Box(US:BOX)2025-12-02 23:00Financial Data and Key Metrics Changes - In Q3, the company reported revenue of $301 million, representing a 9% year-over-year growth, exceeding guidance [21][22] - Operating margin was 28.6%, surpassing guidance, with gross margin at 81.7%, also exceeding expectations [23][24] - Net retention rate improved to 104%, up from 103% in Q2 and 102% in the previous year [23][24] Business Line Data and Key Metrics Changes - Billings grew by 12% year-over-year, driven by strong bookings, exceeding the guidance of approximately 10% [22][23] - Remaining performance obligations (RPO) reached $1.5 billion, growing 18% year-over-year, indicating strong customer demand for Box AI [22][23] Market Data and Key Metrics Changes - The company noted that Suite customers now account for 64% of revenue, up from 59% a year ago, indicating a shift towards higher-value offerings [22] - The company is seeing strong momentum in partner-led business, delivering double-digit revenue growth in partner-led wins in Q3 [17] Company Strategy and Development Direction - The company is focused on driving adoption of its AI-powered solutions, particularly through the Enterprise Advanced platform, which is seeing strong upgrades and new customer acquisitions [10][16] - Strategic partnerships, such as with AWS and Tata Consultancy Services, are aimed at enhancing AI capabilities and expanding market reach [14][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for Box AI and the Enterprise Advanced platform, expecting continued growth in net retention rates and seat expansions [23][36] - The company anticipates Q4 revenue to be approximately $304 million, representing about 9% year-over-year growth, and expects FY26 revenue to be around $1.175 billion [25][27] Other Important Information - The company repurchased 2.4 million shares for approximately $77 million in Q3, with a remaining buyback capacity of $35 million [24] - The company plans to settle $205 million of convertible notes due in January 2026 with cash [24] Q&A Session Summary Question: Growth levers since March Analyst Day - Management indicated that all growth levers are tracking well, with strong adoption of Enterprise Advanced and AI capabilities exceeding expectations [29] Question: Sales and marketing efficiency - Management noted improvements in sales and marketing efficiency, attributing it to investments in sales capacity and partnerships [30][31] Question: Federal vertical performance - The company is seeing good momentum in the federal vertical, aided by FedRAMP High authorization, despite some deal timing shifts due to the government shutdown [34] Question: Seat growth dynamics - Management stated that seat growth is primarily driven by AI-enabled workflows rather than macroeconomic recovery [35] Question: Competitive landscape with AI - Management highlighted that AI is catalyzing new use cases and increasing interest in migrating from legacy systems to Box [39][42] Question: Impact of Enterprise Advanced on pricing and seat growth - Management confirmed that both pricing and seat growth are contributing positively to net retention rates, with significant upside potential [43] Question: Path towards acceleration into next year - Management expressed confidence in returning to double-digit top-line growth, supported by strong underlying momentum [45]