith: In fiscal 2024, we delivered another year of strong bottom line improvements, while laying the foundation for long term profitable growth.

Dylan C. Smith: We generated $1 4 billion in revenue up 5% year over year or 7% in constant currency.

Dylan C. Smith: FY 'twenty four operating margin was 24, 7% up 160 basis points year over year, and up 340 basis points in constant currency.

Dylan C. Smith: We delivered non-GAAP EPS of $1 46 up.

Dylan C. Smith: Up 22% from $1 20 in the prior year.

Dylan C. Smith: We also generated $269 million in free cash flow of 13% year over year increase which enabled us to deploy a $180 million toward our share repurchase program.

Dylan C. Smith: As a result, we reduced fully diluted total shares outstanding sequentially in all four quarters of FY 'twenty four.

Dylan C. Smith: As we continue to navigate this challenging macroeconomic environment, we remain focused on delivering higher topline growth.

Dylan C. Smith: As we continue to navigate this challenging macroeconomic environment, we remain focused on delivering higher top-line growth, generating Consistent Operating Margin Expansion, and Executing a Disciplined Capital Allocation Strategy. Turning to Q4, we delivered revenue in line with our expectations and operating margin and EPS above our guidance. Q4 revenue was $263 million, up 2% year-over-year, or 4% in constant currency. Operating margin of 26.7% was 120 basis points higher than our guidance of 25.5%. EPS of $0.42 was $0.03 above the high end of our guidance and up 14% year-over-year. We ended the year with approximately 1,770 total customers paying us more than $100,000 annually.

Dylan C. Smith: Generating consistent operating margin expansion and executing a disciplined capital allocation strategy.

Dylan C. Smith: Turning to Q4, we delivered revenue in line with our expectations and operating margin and EPS above our guidance.

Dylan C. Smith: Q4 revenue was $263 million up 2% year over year or 4% in constant currency.

Dylan C. Smith: Operating margin of 26, 7% was 120 basis points higher than our guidance of 25, 5%.

Dylan C. Smith: EPS of <unk> 42, <unk> was <unk> <unk> above the high end of our guidance and up 14% year over year.

Dylan C. Smith: We ended the year with approximately 1770 total customers paying us more than $100000 annually.

Dylan C. Smith: We continue to see strong demand for our higher value products. Our Q4 suites attach rate in large deals landed at 81%, up from 72% a year ago. Sweep customers now account for 55% of our revenue, a significant improvement from 46% in Q4 of last year and from 51% in Q3.

Dylan C. Smith: We continue to see strong demand for our higher value product offerings, our Q4 suites attach rate in large deals landed at 81% up from 72% a year ago.

Dylan C. Smith: Even in this environment where IT budgets are tighter, enterprises recognize the value that our suites offerings bring to help them simplify, transform, and secure their content. We end in Q4 with remaining performance obligations, or RPO, of $1.3 billion, a 5% year-over-year increase, or 9% in constant current. These growth rates were 200 basis points and 500 basis points ahead of our Q4 revenue growth, respectively. This demonstrates both the stronger performance that we delivered in the back half of the year, as well as customers' longer-term commitments to Box as a core part of their investment. We expect to recognize roughly 60% of our RPO over the next 12, and Q4 billings of $379 million were up 6% year-over-year, or 10% in constant currency, above our expectations of low-to-mid single-digit growth driven by strong early renewal.

Dylan C. Smith: Suites customers now account for 55% of our revenue a significant improvement from 46% in Q4 of last year and from 51% in Q3.

Dylan C. Smith: Even in this environment, where budgets are tighter enterprises recognize the value that our suite offerings bring to help them simplify transform and secure their content.

Dylan C. Smith: We ended Q4 with remaining performance obligations or <unk> of.

Dylan C. Smith: Of $1 3, billion% to 5% year over year increase or 9% in constant currency.

Dylan C. Smith: These growth rates were 200 basis points and 500 basis points ahead of our Q4 revenue growth respectively.

Dylan C. Smith: This demonstrates both the stronger performance that we delivered in the back half of the year as well as customers longer term commitments to box as a core part of their infrastructure.

Dylan C. Smith: Our net retention rate at the end of Q4 landed at 100%. While we continued to experience pressure on seed expansion within our customer base, our annualized full churn rate remains stable at 3%, demonstrating the stickiness and value that the Box platform provides. We've also continued to achieve an increase in price per seat year over year, despite the pressures on IT.

Dylan C. Smith: We expect to recognize roughly 60% of our RP over the next 12 months.

Dylan C. Smith: Okay.

Dylan C. Smith: Q4, billings of $379 million were up 6% year over year or 10% in constant currency above our expectations of low to mid single digit growth driven by strong early renewals.

Dylan C. Smith: As a reminder, our net retention rate is a trailing 12-month maximum. Based on the headwinds we experienced in FY24 that we are now lapping, we expect our net retention rate to bottom out at 101%, exiting FY25 with a net retention rate in line with or slightly above our Q4 results. Beyond FY25, as we benefit from the introduction of new product offerings and plan tiers and as heat growth returns to more normalized levels, we expect to achieve a higher net retention rate over time. Q4 gross margin came in at 78.4%, roughly in line with the year-ago period.

Dylan C. Smith: Our net retention rate at the end of Q4 landed at 101%.

Dylan C. Smith: Our net retention rate at the end of Q4 landed at 101%.

Dylan C. Smith: While we continued to experience pressure on seed expansion within our customer base, our annualized full churn rate remained stable at 3% demonstrating the stickiness and value that the box platform provides.

Dylan C. Smith: We've also continued to achieve an increase in price per seat year over year. Despite the pressures on it budgets.

Dylan C. Smith: As a reminder, our net retention rate is a trailing 12 month metric.

Dylan C. Smith: Based on the headwinds we experienced in FY 'twenty for that we're now lapping we expect our net retention rate to bottom out at 101% exiting FY 'twenty five with a net retention rate in line with or slightly above our Q4 results.

Dylan C. Smith: As a reminder, we fully migrated our infrastructure to the public cloud in Q3. As our on-premises data center expenses wind down over the coming quarters, we expect to deliver additional gross margin expansion over the course of FY25. We also continue to drive leverage across the business through our lower-cost location strategy and rigorous cost distribution. We now have 300 full-time employees in our Engineering Center of Excellence in Poland, up 21% year over year.

Dylan C. Smith: Beyond FY 'twenty five as we benefit from the introduction of new product offerings and plan tiers and his seat growth returns to more normalized levels, we expect to achieve a higher net retention rate over time.

Dylan C. Smith: Q4 gross margin came in at 78, 4%.

Dylan C. Smith: In line with the year ago period.

Dylan C. Smith: As a reminder, we fully migrated our infrastructure to the public cloud in Q3.

Dylan C. Smith: And in the coming year, the significant majority of our R&D hiring will be in Poland. These initiatives resulted in a 26.7% operating margin, or 28.0% in constant currency, an improvement from the 26.0% we delivered in Q4 of last year and a testament to our disciplined expense management. As a result, we delivered an increased non-GAAP EPS of $0.42 in Q4, or $0.44 on a constant currency basis, compared with $0.37 a year ago. I'll now turn to our cash flow and balance. In Q4, we generated free cash flow of $82 million, a 10% increase from $75 million a year earlier. We delivered cash flow from operations of $89 million, a 3% decrease from $92 million in the year-ago period. Capital lease payments, which we include in our free cash flow calculation, were $4 million, down from $11 million in Q4 of last year.

Dylan C. Smith: As our on premises data center expenses wind down over the coming quarters, we expect to deliver additional gross margin expansion over the course of FY 'twenty five.

Dylan C. Smith: We also continued to drive leverage across the business through our lower cost location strategy and rigorous cost discipline.

Dylan C. Smith: We now have 300 full time employees in our engineering center of excellence in Poland up 21% year over year and in the coming year. The significant majority of our R&D hiring will be in Poland.

Dylan C. Smith: These initiatives resulted in 26, 7% operating margin or 28, 8% in constant currency an improvement from the $26.

Dylan C. Smith: Percent, we delivered in Q4 of last year, and a testament to our disciplined expense management.

Dylan C. Smith: As a result, we delivered increased non-GAAP EPS of <unk> 42.

Dylan C. Smith: In Q4 were 44 on a constant currency basis, compared with 37 a year ago.

Speaker Change: I'll now turn to our cash flow and balance sheet.

Dylan C. Smith: We expect capital lease payments to wind down over the next few quarters as we exit our managed data centers as part of our public cloud migrations. Let's now turn to our capital allocation. We ended the quarter with $481 million in cash, cash equivalents, restricted cash, and short-term investments.

Speaker Change: In Q4, we generated free cash flow of 82, million% to 10% increase from $75 million a year ago.

Speaker Change: We delivered cash flow from operations of 89, Million% to 3% decrease from $92 million in the year ago period.

Dylan C. Smith: In Q4, we repurchased approximately 790,000 shares for approximately $20 million. For the full year of FY24, we repurchased approximately 6.6 million shares for approximately $180 million, or two-thirds of the free cash flow we generated in the fiscal year. As of January 31st, 2024, we had approximately 64 million of remaining buyback capacity under our current share repurchase program. We remain committed to opportunistically returning capital to our shareholders, and our Board of Directors recently authorized an additional $100 million common stock repurchase. With that, I would like to turn to our guidance for Q1 and fiscal 2025. As a reminder, approximately one-third of our revenue is generated outside of the U.S., with roughly 60% of our international revenue coming from Japan.

Speaker Change: Capital lease payments, which we include in our free cash flow calculation were 4 million down from $11 million in Q4 of last year.

We expect capital lease payments to wind down over the next few quarters as we exit our managed data centers as part of our public cloud migration strategy.

Speaker Change: Let's now turn to our capital allocation strategy.

Speaker Change: We ended the quarter with $481 million in cash cash equivalents restricted cash and short term investments.

Speaker Change: In Q4, we repurchased approximately 790000 shares for approximately $20 million.

Speaker Change: For the full year of FY 'twenty, four we repurchased approximately six 6 million shares for approximately $180 million or two thirds of the free cash flow we generated in the fiscal year.

Speaker Change: As of January 31, 2024, we had approximately $64 million of remaining buyback capacity under our current share repurchase plan.

Dylan C. Smith: The following guidance includes the expected impacts of FX headwinds, assuming current exchange rates. While we are seeing some pockets of stabilization in most of our markets, our guidance reflects a continued constrained IT budget environment in FY25. Additionally, as our international businesses are now consistently generating profit, in Q4, we released the valuation allowance against our deferred tax assets in the UK, and beginning in FY25, we will now be recognizing non-cash deferred tax expenses on the profits generated in international countries, which will impact our FY25 GAAP and non-GAAP EPS. We expect this to represent a roughly $0.02 impact on Q1 and $0.06 for the full year in the first quarter of fiscal 2025. We expect Q1 revenue to be in the range of $261 million to $263 million, representing 4% year-over-year growth or 7% growth on a constant currency basis, both above the growth rate we delivered this past quarter. We expect our Q1 billings growth rate to be in the low single digits. This includes an expected headwind from FX of approximately 300 bases.

Speaker Change: We remain committed to Opportunistically, returning capital to our shareholders and our board of directors recently authorized an additional $100 million common stock repurchase plan.

Speaker Change: With that I would like to turn to our guidance for Q1 and fiscal 2025.

Speaker Change: As a reminder, approximately one third of our revenue is generated outside of the U S with roughly 60% of our international revenue coming from Japan.

Speaker Change: The following guidance includes the expected impacts of FX headwinds, assuming current exchange rates.

Speaker Change: While we are seeing some pockets of stabilization in most of our markets. Our guidance reflects a continued constrained budget environment in FY 'twenty five.

Speaker Change: Additionally, as our international businesses are now consistently generating profit in Q4, we have released the valuation allowance against our deferred tax assets in the U K and beginning in FY 'twenty five we will now be recognizing noncash deferred tax expenses on the profit generated in.

Speaker Change: The international countries, which will impact our FY 'twenty, five GAAP and non-GAAP EPS.

Dylan C. Smith: We expect our Q1 gross margin to be roughly 79%, representing a year-over-year improvement of roughly 100. We expect our Q1 non-GAAP operating margin to be approximately 25%, which includes an expected negative impact of approximately 200 basis points due to FDI. This represents a 220 basis point improvement year over year and a 420 basis point improvement in constant currency. We expect our Q1 non-GAAP EPS to be in the range of $0.35 to $0.36, a 13% year-over-year increase at the high end of this range, even as we absorb the deferred tax expenses that I mentioned earlier. Weighted average diluted shares are expected to be approximately $147 million for the full fiscal year ending January 31st, 2025.

We expect this to represent a roughly <unk> <unk> impact to Q1 and <unk> for the full year.

Speaker Change: For the first quarter of fiscal 2025.

Speaker Change: We expect Q1 revenue to be in the range of 261 million to $263 million, representing 4% year over year growth or 7% growth on a constant currency basis.

Speaker Change: Most above the growth rate, we delivered this past quarter.

Speaker Change: We expect our Q1 billings growth rate to be in the low single digit range.

Speaker Change: This includes an expected headwind from FX of approximately 300 basis points.

Speaker Change: We expect our Q1 gross margin to be roughly 79% representing a year over year improvements of roughly 100 basis points. We expect our Q1 non-GAAP operating margin to be approximately 25%, which includes an expected negative impact of approximately 200 basis point.

Dylan C. Smith: We anticipate revenue in the range of $1.08 to $1.085 billion, representing approximately 5% year-over-year growth at the high end of this range and 6% in constant currency. This includes an expected headwind from FX of roughly 170 basis points and is consistent with our preliminary guidance on a constant currency basis. We expect our FY25 billings growth rate to be roughly in line with revenue growth on an as-reported basis. We expect FX to have a negative impact of a little more than 50 basis points on build. We expect our FY25 gross margin to be roughly 80%, representing a year-over-year improvement of more than 200 basis points. We are stepping up our sales and marketing expenses to drive future growth, and we expect our FY25 non-GAAP operating margin to be approximately 27%, representing a 230 basis point improvement from last year's results of 24.7%. We expect FX to have a negative impact on operating margin of a little more than 100.

Speaker Change: Due to FX.

Speaker Change: This represents a 220 basis point improvement year over year, and a 420 basis point improvement in constant currency.

Speaker Change: We expect our Q1 non-GAAP EPS to be in the range of 35% to 36.

Speaker Change: 13% year over year increase at the high end of this range, even as we absorbed the deferred tax expenses that I mentioned earlier.

Speaker Change: Weighted average diluted shares are expected to be approximately $147 million.

Speaker Change: For the full fiscal year ending January 31, two.

Speaker Change: 2025.

Speaker Change: We.

Speaker Change: <unk> revenue in the range of one point to 1.5.

Speaker Change: <unk> 5 billion, representing approximately 5% year over year growth at the high end of this range and 6% in constant currency.

Speaker Change: This includes an expected headwind from FX of roughly a 170 basis points and is consistent with our preliminary guidance on a constant currency basis.

Dylan C. Smith: This guidance is in line with our preliminary guidance, despite an expected incremental headwind from FAA. We expect FY25 non-GAAP EPS to be in the range of $1.53 to $1.57, representing an 8% increase at the high end of this range versus $1.46 in the prior year and includes the six cent impact from deferred tax expenses that I noted previously. Weighted average diluted shares are expected to be approximately $149 million.

Speaker Change: We expect our FY 'twenty five billings growth rate to be roughly in line with revenue growth on an as reported basis.

Speaker Change: We expect FX to have a negative impact of a little more than 50 basis points to billings.

Speaker Change: We expect our FY 'twenty five gross margin to be roughly 80%, representing a year over year improvement of more than 200 basis points.

Dylan C. Smith: Finally, we expect our FY25 revenue growth rate combined with our FY25 free cash flow margin to be in the low 30s on an as-reported basis and in the mid-30s on a constant currency basis, which includes the combined headwind of a little more than 200 basis points from FX to revenue and billings that I discussed previously. We are encouraged by the stabilization trends we've seen in the last couple of quarters, even in light of the macroeconomic pressures on IT budgets that we saw in FY24. As Aaron mentioned, we are entering a new chapter to power AI-driven business processes around content and work. To take advantage of this opportunity, our focus in FY25 is laying the foundation for re-accelerating revenue growth by investing in our innovative product roadmap and strategic go-to-market programs, expanding gross and operating margin, and efficiently returning capital to our shareholders. We look forward to providing further details at our virtual Financial Analyst Day on Tuesday, March 19. With that, Aaron and I will be happy to take your questions. Operator.

Speaker Change: We are stepping up our sales and marketing expenses to drive future growth and we expect our FY 'twenty five non-GAAP operating margin to be approximately 27%, representing a 230 basis points improvement from last year's result of 24, 7%.

Speaker Change: We expect FX to have a negative impact on operating margin of a little more than a 100 basis points.

Speaker Change: This guidance is in line with our preliminary guidance, despite an expected incremental headwinds from FX.

Speaker Change: We expect FY 'twenty five non-GAAP EPS to be in the range of $1 53 to $1 57, representing an 8% increase at the high end of this range versus $1 46 in the prior year and includes the <unk> impact from deferred tax expenses that I noted previously.

Speaker Change: Weighted average diluted shares are expected to be approximately $149 million.

Speaker Change: Finally, we expect our FY 'twenty five revenue growth rate combined with our FY 'twenty five free cash flow margin to be in the low <unk> on an as reported basis and in the mid <unk> on a constant currency basis, which includes the combined headwind of a little more than 200 basis points from FX.

Operator: Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Your first question comes from the line of Josh Baer for Morgan Stanley. Please go ahead.

Speaker Change: To revenue and billings that I discussed previously.

Speaker Change: We are encouraged by the stabilization trends we've seen in the last couple of quarters, even in light of the macroeconomic pressures on it budgets that we saw in FY 'twenty for us.

Aaron Levie: Thanks for the question. I wanted to ask about the acquisition of Cruise, which is very interesting, getting into the no code app development space. How significantly are you expecting to invest there, really compete in that market, versus maybe more limited around use cases centered on content? And then that is a good way to think about that acquisition, sort of like what you did with the eSignature acquisition kind of evolving into Box. Yeah, thanks. So, a really, really great and important point to clarify.

Speaker Change: Aaron mentioned, we are entering a new chapter to power AI driven business processes around content and workflows.

Speaker Change: To take advantage of this opportunity our focus in FY 'twenty five is laying the foundation for re accelerating revenue growth by investing in our innovative product roadmap and strategic go to market programs.

Speaker Change: Expanding gross and operating margin and.

Speaker Change: And efficiently returning capital to our shareholders.

Speaker Change: We look forward to providing further details at our virtual financial analyst day on Tuesday March 19.

Speaker Change: With that Aaron and I will be happy to take your questions operator.

Speaker Change: Thank you if you would like to ask a question. Please press star followed by the number one on your telephone keypad and if you'd like to withdraw that question again Press Star. One. Your first question comes from the line of Josh Baer from Morgan Stanley. Please go ahead.

Aaron Levie: So, Cruise is 100% focused on no-code applications and sort of custom interface development for content-centric workflows. And we are going to remain squarely focused on the content market. But when you think about the kind of workflows and business processes that enterprises have around content, you have digital asset management, invoice processing, contract lifecycle management, and GFP-compliant controlled document management. And so, there are hundreds, or if not thousands, of use cases that enterprises have around content-driven workflows. And traditionally, we've really kind of had our customers have to go build those workflows and the interfaces around those workflows off of Box. And so, you had to do custom app development in some other kind of platform environment.

Joshua Phillip Baer: Excellent. Thanks for the question I wanted to ask about the acquisition of cruise very interesting getting into the no code App development space with <unk>.

Joshua Phillip Baer: How significantly are you expecting to invest there really compete in that market versus maybe more limited around use cases centered on content.

Joshua Phillip Baer: And then.

Joshua Phillip Baer: A good way to think about that acquisition sort of thinking about what you did with the esignature acquisition kind of evolving into boxes.

Speaker Change: Yeah. Thanks, so really really great.

Speaker Change: An important point to clarify so.

Speaker Change: Cruises is 100% focused on no code application.

Speaker Change: And sort of customer interface development for content centric workflows. So we're going to remain squarely focused on the content market, but when you think about the kind of workflows and business processes that enterprises have around content you have digital asset management invoice processing contract lifecycle management.

Aaron Levie: The Cruise, as an independent company, as a startup, really kind of proved out the use case for all of these types of use cases being built out on the Box platform in a no-code environment. So, we got really excited about being able to bring them on board. And what we're doing now is integrating their technology natively into Box. And in the coming quarters within this fiscal year, we anticipate having a new product that we'll be releasing built on the Cruise technology that we'll obviously be sharing much more about throughout the year. And that technology and product will let our customers then, in a very native fashion, go and create these types of interfaces and custom applications on top of Box.

Speaker Change: GSP compliant.

Speaker Change: Control document management, and so theres hundreds if not thousands of of use cases that enterprises have around content driven workflows and traditionally we've really kind of had our customers have to go build those workflows and and the interfaces around those workflows off of box and so.

Aaron Levie: And so, what we've seen from their customer base so far is, again, anything from major players in the commercial real estate market that use Cruise for commercial real estate lease portals. There are customers that are using it as their core portal for any kind of contract management. And so, these are the kind of use cases that will now be natively built in the Box environment. From a monetization standpoint, right now, we have continued the business model that Cruise had previously, which is really kind of selling these Cruise implementations on a per customer basis for the number of users or seats that that customer needs.

Speaker Change: You had to do custom App development and some other kind of platform environment the crews.

Speaker Change: Kind of independent as an independent company as a startup really kind of proved out the use case of all of these these types of use cases being built out on the box platform and a no code environment. So we got really excited about being able to bring them on board.

Speaker Change: And what we're doing now is integrating their technology natively into box.

Speaker Change: And in the coming kind of quarters within this fiscal year, we anticipate having a.

Speaker Change: New product, we'll be releasing built on the cruise technology that will be obviously sharing much more about.

Speaker Change: Throughout the year.

Speaker Change: That technology and product, we'll let our customers than in a very native fashion going create these types of interfaces and custom applications on top of box and so what we've seen from their customer base. So far is again anything from theirs.

Aaron Levie: And we will continue that while we integrate the technology. And then we'll be really kind of driving Cruise as an upsell vehicle within our customer base. So, unlike Box Sign, where we included the core of Box Sign in all of our plans, we won't be doing that with Cruise.

Speaker Change: Major players in the commercial real estate market that use crews for commercial real estate lease portals.

Speaker Change: There is customers that are using it as their core portal for any kind of contract management and so these are the kind of use cases that will now be natively built into box environment from a monetization standpoint right. Now we have continued the business model that crews had.

Aaron Levie: We will be using this as an additional monetization lever, both in our sort of bundled pricing model, but also as standalone capabilities as well. So, we're really excited about what this could do from a monetization standpoint, and we'll be sharing a little bit more at the Financial Analyst in a couple weeks around the strategy here. Really helpful, Aaron.

Speaker Change: Previously, which is really kind of selling these crews implementations on a per customer basis for the number of users receipts that that customer needs and we will continue that while we integrate the technology and then we'll be on.

Dylan C. Smith: And just anything to call out as far as impact to revenue or expenses this year from proof. Yeah, so everything is sort of, you know, built into the model that we just laid out. We will be investing in the team, you know, certainly to go build out this technology, but given our philosophy around how we make R&D decisions, you know, that will certainly be prioritized, but within the cost envelope that we've already laid out, so no changes on that front. And then from a kind of a revenue growth standpoint, you know, this is really the year of building out the technology into Box, and we expect it to provide a tailwind more in that medium and long-term from a pure growth rate standpoint, but, you know, overall, if you sort of step back and say strategically what's happening, why is Cruise very important, it's really that combination of the no-code application development that Cruise brings with metadata views plus the combination of AI and what we're doing in workflow, and together I think you see a real kind of new chapter in our, you know, what our product can deliver for customers, letting them go expand use cases into more of these enterprise content management spaces, as well as rip and replace legacy ECM solutions, so there's a nice kind of combined effect there that we're going to be able to drive. Your next question comes from the line of Pinjalim Bora from J.P. Morgan. Please go ahead.

Speaker Change: It really kind of driving cruise as an upsell vehicle within our customer base. So unlike box sign where we included the core of bauxite and all of our plans we won't be doing that with the <unk> technology, we will be using this as a dozen additional monetization lever.

Speaker Change: Both in our sort of bundled pricing model, but as well as standalone capabilities as well. So we're really excited about what this could do from a monetization standpoint, and we'll be sharing a little bit more at the financial analyst day in a couple of weeks around the strategy here.

Speaker Change: Really helpful, Eric and just anything to call out as far as impact to revenue or expenses. This year from Chris. Thanks.

Chris: Yeah. So.

Chris: Everything is sort of built into the model that we just laid out we will be investing in the in the team.

Chris: Certainly to go build out the technology, but given our our philosophy around how we make R&D decisions.

Chris: That will certainly be prioritized.

Chris: But within the cost envelope that we've already laid out. So note no changes on that front and then from a kind of a revenue growth standpoint. This is really the year of building out the technology in the box.

Chris: And we expect it to provide a tailwind more of that medium and long term from a pure growth rate standpoint, but overall, if you sort of step back and say strategically what's happening wise cruise very important it's really that combination of the no code application development that cruise brings with metadata views plus the combination of AI and what we're doing in workflow and to.

Chris: Together I think you see a real kind of new chapter in our what our product can deliver for customers letting them go expand use cases into more of these enterprise content management spaces as well as rip and replace legacy ECM solutions. So there's a nice kind of combined effect, there that we're going to able to drive.

Dylan C. Smith: Yeah, thanks. Thanks for taking the questions. Congratulations on the quarter.

Aaron Levie: Aaron, what have you seen so far with respect to the kind of adoption of BoxAI? Maybe in terms of the volume of queries that you're seeing within those users that are playing around or have adopted BoxAI? Has that been tracking your assumptions? And have you seen instances where Box is coexisting with other horizontal copilots?

Speaker Change: Great. Thanks.

Your next question comes from the line of pendulum Flores from Jpmorgan. Please go ahead.

Speaker Change: Okay.

Pendulum Flores: Yeah. Thanks, Thanks for taking the questions congrats on the quarter.

Pendulum Flores: Erin what have you seen so far with respect to kind of adoption of box AI.

Pendulum Flores: Maybe in terms of volume of queries that youre seeing within those users that are playing around or have adopted box.

Aaron Levie: Yeah, so I'll address a few of the pieces in there. So first of all, obviously, as everybody knows, we just released BoxAI in beta in Q4, and today is literally the day of GA. So it really was some of the more, let's say, leaning in, early adopter-type customers that were adopting it for the past quarter. We were looking at a lot of their usage patterns, seeing their use cases. The first set of use cases, we're sort of dominated by the core functionality we have today, which is summarizing documents, quickly extracting information from documents as a user, sort of reading that.

Pendulum Flores: Has that been tracking your your assumptions and have you seen instances where boxes coexisting with kind of other horizontal co pilots at this point.

Yes so.

Couple of just a few of the pieces in there. So first of all obviously as everybody knows we just released box AI in beta in Q4 and today is literally the day MGA. So so it really was some of the more let's say leaning in early adopter type customers that that we're adopting it for the past.

Pendulum Flores: Quarter, we were.

Pendulum Flores: Looking at lot of the usage pattern and seeing their use cases. The first set of use cases, we're sort of dominated by the core functionality. We have today, which is summarizing documents quickly extracting information from documents as a user is sort of reading that so some powerful kind of end user productivity use cases, but quickly we got feedback that probably.

Aaron Levie: So some powerful kinds of end-user productivity use cases. But quickly, we got feedback that probably the biggest areas of excitement, and these are things that we've been working on, is one, the ability to ask multiple documents a question. So that's the multi-document kind of analysis functionality that we're working on. That will be embedded in our Hubs product for customers that have BoxAI in their Enterprise Plus plan. They'll be able to ask questions inside of a Hub about any number of documents. So think about this use case of having a knowledge base where your sales materials are in that knowledge base, or your HR materials are in a knowledge base, or any kind of equity research data. You can then set up these knowledge bases or Hubs, make them available to employees, or customers, or anybody outside the Enterprise, and then you can ask questions about all of your data.

Pendulum Flores: The biggest areas of excitement.

Pendulum Flores: And these are these are things that we've been working on is one the ability to ask multiple documents a question. So thats. The multi document kind of analysis functionality that we're working on that will be embedded in our hubs.

Pendulum Flores: For customers that have box AI in the planet.

In their enterprise plus plan there'll be able to ask questions inside of a hub of any number of documents and so think about this use case of having a knowledge base, where your your sales materials are in that knowledge base or your HR materials are in a knowledge base or.

Pendulum Flores: He kind of any kind of equity research data you can then set up these knowledge bases or hubs make them available to employees or customers or anybody outside the enterprise and then you can ask questions of all of your data and so for for those familiar on the call. That's effectively kind of a rag as a service type of approach that we're going to be delivering a right out of the box for our customers. So collect any amount of data put that.

Aaron Levie: So for those familiar with the call, that's effectively kind of a platform-as-a-service type approach that we're going to be delivering right out of the box for our customers. So collect any amount of data, put that into a Hub, and then you can ask questions inside that Hub. So it's going to be a really powerful kind of end-user productivity, business productivity use case. And then secondarily, and as I mentioned on this call, probably the big breakthrough, to some extent, in TAM expanding use case is really the ability to structure our unstructured data. And so the ability to take a contract, or an invoice, or a digital asset and use AI to look at that information and pull out the appropriate metadata from that content.

Pendulum Flores: Into a hub and then you can ask questions inside that hub. So it's going to be a really powerful kind of end user productivity business productivity use case, and then secondarily and as I mentioned on this call probably the big breakthrough kind of to some extent Tam expanding use cases really the ability to structure our unstructured data.

Pendulum Flores: And so the ability to take a contract or an invoice or a digital asset and use AI to look at that information and pull out the appropriate metadata.

Pendulum Flores: From that from that content that aligns with our crews use case, obviously very directly and so we have a number of customers right now that are in our early data program, leveraging our metadata extraction capabilities through our API.

Aaron Levie: That aligns with our Cruise use case, obviously, very directly. And so we have a number of customers right now that are in our early beta program leveraging our metadata extraction capabilities through our API. One such example that's incredibly powerful is a loan processing company where they have loan submissions coming in. They need AI to be able to very quickly read bank statement uploads from that client and then ensure that they're associating documents with the appropriate components in their Salesforce record.

Pendulum Flores: One such example, that's incredibly powerful is our loan processing company, where they have loan submissions coming in they need AI to be able to very quickly read.

Pendulum Flores: Bank statement of uploads from from that client and then ensure that they're associating documents with the appropriate components in their salesforce record and and being able to completely automate that process is saving them a ton of time and letting them go and actually.

Aaron Levie: And being able to completely automate that process is saving them a ton of time and letting them go and actually issue even more business and loans. And so when you think about that combination of Salesforce plus Box, plus Box AI, you start to get to really powerful solutions that we can now deliver to our customers. And so this is going to get us more into things like the intelligent document processing space. And again, we'll talk a bit more at Financial Analyst Day about what we're going to be doing here. But using AI to automatically structure unstructured data is probably the core breakthrough use case that our customers are most excited about, as well as the broad productivity capabilities.

Pendulum Flores: Issue, even more more business in loans and so when you think about that combination of Salesforce plus box plus box AI you start to get to really powerful solutions that we can now deliver to our customers and so this is going to get us more into even things like the intelligent document processing space and again, we'll talk a bit more financial analyst day on what we are.

Pendulum Flores: What we're going to be doing here, but using AI to automatically structure unstructured data is.

Pendulum Flores: They're kind of core breakthrough use case that our customers are most excited about as well as the <unk>.

Pendulum Flores: Productivity capabilities, and then finally with the other kind of co pilots and chatter booties.

Aaron Levie: And then finally, with the other copilots and chat GBTs, our focus remains to make sure that we're integrated with any of the AI products that our customers are using, so we're continuing to work through even better ways to integrate with the copilot or assistant products. But we really see those as just pure individual and user productivity, which is fantastic and a great use case for content. But we're going to be directly going after more of the business process-type use cases. Yep, got it. One quick one for Dylan.

Pendulum Flores: Our focus remains make sure that we're integrated with any of the AI products that our customers are using so we're continuing to work through even better ways to integrate with what the kind of copilot or assistant products, but we really see those as more just pure individual end user productivity, which is fantastic.

Pendulum Flores: That use case for content, but we're going to be directly going after more of the business process type use cases.

Speaker Change: Got it one quick one for Dylan.

Dylan C. Smith: Billings growth and constant currency was very strong coming above your guide. RPO seems like it has accelerated. Both of those billings growth and RPO and constant currency seem like they are running ahead of your revenue guide for the year. Maybe talk about the early renewal, how much was that of an influence for billings?

Speaker Change: <unk> growth in constant currency was very strong coming coming in above your guide are you. It seems like has accelerated.

Speaker Change: Both of those billings growth and our <unk> in constant currency. It seems like it's running ahead of your revenue guide for the year maybe.

Dylan C. Smith: Maybe talk about the early renewal how much was that of the influences for billings and more broadly do you see.

Dylan C. Smith: And more broadly, do you see the 6% growth for this year as kind of a trough level? Yeah, so I would say, you know, first to write that for both, you know, where we delivered in Q4 on our expectations, you know, for RPO, you know, at least for next year, we do expect those to track ahead of revenue. And I think a lot of that, especially the kind of Q4 performance, in addition to the early renewal tailwinds that I'll address in a bit, is really due to the fact that we did see, especially in the back part of the year, stronger performance overall, stabilization, and just, you know, much better execution. And so, you know, while the environment remains challenging, that is what gives us confidence, you know, as we talked about the stability, but also of calling for kind of future improvements and some of those metrics, you know, in various top line areas, including the net retention rate.

Do you see the 6% growth for this year as kind of a trough level going forward.

Speaker Change: Yes, so I would say.

Speaker Change: First you're right that for both.

Where we what we delivered in Q4 on our expectations.

Speaker Change: For <unk>.

Speaker Change: At least for next year, we do expect those to track ahead of revenue.

Speaker Change: And I think a lot of that especially the kind of Q4 performance. In addition to the early renewal tailwind that I'll address in a bit is really due to the fact that we did see especially in the back part of the year a stronger performance overall stabilization.

Speaker Change: And just much better execution.

Speaker Change: While the environment remains challenging that is what gives us confidence.

Speaker Change: You've talked about the stability.

Of calling.

Speaker Change: Kind of future improvements in some of those metrics.

Speaker Change: And various topline areas, including the net retention rate as it relates to early renewals piece for Q4 that had an impact of a couple of points to the growth rate. So even adjusting for that would've still been ahead of our expectations. Both on a reported basis and in constant currency and as we mentioned FX was a little bit more of a headwind.

Dylan C. Smith: As it relates to the early renewals piece for Q4, that had an impact of a couple of points on the growth rate. So even adjusting for that would still have been ahead of our expectations, both on a reported basis and in constant currency. And as we mentioned, FX was a little bit more of a headwind, about a point more than we'd expected going into the quarter.

Speaker Change: A point more than we had expected going into the quarter.

Dylan C. Smith: So, you know, overall, just a, you know, kind of stronger quarter in Q4 than we'd seen earlier in the year, which is great. Your next question comes from a line of Steve Enders from Citi. Please go ahead. Okay, great.

Speaker Change: So overall, just a kind of a stronger quarter in Q4 than we had seen earlier in the year, which was great to see.

Speaker Change: Got it thank you.

Speaker Change: Your next question comes from the line of Steve Enders from Citi. Please go ahead.

Speaker Change: Yeah.

Steven Enders: Okay, great. Thanks for thanks for taking the questions here, maybe just to follow up on the last comment there about just kind of what you are seeing in the macro and beyond environment.

Dylan C. Smith: Thanks for checking the questions here. Maybe just to follow up on the last comments there about just kind of what you are seeing in the macro and in-deal environment. You know, it sounds maybe this was pretty consistent with what you saw last quarter from some of the stabilization trends, but I guess maybe I just want to clarify that. And also, as we think about the outlook, what is kind of being assumed in terms of further stabilization or return to some improvement and how that's beginning to impact some of the net retention bottoming that you're calling out here. Sure, so I would certainly describe the overall environment in Q4, as you mentioned, as pretty stable with Q3. So, you know, there are some incremental signs of life and improvement in some customers, you know, leaning in a little bit more, getting excited about things like AI in particular, but the reality is it remains a pretty challenging environment. I wouldn't say that this has, you know, really turned a corner based on what we're seeing.

Steven Enders: It sounds maybe this is pretty consistent with what you saw last quarter from some of the stabilization trends, but I guess maybe.

Steven Enders: Want to clarify that and also as we think about the outlook.

Steven Enders: I guess, what is kind of being assumed in terms of further stabilization or return too.

Steven Enders: Some improvement in how that's beginning to impact some of the net retention bundling that youre, calling out here.

Speaker Change: Sure so.

Speaker Change: Certainly describe the overall environment in Q4 as you mentioned is pretty stable with Q3.

Speaker Change: So there are some incremental signs of life and improvement in some customers.

Speaker Change: Leaning in a little bit more spread and getting excited about things like AI in particular, but the reality is it remains a pretty challenging environment wouldn't say that that has really turned the corner based on what we're seeing what I would say is that our execution in Q4 was stronger than in Q3. So it was just one example.

Dylan C. Smith: What I would say is that our execution in Q4 was stronger than in Q3. So, as just one example, you know, we called out in Q3 that there were some larger deals in Japan that we had been expecting to close that didn't ultimately close in Q3. We ended up closing, you know, just a very strong quarter overall, including those deals, and they had a very strong Q4 for us. We saw continued strength and, you know, great performance from the public sector in the U.S., and so there are definitely, I'd say, within the business, areas of, you know, improvement which led to, overall, just a stronger outcome versus the prior quarters this year, but I would describe And then if you look at FY25 and how we're thinking about that, we are, you know, assuming more of the same, that this environment remains challenging, and so we are not kind of baking in any sort of macroeconomic recovery into our expectations for FY25.

Speaker Change: And we called out in Q3 that there were some larger deals in Japan that we had been expecting to close.

Speaker Change: That didn't ultimately closed in Q3, we ended up closing.

Speaker Change: Just a very strong quarter overall, including those deals and made a very strong Q4 for US. We saw continued strength in great performance from the public sector in the U S and so theyre definitely I'd say within the business.

Speaker Change: Areas of improvement, which led to overall, just a stronger outcome university. The prior quarters. This year, but will describe the overall environment is fairly stable with what we saw in Q3 and then if you looked at FY 'twenty five and how we're thinking about that we are kind of assuming more of the same that this environment.

Speaker Change: It remains challenging.

Speaker Change: So we are not kind of baking in any sort of macroeconomic recovery indoor FX into our expectations for FY 'twenty, five and really where we see the.

Dylan C. Smith: And really where we see the expected improvement in many of those top line metrics, and you mentioned retention rate, is that we're now lapping some of the more challenging periods that we had, you know, especially those that are trailing 12-month metrics like revenue growth, like net retention, where as you move through the year and, you know, with that stability, we expect those metrics to kind of bottom out at those Q4 levels. And then for net retention, which you asked about in particular, you expect to end the year either at those levels or slightly above, depending on, you know, how that shapes up over the course of the year. Okay, I gotcha. I know that's a helpful context sentence.

Speaker Change: <unk>.

Speaker Change: <unk>.

Speaker Change: Expected improvement in many of those top line metrics you mentioned net retention rate is that we're now lapping some of the more challenging periods that we had.

Speaker Change: Especially those that are trailing 12 month metrics like revenue growth like net retention.

Speaker Change: As you move through the year.

Speaker Change: Yes.

Speaker Change: That stability, we expect those metrics to kind of bottom out at those Q4 levels and then for net retention, which you asked about and in particular.

Speaker Change: We expect to end the year, either at those levels or slightly above depending on.

Speaker Change: How that how that shapes up over the course of the year.

Speaker Change: Okay got it.

Speaker Change: That's helpful context.

Aaron Levie: And then maybe in Sweden in particular, I think maybe you heard less this call around, you know, the enterprise plus tier or, you know, the higher, higher-tiered solution this year. So, I guess, any changes in how you're thinking about the tiering moving forward or how you're thinking about, you know, some of the adoption of those higher price plans. Yeah, I kind of called it out very briefly in my prepared remarks that we will be introducing a higher tier plan, so no change in that strategy. We'll add more color at our financial analyst day around, again, the contours of that plan. And again, the only reason we're not being super precise yet is just because we don't want to get ahead of our customers too much on that, and we want to make sure that we're talking about it more generally when it's fully available.

Speaker Change: And then maybe.

Speaker Change: We can predict the other I think maybe less this call around the enterprise plus here.

Speaker Change: The higher tiered solution. This year, so I guess any maybe changes in how youre thinking about.

This hearing moving forward or how youre thinking about.

Speaker Change: Some of the adoption.

Speaker Change: There was higher price plans.

Speaker Change: Yeah.

Speaker Change: I did kind of call out very briefly in my prepared remarks that we will be introducing a higher tier plan. So no change in that strategy will add more color at our financial analyst day around again kind of the contours of that plan.

Speaker Change: The only reason, we're not we're not being super precise yet it is just because we don't want to get ahead of our customers too much on that and we want to make sure that that we're talking about it more generally when it's fully available, but you can get the sense that we will have additional higher tier functionality.

Aaron Levie: But you can get the sense that we will have additional higher-tier functionality that will include some degree of higher-tier AI functionality, some of this more advanced kind of workflow and content management features with Cruise, as well as other capabilities. So stay tuned, and we'll share more at financial analyst day. Perfect, great to hear, and looking forward to the event in a couple weeks. Yeah, thanks. Your next question comes from the line of John Messina from Raymond James. Please go ahead. Hi, thanks for taking the question. This is John on behalf of Brian.

Speaker Change: That will include some degree of higher higher tier AI functionality. Some of this more advanced kind of workflow and content management features with cruise as well as other capabilities. So stay tuned and we'll share more at financial analyst day.

Speaker Change: Alright, perfect, Chris and looking forward to the event in a couple of weeks.

Speaker Change: Yes. Thanks.

Speaker Change: Your next question comes from the line of John Massena from Raymond James. Please go ahead.

John Stio: Hi, Thanks for taking the question is John on for Brian just another one on box AI I realized just when ta today, but I'm curious as it was in beta.

Aaron Levie: Just another one on Box AI. I realized it just went GA today, but I'm curious, as it was in beta, how AI has impacted the pipeline for suites adoption. Any additional color we can provide. Yeah, so we saw a pretty healthy number of customers that elected to move into Enterprise Plus, where Box AI was one of the biggest or biggest contributing factors in that decision. So, you know, kind of across a wide range of sectors and sizes of companies where, again, they wanted to have AI on their content for, again, being able to ask content questions, summarize information, be able to access multi-document AI as hubs become available, as well as our APIs. But because of the pricing model that we chose, you have to upgrade to Enterprise Plus to have access to that technology.

John Stio: How AI is impacting the pipeline for suite adoption because any additional color we can get there.

Speaker Change: Yeah. So.

So we saw a pretty healthy number of customers that elected to move into enterprise, plus where box AI was one of the biggest or bigger biggest contributing factors of that decision. So.

Speaker Change: So kind of across a wide range of sectors size of companies.

Speaker Change: Where again they wanted to have AI on their content for again being able to App content question and summarize information enabled aspects multi document AI is as hubs becomes available as well as our API and and because of our pricing model that we chose you have to upgrade into enterprise plus two to have access to that technology. So so.

Aaron Levie: So we saw that as a healthy contributor to the upsell motion. And now, with the product being in GA, we expect that just to continue throughout this year. And as we, you know, get a sense for even higher-tier functionality that customers are looking for, whether those are higher performance models, the ability to kind of customize the AI in your enterprise, whether that's custom prompts or being able to create custom sort of, you know, kind of AI agents or use cases in your enterprise, that will create additional ways that we can monetize on a higher-tier plan from here as well. Great, that's a great color there.

Speaker Change: We saw that as a healthy contributor to the upsell motion and and we now with the product being <unk>, we expect that just to continue throughout this year.

Speaker Change: And as we get a sense for even higher tier functionality that customers are looking for whether those are higher performance models the ability the ability to customize the AI in your enterprise, whether that's custom prompts or being able to create custom.

Speaker Change: Sort of kind of almost AI.

Speaker Change: Agents or or use cases in your enterprise that will be additional that will create additional ways that we can monetize in a higher tier plan from here as well.

Speaker Change: Great. That's great color there and then just on suites adoption overall, I think you've spoken to being on track at 65% of revenue by 2026 is that still the right way of thinking about the cadence of adoption or it has AI kind of accelerated that and then how should we think about maybe the long term what tweets can contribute to revenue. Thank you.

Dylan C. Smith: And then just on suite adoption overall, I think you've spoken to being on track at 65% of revenue by 2026. Is that still the right way of thinking about the pace of adoption? Or has AI kind of accelerated that? And then, how should we think about, maybe in the long term, what suites can contribute to revenue? Thank you. Yeah, so I would say that, for a bit of context and going back, we would describe this suite's momentum and penetration overall as certainly ahead of our expectations when we launched those suites. And even just about a year ago, we pulled in the timeframe in which we expected to have the majority of our revenue coming from suites by a full year to the end of this year. And then, as you saw, we now have 55% of our revenue at the end of the year. So once again, kind of ahead of our expectations.

Speaker Change: Yes, so I would say that is for a bit of context going back.

Speaker Change: You described the suites momentum in penetration overall is certainly ahead of our expectations. When we launched those suites and even just about a year ago pulled in the timeframe in which we expected to have the majority of our revenue coming from suites by a full year to the end of this year and then as you saw we now have it.

Speaker Change: The end of the year, 55% of our revenue. So once again kind of ahead of our expectations and Thats really being driven by combination of just the way that enterprise plus.

Dylan C. Smith: And that's really being driven by a combination of just the way that Enterprise Plus is responding overall with the customer base, as well as in Q4. And the reason for the big sequential step-up was a few larger customers who had 1 to 2 products who were really convinced of the value of our full platform, so they upsold into E+. So it's kind of a combination of the way new customers are being sold off the bat, as well as existing customers continuing to move over.

Speaker Change: <unk> is resonating overall with the customer base as well as in Q4 and the reason for the big sequential step up.

Speaker Change: With a few larger customers, who had had one to two products.

Speaker Change: Who are really convinced of the value of our full platform. So they uphold and the E plus.

Speaker Change: Combination of the way new customers are being sold off the bat as well as existing customers continuing to move over.

Dylan C. Smith: So overall, I would say that certainly the trend has been ahead of our expectations. We'll provide more commentary in terms of the forward longer-term expectations in just a couple of weeks at Analyst Day. But it is safe to assume that overall, the rate and pace of how we expect that to move in the market is faster than we expected a year ago or two years ago. Thank you very much. Your next question comes from the line of Rich Hilliker from UBS. Please go ahead.

Speaker Change: And then so overall, we'd say that certainly the trends have been ahead of our expectations.

Speaker Change: I'll provide more commentary in terms of the forward longer term expectations in just a couple of weeks at analyst day, but is it safe to assume that the overall.

Speaker Change: Kind of the rate and pace of how we expect that to move in the market.

Speaker Change: <unk> is faster than we expected a year ago or two years ago.

Speaker Change: Okay.

Speaker Change: Thank you very much.

Speaker Change: Our next question comes from the line of Rich Hilliker from UBS. Please go ahead.

Richard David Poland: Hi, Thanks for taking my question.

Aaron Levie: Hi, thanks for taking my question. In your preparatory report, I think you highlighted a construction and a health care deal. I was wondering if, maybe for my first question, you could talk a little bit about your vertical strategy moving forward or any change to that sort of appetite. Thanks. Yeah, there's a couple of little cutoffs, but I'll do my best to try and cover the essence of the question. If I don't, let me know.

Richard David Poland: On your prepared remarks, I think you highlighted construction and healthcare deal I was wondering if maybe for my first question. If you could if you could talk a little bit about <unk>.

Richard David Poland: Vertical scrap moving forward.

Richard David Poland: That sort of appetite.

Speaker Change: Yeah there's.

Speaker Change: There's a couple of little cutoffs, but I'll do my best to try and cover the.

Speaker Change: The essence of the question if I don't let me know but.

Aaron Levie: But, you know, essentially, what we're seeing is that we do extremely well really wherever there is a large amount of unstructured data in an enterprise where that data needs to be secured. So it's often a compliance or security, you know, kind of driven workflow. There's a lot of collaboration on that data, so it needs to flow between systems or between any kind of internal or external parties. And so that aligns very well with many of the most regulated industries out there. So public sector, financial services, healthcare, life sciences, and often in kind of global manufacturing. So we want to put even more emphasis on some of these key verticals in the year and years ahead. Not obviously in any kind of reduction in other verticals, but how do we really double down in some of these key spaces?

Speaker Change: Essentially what we're seeing is.

Speaker Change: We do extremely well really wherever there is a large amount of unstructured data in an enterprise where that data needs to be secured so it's often a compliance or security.

Speaker Change: Kind of driven workflow.

Speaker Change: Theres a lot of collaboration on that data so it needs to flow between systems or between kind of internal or external parties and so that aligns very well to many of the most regulated industries out there so public sector financial services Health care life Sciences, some often in in kind of global manufacturing. So we want to put even more emphasis on some of that.

Speaker Change: These key verticals in the year and years ahead, not obviously too.

Speaker Change: And any kind of reduction in other verticals, but how do we really double down in some of these key spaces.

Aaron Levie: AI, as an example, has a lot of great additional use cases when you go and mine through all of the unstructured data that those industries work with. So take, for instance, in healthcare or life sciences, just being able to, again, automate or drive workflows in a pharma process or in banking for client onboarding and wealth management services. So really wherever there's a large amount of unstructured data or content and you want to be able to process that, secure it, manage it, govern it, that's really what our platform is well aligned for and well aligned to, and that's where we're going to be kind of further doubling down on that vertical strategy. Thanks. I'll leave it there. I appreciate it.

Speaker Change: AI as an example has.

Speaker Change: Has a lot of great additional use cases, when you go in mind through all of the unstructured data that those industries work with so.

Speaker Change: Take for instance, in healthcare life Sciences, just being able to again automate or drive workflows in our pharma process or in banking for client Onboarding and wealth management.

Speaker Change: Services. So so really wherever there is a large amount of unstructured data or content and you want to build a process that secure it manage it governance, that's really what our platform is well aligned for and well aligned to and that's where we're going to be kind of further doubling down in that that vertical strategy.

Speaker Change: Great. Thanks, I'll leave it there I appreciate it thanks.

Aaron Levie: Cool. Thanks. Your next question comes from the line of Jason Adder from William Blair. Please go ahead.

Speaker Change: Your next question comes from the line of Jason Ader from William Blair. Please go ahead.

Sebastien Cyrus Naji: Hi, this is Sebastian Adjian for Jason. Thanks for taking the question. Just one for me, really around competition.

Speaker Change: Hi, This is Sebastian <unk> on for Jason Thanks for taking the question just one from me.

Sebastian: Around competition, Aaron I'm curious to hear how you think AI impacts the competitive landscape for ECM.

Aaron Levie: Aaron, I'm curious to hear how AI impacts the competitive landscape for ECM. Could we see increased pressure from vendors like Google or Microsoft or maybe pay more attention to their historically limited FSS offerings now that there's a whole new universe of things you can do with that data? Once you apply AI to it, there just seems to be a bunch of new ways that those guys can monetize this FSS data, especially given their leadership with AI, and that could push them to be more competitive with Box over the long run. How do you respond to that?

Sebastian: Could we see increased pressure from vendors like a Google or Microsoft where may be paying more attention to their historically limited FSS offerings now that theres a whole new universe of things you can do with that data once you apply AI to it there just seems to be a bunch of new ways that those guys can monetize this FSS data, especially given their leadership with AI and.

Sebastian: That could push them to be more competitive with box over the long run how do you respond to that.

Aaron Levie: Yeah, so I think there are definitely elements where, you know, the value of unstructured data and content has gone up as a result of AI, and that's, you know, clearly a key point. And that means anybody well prepared to drive innovation on unstructured data should see this as a positive. At the same time, it means that a lot of the legacy solutions, the fragmented architectures are also now under greater threat because companies are going to want to get more value out of their content in this new AI-driven world. And so I think that becomes a positive for us, you know, within the customer base. And when you take a look at what we've done in the near term, as well as what we've laid out from a roadmap standpoint, again, the combination of cruise interfaces for no code applications, workflow automation, and platform-neutral AI that can come from any of the vendors that are in the market, that's a pretty potent combination that doesn So, we feel very, you know, very strong about our competitive position, and that's being reinforced every day in customer conversations. And then maybe only the one kind of note I'd throw out there, one more on the platform neutral approach.

Speaker Change: Yes, so I think there is.

Speaker Change: Theres definitely elements were.

Speaker Change: The value of unstructured data and content has gone up as a result of AI.

Speaker Change: Clearly a key point in that that means anybody well prepared to drive innovation on unstructured data should see this as a positive at the same time. It means that a lot of the legacy solutions. The fragmented architectures equally are now under greater threat because companies are going to want to get more value out of their content in this new.

Speaker Change: AI driven world and so I think that becomes a positive for us.

Speaker Change: Within the customer base and when you take a look at what we've done in the near term as well as what we've laid out from a roadmap standpoint again, the combination of cruise interfaces for no code applications.

Speaker Change: Workflow automation and platform neutral AI that can come from any of the vendors.

Speaker Change: That are in the market, that's a pretty potent combination that doesn't exist elsewhere in terms of the names that you just mentioned so so.

Speaker Change: So we feel very.

Speaker Change: Very strong about our competitive position.

Speaker Change: And that is being reinforced everyday within customer conversations and then maybe only the only kind of note I'd throw out there one more on the platform neutral approach one of the big benefits that we have by not being in the model training game is that we actually want there to be a massive race between all of the tech companies on training and deliver.

Aaron Levie: One of the big benefits that we have by not being in the model training game is that we actually want there to be a massive race between all of the tech companies for training and delivering advanced AI models because we can then enable all of that innovation for our customers. And so when you're a client of Box, you don't have to choose between whether you want the best of Google or the best of Microsoft and open AI, or the best of Amazon or Anthropic, or IBM. You don't have to make that decision about where you move your data to get the value of those capabilities. By having your content in the box, it will work with all of the AI coming from those different vendors. And so this puts us, I think, in a very unique position. There are not really many cloud-based content platforms that are able to be as neutral as we are, and certainly at the scale that we're at.

Speaker Change: Advanced AI models, because we can then enable all of that innovation for our customers and so when you are a client of box you don't have to choose between whether you want the best of Google or the best of Microsoft and open AI or the best of Amazon or an <unk> or IBM you don't have to make that decision about where you move your data to get the value.

Speaker Change: Of those those capabilities by having your content in box. It will work with all of the AI coming from those different vendors and so this puts us I think in a very unique position. There is not really many cloud based content platforms that are able to be.

Speaker Change: As neutral as we are and certainly at the scale that we're at so we think that's going to be a huge advantage for us in AI.

Aaron Levie: So we think that's going to be a huge advantage for us in AI. Great. Very helpful. Thank you. Your next question comes from the line of George Iwanyc from Oppenheimer. Please go ahead.

Speaker Change: Great very helpful. Thank you.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of George <unk> from Oppenheimer. Please go ahead.

Dylan C. Smith: Thank you for taking my questions. With the incremental sales and go-to-market investment you're highlighting for this year, can you give us a sense of where you're prioritizing the additions and how much is going into the direct sales force and how much into the channel and go-to-market efforts? Yeah, so you can think about the majority of that increase in sales and marketing spend going towards scaling programs to generate demand, which have been performing very well for us, especially on the heels of a lot of the optimizations we've made in field marketing, in our digital channels that we've called out historically, and efforts like that, including some investments, kind of laying the foundation to scale the partner and channel ecosystem. And then we will also be investing, kind of given But you can think about the majority of the dollars being toward just overall demand generation versus kind of disproportionately scaling the sales force.

George: Thank you for taking my questions with the incremental sales and go to market investment you highlighted for this year can you give us a sense of where you're prioritizing the additions and how much is buying into the direct sales force.

George: Into the channel go to market efforts.

Speaker Change: Yes. So you can think about the majority of that increase in sales and marketing spend going towards scaling programs to generate demand, which have been performing very well for us, especially on the heels of a lot of the optimizations we've made.

Speaker Change: And field marketing and our digital channels that we've called out historically.

Speaker Change: And in efforts like that including some investments kind of laying the foundation to scale the partner and channel ecosystem.

Speaker Change: And then we will also be investing kind of given the demand trends that were already seeing in the sales force and kind of growing that at a moderate clip, but you can think about the majority of the dollars being towards just overall demand generation.

Speaker Change: Versus.

Speaker Change: Kind of disproportionately scaling the sales force and then Youll hear a lot more about the overall go to market strategy as well as details of where we're going to be making some of those investments at our financial analyst day in just a couple of weeks.

Dylan C. Smith: And then you'll hear a lot more about the overall go-to-market strategy, as well as details of where we're going to be making some of those investments at our financial analyst day in just a couple of weeks. And Dylan, maybe you can give us a bit more color on what you're seeing internationally? It sounds like you did catch up in Japan, but within Cornell FX, given the headwinds that you're seeing there, you know, how is the demand pipeline looking? So it remains very strong, and we talk about, you know, those areas that we will be growing in, based on where we are seeing, you know, strong outcomes, as well as leading indicators. Japan, particularly the enterprise, you know, segment in Japan is absolutely one of those areas, and I would note that even with the FX headwinds that we saw really over the past two years, our Japan business grew, and the revenue generated by our Japan business grew in the mid-teens this past year, so continuing to show very strong growth, and that again is even including those FX headwinds.

Speaker Change: John maybe can you give us a bit more color on what youre seeing in that.

John: It sounds like you did catch up and Japan, but with the incremental FX headwinds that youre seeing there how is the demand pipeline looking.

John: So it remains very strong and when you talk about those areas that we will be growing.

Speaker Change: Based on where we are seeing.

John: Strong outcomes as well as leading indicators, Japan, particularly the enterprise.

John: Segment in Japan.

John: He is absolutely one of those areas.

John: And we'd note that even with the FX headwinds that we saw really over the past two years, our Japan business grew the revenue generated by our by our Japan business grew in the mid teens over this past year. So continuing to show very strong growth and that again is even including.

John: Those FX headwinds.

Dylan C. Smith: And then, you know, if you talk about international business more broadly, we'd say, you know, no real change in terms of what we're seeing in EMEA. I do think there's an opportunity, especially given some of those investments that we talked about earlier, and in particular around the channel ecosystem, that could really help, you know, kind of fuel our reach and, ultimately, kind of the business that we can generate over there. But I would describe EMEA overall as, you know, certainly stable, but stable at levels that we think are, you know, not quite commensurate with the opportunity that we have. Great Thank you very much. Your next question comes from the line of Rishi Jaluria from RBC. Please go ahead. Oh, wonderful! Thanks for answering my question. Just one from me.

John: And then can you talk about international more broadly would say no real change in terms of what we're seeing in EMEA do think theres, an opportunity, especially given some of those investments that we talked about earlier and in particular around the channel ecosystem that could really help.

John: Kind of fuel the our.

John: Our reach and ultimately kind of the business that we can generate over there, but we would describe EMEA overall as you know certainly stable, but stable at levels that we think are.

John: Not quite commensurate with the opportunity that we have.

Speaker Change: Great. Thank you very much.

Speaker Change: Your next question comes from the line of Rishi <unk> from RBC. Please go ahead.

Rishi: Wonderful Thanks, guys for taking my question just one for me.

Rishi Nitya Jaluria: Just turning back to AI and kind of starting to put some numbers around it. Number one, have you embedded any upside from AI, whether direct or indirect, this year in your FY25 guidance? And then, you know, not to front run Virtual Analyst Day in a couple weeks, but as you think about building out your longer-term targets, what are you starting to assume in terms of actual AI revenue as you build out those targets? Thanks. Yeah, so we'll probably maybe answer the second one around the financial analyst as you have a sense of kind of how we're laying out the, you know, our continued view on the model. But maybe the answer to the first question will also kind of tie to that.

Rishi: Turning back to AI and kind of starting to put some numbers around it.

Number one have you embedded any upside from AI, whether direct or indirect this year in FY 'twenty five guidance and then not.

Rishi: <unk> virtual analyst day in a couple of weeks, but as you think about building out your longer term targets. What are you starting to Sterling in terms of actual revenue as you build out those targets. Thanks.

Speaker Change: Yes so.

Speaker Change: We'll probably maybe answer the second one around the financial Analyst day as you as you have a sense of kind of how we're laying up of.

Our continued view on the model, but maybe.

Speaker Change: The answering the first question will will.

Speaker Change: Also kind of tied to that.

Rishi Nitya Jaluria: So we have, we've seen the upsell trends that we have from customers moving into enterprise plus with Fox AI as an additional catalyst. And, you know, we only have about a quarter of the data to look at. But we certainly are able to continue to extrapolate that out into this year and, and somewhat beyond. We also want to be, you know, somewhat conservative around kind of baking that in, because there's still variability; it's still an early product. So I would say it's conservative in the sense that we're not expecting any kind of outside that, you know, kind of dynamic crypto products. Because of AI, but we are seeing it become a catalyst to drive enterprise plus upsells. And then I think that maybe the, you know, the x factor, and all this would be more platform consumption from AI that isn't particularly embedded.

Speaker Change: So we have we've seen the upsell trends that we have from customers moving into.

Speaker Change: Enterprise plus with Fox AI as an additional catalyst.

Speaker Change: And we have only about a quarter of data to look at but we certainly are are able to continue to extrapolate that out into this year end and somewhat beyond we also want to be somewhat conservative around kind of baking that in because there is still variability is still an early product.

Speaker Change: I would say it's conservative.

Speaker Change: The sense of we're not expecting any kind of outsized.

Speaker Change: Kind of dynamic because of AI, but but we are seeing it become a catalyst to drive enterprise plus upsells and and then I think the.

Speaker Change: That may be the X factor in all of this would be more platform consumption from AI, but isn't particularly embedded and so that's obviously, what we're going to be driving this year and we'll be talking more about some of the platform consumption dynamics that we want to drive, but we see that as sort of upside in the medium term.

Aaron Levie: And so that's obviously what we're going to be driving this year, and we'll be talking more about some of the platform consumption dynamics that we want to drive. But we see that as sort of upside in the medium term. All right, really helpful.

Speaker Change: All right really helpful. Thank you.

Cynthia Hiponia: Thank you. Cool, thank you. Thank you. That concludes our question and answer session. I will now turn the call back over to Cynthia for her closing remarks. Thank you, everyone, for joining us today. We look forward to hopefully seeing a number of you at our virtual Investor Relations Day. The registration is now live on our IR website, and that is going to be on Tuesday, March 19th. Thank you. This concludes today's conference call. Thank you for your participation, and you may now disconnect. Operations are now live on our IR website.

Speaker Change: Thank you.

Speaker Change: Thank you that concludes our question and answer session I will now turn the call back over to Cynthia for closing remarks.

Cynthia Tonia: Thank you everyone for joining us today, we look forward to hopefully seeing a number of you at our virtual Investor Relations Jay The registration is now live on our IR website and that is going to be on Tuesday March 19. Thank you.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Speaker Change: Creations now live on our IR website.