Box(BOX) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3, revenue grew 5% year-over-year to $276 million, or 6% in constant currency [9][29] - Record gross margin of 82% and record operating margin of 29%, up 440 basis points year-over-year [9][34] - Remaining performance obligations (RPO) increased by 13% year-over-year to$ 1.3 billion [31] - Q3 billings were $265 million, up 4% year-over-year [32] - Net retention rate remained stable at 102% [32] Business Line Data and Key Metrics Changes - Strong demand for Box AI and Enterprise Plus contributed to growth, with Enterprise Plus seeing solid attach rates in large deals [10][21] - Suites customers now represent 59% of total revenue, up from 51% a year ago [30] - Q3 Suites attach rate in large deals improved to 83% from 79% year-over-year [30] Market Data and Key Metrics Changes - Approximately 1,900 customers are paying at least$ 100,000 annually, an 8% increase year-over-year [29] - The company anticipates exiting FY '25 with a net retention rate of roughly 102% [32] Company Strategy and Development Direction - Focus on embedding AI into the platform to enhance customer value from content [8] - Introduction of Enterprise Advanced to address complex enterprise use cases [13][22] - Expansion of partnerships with key technology providers like AWS, Anthropic, and OpenAI to enhance product offerings [19][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory despite macroeconomic headwinds [65] - Anticipated revenue for Q4 is approximately $279 million, representing 6% year-over-year growth [41] - Full fiscal year revenue expected to be around$ 1.09 billion, indicating a 5% year-over-year growth [44] Other Important Information - The company completed the sale of remaining data center assets, benefiting Q3 gross margin by approximately 70 basis points [33] - Free cash flow for Q3 was $57 million, down 2% year-over-year [36] - The company repurchased 1 million shares for approximately$ 30 million during the quarter [38] Q&A Session Summary Question: Feedback on AI solutions and legacy ECM footprint - Management noted positive early feedback on AI capabilities, which are expected to drive growth and replace legacy systems [54][60] Question: Billings outlook for Q4 - Management indicated that low single-digit growth in billings is due to difficult year-over-year comparisons rather than unusual factors [62][64] Question: Impact of new products on renewals and purchases - Management expects Enterprise Plus to dominate Q4 revenue, with Enterprise Advanced driving growth in the following year [70][74] Question: Net retention rate outlook - Management anticipates that the net retention rate has bottomed out and will trend upward over time [75][76] Question: Applicability of new SKU within customer base - Management stated that the new SKU is designed to be broadly applicable, catering to various customer needs [79][82] Question: Pricing expectations for new SKU - Management expects a 20% to 40% uplift in pricing for Enterprise Advanced compared to Enterprise Plus [85][86] Question: Business impact of new products - Management highlighted that the new offerings are expected to be significant drivers of growth and customer retention [90][100]