Box, Inc.

Gentlemen, good afternoon and thank you for standing by. 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 second quarter fiscal 2025 earnings conference call. All lines have been placed on mute to prevent any background noise and 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 the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Cynthia Hiponia, Vice President of Investor Relations. You may begin.

Good afternoon and welcome to Box's second quarter fiscal 2025 earnings conference call. I'm Cynthia Hiponia, Vice President of 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 be available for replay on our investor relations website at boxinvestorrelations.com. Our webcast will be audio only. However, supplemental slides are now available for download from our website. We'll also post the highlights of today's call on the X platform at the handle at boxirinc. On this call, we'll be making forward-looking statements, including our third quarter and full-year fiscal 2025 financial guidance and our expectations regarding our financial performance for fiscal 2025 and future periods, including our 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 deferred tax expenses, 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, the timing and market adoption of and benefits from our new products, pricing models and partnerships, the proceeds from the sale of our data center equipment, 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 may 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 file 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, August 27, 2024, and we disclaim any obligation to update or revise them should they change or cease to be up to date. In addition, during today's call, we will discuss non-GAAP financial measures, These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, our GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliation with comparable GAAP results, in our earnings press release and in the related supplemental slides, which can be found on the IR page of our website. Unless otherwise indicated, all references to financial measures are on a non-GAAP basis. With that, let me turn the call over to Erin.

Thank you Cynthia and thanks everyone for joining us today. We delivered a strong second quarter with operating results at the high end or above our guidance. This includes revenue growth of 3% year over year or 6% in constant currency and record gross margin of 81.6%. Our focus on operational discipline drove operating margin of 28.4% up 360 basis points from a year ago. while our continued investments in growth are reflected in our Q2 accelerated buildings growth of 10% year-over-year and RPO growth of 12% year-over-year. Our results show the continued success of building out the most powerful AI-enabled platform for secure content management, collaboration, workflow automation, and intelligence. In Q2, we saw customer demand for Box AI continue to grow, driving both upgrades and new logo wins in Enterprise Plus in order to gain access to Box AI. Customer examples in Q2 include a large US-based law firm and a new Box customer that purchased Enterprise Plus in a six-figure deal. They plan to leverage Box Hubs and Box AI to create easily searchable repositories for their attorneys and other staff. They will also leverage Box Sign, replacing an existing e-signature vendor, to help Box serve as their attorney-client collaboration layer. A leading consumer convenience store in Japan upgraded to Enterprise Plus and expanded its use of Box company-wide to boost productivity by enabling all employees to use Box AI. They chose Box as their content platform to leverage AI and reinforce their security posture. These wins illustrate what has become clear in my conversations with customers. that almost every enterprise is working to figure out how to use AI to enable more productivity from their employees by automating more work, improve their data security, and deliver improved experiences for their customers. And at the center of all of this is enterprise content. You have heard me talk about how 90% of an enterprise's data is unstructured, with most of that unstructured data being enterprise content. Historically, enterprises have not been able to truly get the value from this enterprise content due to years of investment in disparate technologies where content is scattered across many repositories in the enterprise among numerous applications and not built for a modern way of working with AI. At Vox, we are fundamentally transforming how companies leverage their enterprise content with intelligent content management. Instead of enterprises investing in fragmented legacy ECM technologies, workflow products, e-signature tools, and security solutions, and attempting to bolt on AI on top of these systems, Box is delivering a singular platform that can power the end-to-end lifecycle of content with intelligence built right in. And building on our leadership in secure content management and collaboration, we are now extending our value into workflow automation and intelligence. With Box AI, we can change the equation and enable enterprises to fully leverage their content to gain insights and dramatically increase productivity. And critically, instead of legacy ECM systems that cost a fortune and can only be used in relatively rigid ways, intelligent content management from Box extends well beyond the use cases of traditional ECM systems by offering modern user experiences, integrating with every app, having security and compliance at the core, building in enterprise-grade AI, and being entirely in the cloud. We're seeing more and more customers turn to Box to replace their legacy ECM solution and choose us as a more flexible, multi-tenant, lower cost, and more powerful, intelligent ECM solution. With Box on a single platform, customers will be able to power everything from their secure collaboration externally with clients to internal use cases, including how they manage their most important digital assets and marketing or sales, how they automate workflows with their contracts or financial documents, and ultimately how they govern and protect their sensitive records over the long run. Because we can now support vastly more use cases across the enterprise than traditional ECM, and for customers of all sizes, this represents a dramatic expansion of our market opportunity, similar to when Salesforce disrupted CRM or ServiceNow disrupted ITSM. In a strategic move to significantly expand Vox's intelligent content management platform, we recently announced the acquisition of the AI-powered Intelligent Document Processing, or IDP, technology and team from AlphaMoon. AlphaMoon's technology combines leading large language models from OpenAI and others with proprietary image and document processing technology to intelligently structure documents at scale. Once natively integrated into Box, AlphaMoon's technology will further expand the capabilities of the Box AI platform to revolutionize IDP and address the longstanding challenges of metadata creation at scale and empower our customers with unprecedented new automation capabilities. Once metadata is applied to content within Box, customers can more easily automate workflows like contract management, digital asset management, invoice processing, client onboarding, and so much more. Combined with the technology from our cruise acquisition earlier this year, Box will be able to transform critical content-centric business processes for enterprises of all sizes. And critical to our success in intelligent content management is our ability to enable Box customers to be on the leading edge of innovation with enterprise-grade Box AI. In June, we announced that Enterprise Plus customers now have unlimited end-user queries for Box AI in Notes, Documents, and Hubs. making it even easier for customers to roll out Box AI across their enterprise. Customers can now focus on leveraging AI to drive value without having to worry about usage caps. In Q2, we also unveiled a new set of features in Box AI, which include access to GPD 4.0 for products such as Box Hubs, as well as support for new file types, including images and spreadsheets in Box AI. We expect these features will be available later this year and will be included in Enterprise Plus plans. BoxAI for metadata is also available in our API in beta for customers on the Enterprise Plus plans. Developers are able to integrate BoxAI with custom applications using new BoxAI for metadata API functionality to automatically extract key information from documents at scale. When combined with Box's workflow automation tools, customers will be able to automate processes based on file metadata, extract key fields from unstructured content, and save information to external applications such as Salesforce. We also continue to roll out advancements across security and compliance. Over the last several months, we've launched Zero Trust 2.0 enhancements for admins and GXP validation sandbox management and we are on track to meet FedRAMP high compliance in the coming quarters to expand our use cases in the federal government. Finally, our flexible and interoperable platform is a major differentiator for Box. We are supporting deeper integrations with Salesforce, Microsoft Teams, Microsoft Copilot, IBM Technologies, ServiceNow, and our customers' custom-built applications. Just last month, we announced an expanded partnership with Slack, that brings secure AI to enterprise content. Joint customers of Slack and Box can access unlimited Box AI queries directly in Slack, allowing users to ask critical questions and uncover timely insights from their Box files. Now, turning to go-to-market. As I mentioned earlier, we continue to see strong adoption of Enterprise Plus, our multi-product suite offering with unlimited access to Box AI. In Q2, Suites comprised 87% of our deals over $100,000, up from 78% a year ago. With Enterprise Plus comprising over 95% of those deals, we saw solid Suites attach rates in large deals across verticals in all geographies, including record attach rates in Japan. Now, with 57% of our revenue coming from Suites compared to 48% a year ago, we still have a large opportunity to drive Enterprise Plus adoption. Our Q2 customer expansions and wins with Enterprise Plus include one of the largest marketing companies in the world upgraded to Enterprise Plus with a six-figure upsell as the organization looks to leverage Box AI metadata and Box hubs to create client-centric hubs with workflow to reduce the time for teams to come up to speed on new engagements with clients partners, vendors, and securely collaborate across their ecosystem. A UK-based event, design, and production company purchased Enterprise Plus with a three-year enterprise license agreement with a key focus on replacing legacy ECM tools like SharePoint in order to enhance and streamline their collaboration efforts as they create engaging experiences for their clients. And an organization that regulates and creates policies for the construction industry purchased Box with a six-figure deal to replace an antiquated on-prem ECM system. With Box as their modern intelligent content management solution, they expect to save costs associated with their on-prem solution, including hardware, storage, maintenance, upgrades, and support costs. The organization also has plans to integrate Box to their contract permitting system and utilize Box AI with their contract team. As we power more advanced workflows in partnership with key system integrators in Q2, we saw a number of wins with large customers across critical focus industries with the help of these strong SI partners, including the replacement of many legacy ECM systems. Now, looking forward, our go-to-market engine will continue to drive Enterprise Plus expansion, catalyzed by gaining access to BoxAI. And we have planned to expand our efforts with critical go-to-market partners like system integrators that can expand our penetration into key prospects and accounts and get Box embedded into more customer workflows and retire legacy ECM systems. We are also incredibly excited to host Boxworks, our flagship customer conference this year on November 12th in San Francisco, which will also be live streamed to tens of thousands of customers globally. At Boxworks this year, we expect to unveil major new product enhancements, as well as highlight major partnerships across the AI landscape and system integrator ecosystems. In conjunction with Boxworks, we're hosting a virtual IR product briefing for investors to discuss these major updates. Now, in the last few months, we have been pleased to announce the appointment of some fantastic leaders with decades of enterprise software experience to our leadership team. This includes Samantha Wessels, who has joined us as president of Box EMEA. Samantha has led successful teams at high-performing SaaS and software companies, including Elastic and Snyk, and large system integrators in EMEA. Another new leader, Tricia Gelman, has joined as our chief marketing officer. Tricia brings over two decades of experience in driving growth and innovation for leading technology companies, including high-growth startups and industry giants like Salesforce and Adobe. These leaders will help us to drive our evolution as the leading intelligent content management platform, delivering AI-powered collaboration, workflow automation, security, and intelligence. Finally, we're also pleased to welcome Steve Murphy to our board of directors. Steve is the CEO of Epicor Software and has had an extensive career in the software industry, a track record of operational excellence, and expertise in the content management market. Overall, we are incredibly pleased with our strong performance and execution in Q2. Our acceleration in RPO growth will continue to drive momentum in the second half of this year and beyond. And with that, let me hand it off to Dylan.