Box, Inc.

Good afternoon. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Box Incorporated fourth quarter and fiscal 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. Cynthia Japonia, Vice President of Investor Relations, you may begin your conference.

Good afternoon, and welcome to Box's fourth quarter and four-year fiscal 2023 earnings conference call. I'm Cynthia Japonia, Vice President, Investor Relations. On the call today, we have Aaron Levy, Box's co-founder and CEO, and Dylan Smith, Box's co-founder and CFO. Following our prepared remarks, we will take your questions. Today's call is being webcast and will also be available for replay on our Investor Relations website at www.box.com forward slash investors. Our webcast will be audio only. However, supplemental slides are now available for download from our website. We'll also post the highlights of today's calls on Twitter at the handle at boxincir. On this call, we will be making forward-looking statements, including our Q1 and full-year fiscal 2024 financial guidance and our expectations regarding our financial performance for fiscal 24, fiscal 25, and future periods, including free cash flow, gross margins, operating margins, operating leverage, future profitability, 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, headcount targets, and growth strategies, our ability to achieve long-term revenue, operating margins, and other operating model targets, the timing and market adoption of and benefits from our new products, pricing models, and partnerships, our ability to address enterprise challenges and deliver cost savings for our customers, the impact of the macro environment on our business and operating results, and our capital allocation strategies, including potential repurchase of our common stock. These statements reflect our best judgment based on factors currently known to us and actual events or results may differ materially. Please refer to our earnings press release filed today and the risk factors and documents we file with the Securities and Exchange Commission, 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. These forward-looking statements are being made as of today, March 1st, 2023, and we disclaim any obligation to update or revise them should they change or cease to be up to date. In addition, today's call, we will be discussing non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to and 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 the related PowerPoint presentation, which can be found on our investor relations page of our website. Unless otherwise indicated, all references to financial measures are on a non-GAAP basis. With that, let me hand it over to Aaron.

Thanks, Cynthia, and thank you all for joining the call today. We had a strong year at Box. exceeding a $1 billion annual revenue run rate on a quarterly basis and delivering a healthy balance of revenue growth and increased profitability. For the full year, we achieved 13% annual revenue growth. Our operational excellence drove significant margin expansion as we achieved 23% non-GAAP operating margins, up more than 330 basis points from 20% a year ago. Our continued execution and our sharp focus on profitability allowed us to deliver on our revenue growth plus free cash flow margin target of 37%, a 400 basis point improvement from last year's outcome of 33%. We delivered these results in the midst of a challenging macro environment, and our ability to execute on delivering bottom line performance, even with a slowing demand environment, is a testament to the strategies we put in place several years ago to lower our cost structure while still investing for long-term, durable revenue growth. Turning to Q4, we achieved revenue growth of 10% year-over-year while delivering record quarterly operating margins, gross margins, and EPS. As expected, our Q4 net retention rate was down year-over-year, impacted by pressure from customers' lower headcount growth and greater budget scrutiny on internal transformation initiatives. In some cases, These dynamics impacted our customers' IT decisions and priorities across their business. And this dynamic included some deals pushing out or deals getting incrementally smaller than anticipated, leading also to a softening in billings as we exited FY23. Even with this added macro pressure, our platform remains top of mind and extremely relevant for customers as they look to secure their most important data, drive up productivity, or retire legacy IT systems and simplify their IT stack. Examples of Box delivering this value to our customers in Q4 include a global logistics company that upgraded to Enterprise Plus through a six-figure deal to leverage Shield Governance and Sign and the unlimited Salesforce and Sign integrations. With Box's additional security and e-signature capabilities, the company expects to see significant cost savings while improving employee productivity by eliminating the need for multiple solutions. The medical research center that purchased Enterprise Plus in Q4 will be retiring their legacy share file environment, as well as other systems to reduce cost and complexity while increasing their security posture with Box. This move also sets up Box for additional expansion when a new research facility opens next year. As I continue to speak with CIOs and CEOs in a wide range of industries, Their digital transformation imperatives remain focused on enabling productivity across their business, especially in a hybrid work environment. They're working to optimize their spend and simplify their IT stack as they move more to the cloud, and most importantly, ensure they're dealing with a number of challenges in data security and compliance, ranging from ransomware threats to data leak challenges. At the center of these challenges is how enterprises work with their content. Fragmented content architectures have led to greater security risks, lower productivity due to complex tools, and limited ability to automate anything, and too many overlapping or legacy solutions with significant IT management overhead. We know that our content cloud is best positioned to help customers solve this challenge. Our platform enables our customers to drive up productivity in their organization, simplify their IT stack and optimize spend, and protect their most important data from a wide range of threats. And we continue to solve these challenges for customers with even more innovation in Q4, such as releasing key enhancements to Box Shield, adding new authentication and verification controls to our platform to provide customers with greater protection against unauthorized account access. We launched the public beta version of Box Canvas, our virtual whiteboarding solution, and we continue to integrate deeply across the SaaS landscape with the delivery of new enhancements to the Boxer Salesforce integration on the Salesforce AppExchange. And we're just getting started. As I look forward into FY24, we will be going deeper on our three major pillars of differentiation. To help protect our customers' most important data, we will be dramatically enhancing our core security and admin features for all customers, building up further Shield features to support an evolving threat landscape, expanding governance capabilities to support more complex lifecycle requirements, and continuing to maintain our high compliance standards. To help customers drive up productivity with seamless internal and external collaboration and workflows, we will be continuing to improve our core product experiences and usability, focusing on adoption and awareness of products to all users and admins, doubling down on sign and relay for advanced workflows, building out our modern collaboration experiences for the hybrid workplace with Notes and Canvas, expanding to help our customers disseminate content to internal and external audiences more easily, enhancing our content insights capabilities to offer richer visibility into what's happening with your content, and more. With our platform, we will continue to focus on connecting content across all our customers' IT systems, making Box the single source of truth for content in the enterprise, and we'll continue to enhance our critical partner integrations like Cisco, Google, IBM, Microsoft, Salesforce, ServiceNow, Zoom, and many others, while also further building out the tools for customers to build applications on Box. We will also be further building out our security ecosystem, driving enhanced partnerships across the wide range of security partners like IBM, Okta, Palo Alto Networks, and Splunk. With our content cloud, we have built the defining company that helps enterprises store, secure, automate, collaborate, sign, digitize, analyze, and gain insights from their most important information. We know that our customers' most important data resides in their content. It's their contracts, their movie scripts, their marketing campaigns, critical research reports, project plans, and more. The recent breakthroughs in AI and large language models enable a new universe of use cases that we can also solve for customers. Building on box skills, our framework that applies best-of-breed AI technologies from leading providers to our customers' content inbox, we see all new use cases for enterprises to generate more value from their content when it's in box. As an example, being able to query box for the risky clauses of a particular contract, synthesize a research report for key insights or summarization, quickly find the answer to a sales prospect's question from a document, extract key metadata from an invoice without any pre-training and much more. This vision will take time, but we expect the digitization of content combined with AI will bring us exciting new product opportunities in the future. Now, turning to go-to-market. We continue to enable more new and existing customers to recognize the full value of the Box platform with increased adoption of our multi-product offerings in Q4. Enterprise Plus, our latest suite offering, was over 90% of our suite sales in large deals, with suites now representing 72% of deals over $100,000, up from 65% a year ago. We saw continued solid suites attach rates in large deals across all geographies. Our Q4 customer expansion and new wins with Enterprise Plus include a multinational healthcare company, that became an Enterprise Plus customer through a six-figure upsell, enabling them to use Box zones to meet in-region EU storage compliance requirements, roll out Shield to safeguard their collaboration with partners, and leverage Box's GXP compliance to accelerate validation of complex use cases. A leading global manufacturer that chose to go wall-to-wall with Box with a six-figure Enterprise Plus deal as well. With Box, they will be able to integrate across their current tools like Microsoft Teams, O365, and RingCentral, and execute some of their most mission-critical business operations, including contract management in R&D and sales approval workflows, while also fulfilling regulatory compliance requirements. We recently held our global go-to-market kickoff, and the team is fully energized to go tackle the opportunity ahead of us. Throughout FY24, we plan to continue to focus on ensuring our over 100,000 customers get the most value out of Box and continuing to focus on moving more of the customer base into Enterprise Plus. Our programs across go-to-market are all about doubling down on our land, adopt, expand, retain motion through our digital engine, inside and field sales efforts, working with key strategic system integrators and technology partners, applying more focus to our key international geographies, as well as going deeper in key industries like financial services, life sciences, healthcare, public sector, and more. Finally, over the past year, we have been executing on our strategy to drive long-term sustainable growth while also delivering continued operating margin improvements. As we began to see the impact from the challenging macro, we adapted to the environment and continued to deliver significant growth and operating margin expansion. Even amidst the ongoing macro dynamics, which may pressure top line results at times, we remain focused on continuing to deliver bottom line improvements. We are driving efficiency across the business, making ROI-based decisions across every area of investment from product to go-to-market initiatives, continuing to improve our gross margin by fully moving into the public cloud, and driving operational excellence in everything we do. Our resilient financial model allows us to respond dynamically to the market environment, which is even more important as we enter into a period of incredible change throughout the world of business and technology. There has simply never been a more exciting time for what we can now do with content, and our business strategy will ensure that Box is at the very center of how customers work. With that, I'll hand it over to Dylan.