Box (NYSE:BOX) Q3 2026 Earnings Call December 02, 2025 05:00 PM ET Company ParticipantsDylan Smith - Co-founder and CFOAaron Levie - Co-founder and CEOMatt Bullock - Equity Research AssociateFrederick Gooding - Equity Research AssociateCynthia Hiponia - VP of Investor RelationsConference Call ParticipantsJosh Baer - Software Small and Midcap Research AnalystNone - AnalystGeorge Kurosawa - Equity Research AnalystOperatorLadies and gentlemen, thank you for standing by. My name is Abby, and I will be your conf ...

Box (NYSE:BOX) Q3 2026 Earnings Call December 02, 2025 05:00 PM ET Company ParticipantsDylan Smith - Co-founder and CFOAaron Levie - Co-founder and CEOMatt Bullock - Equity Research AssociateFrederick Gooding - Equity Research AssociateCynthia Hiponia - VP of Investor RelationsConference Call ParticipantsJosh Baer - Software Small and Midcap Research AnalystNone - AnalystGeorge Kurosawa - Equity Research AnalystOperatorLadies and gentlemen, thank you for standing by. My name is Abby, and I will be your conf ...

Box (NYSE:BOX) Q3 2026 Earnings Call December 02, 2025 05:00 PM ET Speaker0Ladies and gentlemen, 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 third quarter fiscal 2026 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 ...

AI & Unstructured Data Management - Box is focused on helping companies manage their unstructured data, which accounts for approximately 90% of enterprise data, including financial documents, contracts, and research materials [2] - The company is introducing new capabilities with agents to enable users to tap into unstructured data and automate workflows [3] - Box is launching a new workflow automation capability called Box Automate, allowing users to design end-to-end business processes and integrate agents at various steps [3] - These capabilities can be applied to various industries, such as client onboarding in banking, contract review in law firms, and healthcare data management [4] Competitive Advantage & Market Position - Box's approach of integrating AI into existing data and security infrastructure leads to higher success rates compared to companies building their own AI technology [6][7] - The company emphasizes adapting to the changing software landscape and continuously innovating to maintain its market position [11][12][13] Revenue & Growth Strategy - Box introduced a new plan called Enterprise Advanced, which includes advanced AI capabilities and workflow automation, driving revenue growth [9] - The Enterprise Advanced plan is designed to facilitate customer upgrades and seamless adoption of advanced capabilities [9] - The company's recent financial performance, exceeding guidance and consensus, is attributed to the momentum of Enterprise Advanced [10] - Box is a $1 billion revenue per year company [8]

Core Insights - The company is focused on helping organizations manage unstructured data, which constitutes approximately 90% of enterprise data, including financial documents, contracts, and research materials [2][3] - A new workflow automation capability called Box Automate has been announced, allowing businesses to design end-to-end processes and integrate agents for automation in unstructured workflows [3][4] - The introduction of the Enterprise Advanced plan includes advanced AI capabilities and workflow features, which is expected to drive revenue growth and improve customer engagement [9][10] Industry Trends - There is a notable difference in success rates for companies that collaborate with software vendors versus those that attempt to build their own technology, with the former showing higher success [6][7] - The MIT report highlighted varying success and failure rates in AI implementations, suggesting that CIOs should consider these insights when deploying AI solutions [5][7] - The competitive landscape in the software industry is shifting, with companies needing to adapt quickly to maintain their positions, as emphasized by the historical context of disruption in the tech sector [11][13]

Group 1 - Box has been public for almost 10 years and is experiencing excitement around its newer AI capabilities resonating with customers [2][3] - The recent quarter showed strong financial results driven by the adoption of Enterprise Plus and the newly launched Enterprise Advanced plan [3] - Initial adoption of the new plans has contributed to outperformance in various top line metrics, indicating positive customer reception and future growth potential [3]

Financial Data and Key Metrics Changes - The company reported strong financial results driven by the adoption of new AI capabilities, which positively impacted various top-line metrics [4][28] - The net retention rate increased by one point quarter on quarter, achieving year-end targets earlier than expected [28] Business Line Data and Key Metrics Changes - The Enterprise Advanced plan launched in January has shown early momentum, contributing to improved price per seat and overall growth [28] - The company is seeing a significant increase in use cases, particularly in loan origination and document processing, which are driving customer satisfaction and operational efficiency [56][61] Market Data and Key Metrics Changes - The macroeconomic environment is described as relatively stable, with customers continuing to make purchasing decisions despite a cautious outlook [7][8] - There is a noted shift in customer engagement, with many moving from skepticism to actively trying and implementing AI solutions [53] Company Strategy and Development Direction - The company is positioning itself as an AI-first organization, focusing on integrating AI capabilities into its product offerings to enhance customer value [32][33] - The introduction of the MCP protocol is expected to facilitate better integration across platforms, allowing for more sophisticated and rapid deployments [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the importance of AI in driving new use cases and customer engagement [28][62] - The company is focused on leveraging AI to improve operational efficiencies and accelerate product development [50][51] Other Important Information - The company is committed to making AI certification mandatory for all employees to ensure a deep understanding of AI capabilities [47] - The upcoming BoxWorks conference is anticipated to showcase new features and capabilities related to the Enterprise Advanced plan [42] Q&A Session Summary Question: How is the AI revenue base evolving? - The company does not specifically track AI revenue as it considers itself an AI-first company, integrating AI capabilities across all plans [27] Question: What is driving seat growth? - Seat growth is primarily driven by expanding use cases and stabilizing churn rates, with a focus on adding back users rather than just stabilizing losses [30] Question: How does the company view the competitive landscape? - The company believes its focus on secure, compliant, and high-accuracy AI applications for unstructured data gives it a competitive edge [62] Question: What is the role of the new CRO? - The new CRO is expected to scale existing strategies and enhance customer engagement, leveraging his experience with enterprise customers [66] Question: How does the company plan to work with partners? - The company sees a significant opportunity to collaborate with partners, particularly in the context of AI, to help clients transform their content management practices [68]

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $294 million, exceeding guidance and reflecting a 9% year-over-year growth, or 7% in constant currency [28] - Remaining performance obligations (RPO) grew 16% year-over-year to $1.5 billion, with short-term RPO increasing by 12% [29] - Q2 billings were $265 million, up 3% year-over-year, driven by strong bookings and early renewals [30] - The net retention rate improved to 103%, up from 102% in the previous quarter [31] - Gross margin for Q2 was 81.4%, reflecting a 40 basis point year-over-year increase [31] Business Line Data and Key Metrics Changes - The Enterprise Advanced plan saw significant customer adoption, contributing to revenue growth and customer upgrades [8][10] - Suites customers accounted for 63% of total revenue, up from 58% a year ago, driven by the adoption of Box.ai and Enterprise Advanced [29] - The company experienced strong momentum in Enterprise Plus, which also contributed to revenue growth [10] Market Data and Key Metrics Changes - Approximately one-third of revenue is generated outside the U.S., with 65% of international revenue coming from Japan [34] - The company noted a favorable foreign exchange impact on revenue and billings growth [35][38] Company Strategy and Development Direction - The company is focusing on driving the adoption of Enterprise Advanced and enhancing its AI capabilities to transform enterprise workflows [20][24] - Plans for the second half of the year include new workflow and no-code app capabilities, enhancing productivity through AI integration [18][19] - The company aims to maintain a strong security posture as it expands its AI capabilities, ensuring customer trust [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing demand for AI capabilities and the potential for significant growth in enterprise content management [27][39] - The company is committed to a disciplined capital allocation strategy while continuing to invest in its AI-driven platform [27] Other Important Information - The current Chief Revenue Officer announced retirement, with Jeff Newsome appointed as the new CRO [22][24] - The company plans to showcase new product announcements at the upcoming BoxWorks conference [90] Q&A Session Summary Question: What drove the outperformance in Enterprise Advanced? - Management indicated that the outperformance was influenced by strong bookings, early renewals, and the demand for AI capabilities across the business [41][42] Question: How is the pipeline expanding with Enterprise Advanced? - The company noted that the use cases for Enterprise Advanced are broadening, leading to larger deal sizes and more complex workflows [42][43] Question: What is driving the net seat growth? - The increase in net seat growth is attributed to the relevance of Enterprise Advanced to more users and departments [47][48] Question: How much of the Q2 outperformance was due to early renewals? - Management stated that early renewals contributed to the outperformance, but all factors had a similar impact [51][53] Question: What are the next steps for customers comfortable with metadata extraction? - The company plans to automate workflows tied to extracted data, enhancing the overall value of unstructured data [60][62] Question: What is the vision for the MCP server? - The MCP server aims to centralize access to unstructured data across various AI systems, enhancing security and efficiency [66][68]

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $294 million, reflecting a 9% year-over-year growth and a 7% increase in constant currency [26] - Remaining performance obligations (RPO) grew by 16% year-over-year, reaching $1.5 billion [27] - Q2 operating margin was 28.6%, with earnings per share (EPS) of $0.33, exceeding guidance [30] Business Line Data and Key Metrics Changes - Customer adoption of Enterprise Advanced significantly increased, contributing to strong revenue growth [6] - Suites customers now account for 63% of total revenue, up from 58% a year ago, driven by the adoption of Box.ai and Enterprise Advanced [27] - The company experienced a net retention rate of 103%, an improvement from 102% in the previous quarter [28] Market Data and Key Metrics Changes - Approximately one-third of revenue is generated outside the U.S., with 65% of international revenue coming from Japan [32] - Q2 billings were $265 million, up 3% year-over-year, exceeding expectations despite foreign exchange headwinds [28] Company Strategy and Development Direction - The company is focusing on driving the adoption of Enterprise Advanced and enhancing AI capabilities to transform enterprise workflows [18][21] - Plans to introduce new workflow and no-code app capabilities to automate critical workflows around content [16] - The company aims to maintain a strong security posture to protect sensitive enterprise data as AI capabilities expand [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum in AI adoption and its impact on business growth [25] - The company is committed to a disciplined capital allocation strategy while investing in key initiatives to drive growth [25] - Management acknowledged the challenges in the macroeconomic environment but remains focused on long-term growth opportunities [54] Other Important Information - The company announced the retirement of its current Chief Revenue Officer, with Jeff Newsome appointed as the new CRO [20] - The upcoming BoxWorks conference is expected to showcase significant product launches and updates [23] Q&A Session Summary Question: What drove the outperformance in billings? - Management indicated that the outperformance was influenced by strong bookings, early renewals, and the demand for AI capabilities in Enterprise Advanced [40][41] Question: How is the pipeline expanding with Enterprise Advanced? - The company noted that the use cases for Enterprise Advanced are broadening, leading to larger deal sizes and more complex workflows [42][44] Question: What is driving net seat growth? - The increase in net seat growth is attributed to the relevance of Enterprise Advanced to more users across customer organizations [47] Question: How common are upgrades to Enterprise Advanced? - Upgrades to Enterprise Advanced are occurring more frequently than expected, with significant pricing uplifts observed [49] Question: How does early renewal impact Q2 performance? - Early renewals contributed to the strong performance, with similar impacts from various factors driving overall outperformance [52][54] Question: What are the next steps for customers using metadata extraction? - Customers are expected to automate workflows tied to extracted data, enhancing operational efficiency [60][64] Question: What is the vision for the MCP server? - The MCP server aims to serve as a central repository for unstructured data, allowing seamless access across various AI systems [66][70]

Core Viewpoint - MongoDB is positioned as a leading choice for non-relational data projects, becoming an industry standard for developers needing flexible data storage solutions [1][2]. Group 1: Business Model and Revenue Sources - MongoDB's business model consists of three main revenue sources: Atlas, Enterprise Advanced, and Professional Services [2]. - Atlas is the core business, accounting for approximately 72% of total revenue in Q1 FY2026, with a year-over-year growth rate of 26% [2][7]. - Enterprise Advanced, which is a downloadable software for non-cloud applications, has seen slower growth, with a year-over-year increase of only 7% [3]. Group 2: Financial Performance - In the last quarter, MongoDB's total revenue grew by 22% year-over-year, surpassing analyst expectations of around 15% [7]. - The company reported a non-GAAP gross margin decrease from 75% to 74%, which is considered normal fluctuation [9]. - The company has a strong balance sheet with total liabilities under $600 million and current assets exceeding $2.8 billion [12]. Group 3: Future Growth and Valuation - Analysts expect MongoDB's revenue to grow from $2 billion to $2.3 billion by the end of FY2026, with free cash flow projected to reach approximately $550 million, reflecting a nearly 30% increase [12][15]. - The expected price-to-free cash flow ratio is projected to decrease from 40x to a more acceptable 31x, making the stock potentially attractive for investors [13][14]. - The company is anticipated to maintain a compound annual growth rate (CAGR) of around 15% to 20% due to the increasing demand for non-structured data driven by digitalization and cloud computing trends [13][16]. Group 4: Challenges and Risks - MongoDB faces challenges related to significant equity dilution and high valuation, which could hinder capital appreciation [12][16]. - The reliance on the emergence of new non-structured data and a stable macroeconomic environment is crucial for continued growth [16].