Box, Inc.

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Box, Inc. First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Cynthia Hiponia, Head of AR. You may begin your conference.

Good afternoon and welcome to Box's first quarter fiscal year 24 earnings conference call. I'm Cynthia Hiponia, Vice President, Investor Relations. On the call today, we have Aaron Levy, 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 and will also be available for replay on our Investor Relations website at 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 call on Twitter at the handle at boxincir. On this call, we'll be making forward-looking statements, including our second quarter and full-year fiscal 2024 financial guidance and our expectations regarding our financial performance for fiscal 2024 and future periods, including our free cash flow, gross margins, operating margins, operating leverage, future profitability, net retention rates, remaining performance obligations, revenue and billings, and the impact of foreign currency exchange rates, and our expectations regarding the size of our market opportunities, our planned investments, future product offerings, and growth strategies, our ability to achieve our revenue, operating margins, and other operating model targets, the timing and market adoption of and benefits from our new products, pricing models, and partnerships, 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 the factors currently known to us and actual events or results made differ materially. Please refer to our earnings press release filed today and the risk factors and documents we filed with the Securities and Exchange Commission, including our most recent annual report on Form 10-K for information on risk and uncertainties that may cause actual results to differ materially from statements made on this earnings call. These forward-looking statements are made as of today, May 30, 2023, and we disclaim any obligation to update or revise them should they change or cease to be up to date. In addition, during today's call, we will discuss our non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from our GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and the related supplemental slides, which can be found on the investor relations page of our website. Unless otherwise indicated, all references to financial measures are on a non-debt basis. With that, let me hand it over to Aaron.

Thank you, Cynthia, and thanks, everyone, for joining us today. We are pleased to deliver first quarter operating results above our guidance. This includes revenue growth of 6% year-over-year and 10% on a constant currency basis, in addition to a strong focus on profitability resulting in operating margins of 23% up 220 basis points from a year ago. Achieving these results in a challenging macro environment is a testament to the value of our content cloud platform and the operational discipline of our boxers as we deliver substantial year-over-year bottom line improvements. While the dynamic macro economy continues to pressure IT spend and headcount growth expectations from our customers, trends we've seen continue to play out most notably in EMEA and smaller businesses in the U.S., We are also seeing strong traction and stickiness of our platform and customers, and our message is well aligned to the challenges they are facing today. Over the last quarter, I've had the opportunity to speak with hundreds of business and technology leaders, and it's clear that the dynamics enterprises face today are fully aligned with the pillars that underpin our strategy. Enterprises are focused on simplifying their IT environments, driving productivity across their businesses, and protecting their most sensitive data. And across nearly all of my conversations in the last quarter, business leaders everywhere are looking to leverage the power of AI to help transform how they work and get even more value out of their data. Box's content cloud platform is best positioned to help these customers solve these challenges. And our Q1 customer wins illustrate how we will remain mission critical for them. These wins include a global manufacturing company that collaborates with defense and federal government agencies, who is a new customer who purchased Box in Q1 in order to meet FedRAMP and ITAR compliance for content management. Also realizing the value to streamline its tech stack and integrate Box with its Salesforce instance to power the underlying compliant content layer for their customer portal. A multinational retailer expanded its use of Box with a six-figure ramped enterprise license agreement and purchase of Box Shield to protect the vast amount of personal identifiable information that is stored inside of Box. And critical to our success is our continued execution of our product roadmap, which expands our TAM and adds value to our core platform with new product innovation. In Q1, we were pleased to announce the general availability of Box Canvas, which delivers a powerful new way for teams to unleash their creativity to take brainstorming and ideation to a new level while leveraging the enterprise-grade security, compliance, and workflow automation capabilities of Box. Box customers now have access to unlimited canvases included in their plans, which enables us to disruptively enter this market And we're already seeing amazing use cases emerge across our customers. Since we launched BoxSign, Box customers are taking advantage of unlimited e-signatures included in their plans and have migrated use cases over from costly incumbents. In Q1, we released advanced e-signature features such as a dedicated BoxSign policy for BoxShield to provide users with the ability to seamlessly request signatures on documents subject to BoxShield's access policies, We also launched a box sign relay integration that specifically enables post signature actions to be orchestrated and enables our customers to build end-to-end e-signature workflows in the content cloud. We also announced the next generation of Box's content migration solution, Box Shuttle, now built directly into the Box admin console. With Box Shuttle, content migration is a simple, accessible process and that organizations of all sizes can take full advantage of the many features and capabilities that the Content Cloud has to offer. Finally, an integral part of the product strategy is our ability to integrate deeply across the SaaS landscape, including with products like Microsoft Teams and Office, WebEx, Zoom, Google Workspace, ServiceNow, IBM's technology solutions, and much more. In Q1, in addition to delivering integration enhancements with Slack and Salesforce, we were pleased to announce a number of new technology partners that extend the value of Box, including Notion, Sana, Nowwarebytes, and Cloudflare. As we look forward into FY24 and beyond, our pace of innovation continues to accelerate. We are at the beginning stages of a new era of software. Similar to how cloud and mobile change the technology landscape forever, AI has the opportunity to completely change how work gets done. As highlighted by the meteoric rise of ChatGPT, we've recently begun to see a huge breakthrough in the potential of large language models, or LLMs, which are now capable of bringing human-level reasoning to a large number of tasks. However, the real power of these new AI models is when you use their intelligence to help you work securely with your own proprietary data set. For years, we've been able to ask questions about our structured data, like the information that's in a database ERP system or CRM system. You can ask those systems for financial forecasts, sales pipeline results, inventory levels, supply chain details, and more. But we've had limited ability to ask questions of our unstructured data, like content, which is 80% of corporate data. And now we can. By safely bringing leading AI models to enterprise data, enterprises can truly unlock the value that lies in their content. To do this, we need a way to connect these models safely, securely, and compliantly to our enterprise content. As we announced just earlier this month, With Box AI, we're taking the power of the world's leading AI models, starting initially with OpenAI's ChatGPT 3.5 and GPT-4, and securely letting customers leverage them for their enterprise content. With Box AI, customers can ask questions of their content or generate new information leveraging Box Notes. Imagine being able to instantly ask things like, How many days of parental leave can I take on an HR document? Or please summarize this report and provide five key takeaways on a quarterly earnings document. Or how would you pitch this product to a customer in the automotive industry when looking at a product overview document? But this is just the beginning. Ultimately, as a core platform capability, Box AI will be used throughout the product to continue to transform how we work with our content in a variety of ways. We can imagine in the future being able to use AI to automatically classify content in even more specific ways, automatically extract data using a relay workflow, use platform APIs to interact with AI models from a variety of providers, and being able to ask questions of a larger set of documents on a specific topic. And as a platform neutral vendor, we will also be AI neutral. which means as new AI breakthroughs emerge for more vendors over time, we'll be in a position to bring the full power of their technology to Box and our customers. In addition to our collaboration with OpenAI, we recently announced that we are building on our strategic partnership with Google Cloud to integrate Google's advanced AI models into Box AI to create new ways for joint customers to work smarter and more productively with generative AI. Like any new technology era, our approach with BoxAI is to execute on this opportunity with a high degree of thoughtfulness. Initial customer access will be granted through a design partner program, and we are excited to keep you updated as we continue to innovate with BoxAI to capitalize on the exciting new product opportunities this technology shift has created. Now, turning to go to market, as we discussed at our analyst day in March, Our optimized pricing and packaging initiatives have allowed us to see a greater total account value, higher net retention, higher gross margins, and a more efficient sales process. Our strategy is to continue launching new multi-product offerings over time, increasing the value to our customers by bringing them the full power of the Content Cloud. Our latest multi-product offering, Enterprise Plus, continues to be well over 90% of our suite sales in large deals, with suites comprising 69% of deals over $100,000 in Q1. We saw consistent suites attach rates in large deals across all of our geographies. Our Q1 customer expansions and new wins with Enterprise Plus include a US company that develops and produces Building materials and services expanded its use of Box with a six-figure renewal and purchase of Enterprise Plus to gain the benefits of Shield and Box governance. As more and more data is migrated into Box from old SharePoint sites and file servers, it was necessary for the company to implement the advanced security and compliance controls that Enterprise Plus provides. A leading US hospital system and research institute expanded its use of Box in Q1 with an upgrade to Enterprise Plus in order to enable BoxSign for their clinical trials. Box's security posture is also a critical component to their technology ecosystem. In summary, our ability to deliver first quarter results above our guidance is a direct result of the compelling value of our content cloud platform and the execution we have been driving as a company. And with our latest BoxAI efforts, we're building a powerful platform neutral approach for companies to securely bring AI to their content and transform how they work. I'm proud of the work that our Boxers do globally, and at Box, our employees are critical to our ability to serve our customers successfully and innovate rapidly. In addition to being named number two best place to work by Glassdoor last quarter, Box was recently recognized by Fortune magazine as number 27 in the 100 best companies to work for in 2023. Finally, along with continuing to build out a strong culture, we remain steadfastly committed to driving a continued balance of growth and increased profitability in this very dynamic market, while investing in growth drivers for the future, like BoxAI. While currency headwinds and the IT spend environment are putting pressure on our top-line results for this year, we continue to drive improved bottom-line results through a culture of operational excellence and focused discipline on our spending while doubling down on new product development that will lead us to increasing long-term revenue growth. And with that, let me hand it off to Dylan.