Box, Inc. (BOX)

Status Update

← View all transcripts

Sep 17, 2020

Hi, everyone. I'm Alice Lopatto, Head of Investor Relations. Welcome to the virtual edition of our investor breakout session. We hope you've been staying safe and healthy, and we appreciate you taking the time to connect with us once again. We've had a great day hosting Boxworks Digital for our customers and partners, and we hope you had a chance to tune into some of the keynotes and breakout sessions. If you haven't, rest assured that we'll have many sessions available on demand in the next day for you to check out at a later time. For this session, we'll spend the next hour and a half with Aaron Levie, our Co Founder and CEO, who will provide an overview of our product innovation, our market opportunity, and our go to market strategy and Dylan Smith, our Co Founder and CFO, will provide a deep dive into our financial model and how we're driving profitable growth. At the end of the presentations, we encourage you to participate in our Q and A session. Before we begin, here is the safe harbor for today's services. Please refer to the risk factors of documents we file with the SEC, including our most recent quarterly report on Form 10Q, for information on risks and uncertainties that may cause actual results to differ materially from those set forth in the forward looking statements we make today. In addition, during today's presentation, we will discuss non GAAP financial measures. These non GAAP financial measures should be considered in addition to, but not as a substitute for, or in isolation from our GAAP results. We will post today's presentation on the IR section of our website at the conclusion of the event. With that out of the way, I'd like to go ahead and hand it over to Aaron. Aaron? Awesome. Thanks, Alice. Really good to be here with everybody today and hope you had a chance to tune into some of our product updates and keynote as well as our panels with Chuck Robbins, Arvind Krishna and the CEOs of Slack, Zoom and Okta. We're really, really excited about where we're taking our platform and the product strategy going forward. And there's 4 big areas that we want to talk about today at the investor and analyst update. The first is that we're going after a really big market opportunity. So, I'll dive into a little bit about what that opportunity looks like and why that's only increased in significance recently. The second is where we're going with our product strategy and how we're continuing to drive rapid innovation on our platform to make sure that we can address all of the use cases of our customers as they move content to the cloud. Then 3rd, I'll briefly go over some of the go to market updates around our very repeatable land and expand go to market engine. And then finally, Dylan will cover how we're driving profitable growth both this year and going forward and what that long term model looks like. So as we've shared on the last earnings call, we now have reached over 100,000 customers and we're in 69% of the Fortune 500. So we're incredibly excited about the traction that we've been able to see, especially recently, but certainly over the past few years, whether it's some of the world's largest technology companies, companies like Amazon, Cisco, IBM, Airbnb and many other technology disruptors leveraging Box to some of the world's largest industrial players like General Electric. We are fundamentally powering how the world works together in these organizations. And I think what all of these companies have in common and so many more out there is that work is fundamentally changing. And we've long believed that the future of work is going to look very, very different than what the past looks like. But COVID has only accelerated this transformation in businesses. We're going through a world where work used to be about going into the office, 9 to 5 based schedules with office based work and now we're moving toward much more agile work where you can work from anywhere, where the office and the work from anywhere ability sort of bridges with a hybrid and digital workplace strategy. We're moving from a world where we focus on collaborating mostly with just people inside of our business to a world where we're collaborating externally with colleagues inside and outside of the organization, contractors, partners, freelancers, vendors that we need to be able to share with. So, we have to be able to bridge the digital gaps between our organization and the other companies that we partner with. We're moving from manual paper based processes to digital automated workflows, legacy siloed systems to really simple intuitive applications. And then finally, the data security model of the enterprise is also fundamentally changing. We can no longer secure data just in the premises of our organization wrapping security around a data center. We fundamentally have to secure data as it flows inside and outside of our organizations as content goes out to partners and customers and contractors. So, what we've seen is that certainly the past 6 months, you know, within this COVID-nineteen environment, these trends have only accelerated. And fundamentally, we don't believe that there's any going back to the way that we used to work. So, where we believe this is all going is that at the center of how we work and at the center of what the future of work looks like, the ability to secure and manage and organize and structure and make use of your content remains incredibly important. At the center of really this future of work strategy, companies have to make sure that they understand what's in their information, how it's being shared, who it's being shared with, the workflows around their their content and much more. And at the center of every business process is fundamentally content. If you think about banking, whether you're doing client onboarding and you do banking data and financial records and life sciences, as you're collaborating on new research and we work with many of our customers that are actually working on research around COVID-nineteen, the amount of testing and research that goes into content and documents and spreadsheets is obviously enormous. In media and entertainment, the movie scripts and marketing campaigns and digital assets and retail, assets and retail, all of the campaigns and all of the retail store information and in the tech industry, the product designs, the technical PRDs and so much more. All of this is the content that moves through an organization that allows companies to get their work done, to be able to serve their customers, to be able to streamline their business operations. And the challenge is that working with this content is very difficult in many organizations. And today's technology, especially the technology that's been carried forward from the past, is really holding companies back. It's not allowing companies to modernize the way that they work. If you think about, you know, how we work used to work how we want to be able to work in the future, content management and document management technology is really disabling companies from being able to actually go and drive this new way of working. And in our category in particular, there's sort of 2 large categories that we think about when we think about content management. 1st is sort of the legacy enterprise content management systems. These are products like OpenText and Documentum and some of these on productivity tools, they can't be accessed remotely very easily, you have to VPN into them. And so what that led to was really this growth of personal storage and sharing tools. The challenge with these technologies is they lack security controls, reporting, data governance, they don't tie to business processes, they can't tie the line of business systems very easily and they're unable to automate workflows across the enterprise because they're really about my content as a user, they're not about the business process that information is tied to. So when we look at this when we look at this landscape, we see a massive problem. You have legacy systems that don't work for modern workflows and you have modern tools but they're just really positioned for the user and they don't tie to our business processes. And what this has led to is a high degree of fragmentation across the enterprise. When you think about most enterprise and when we go to talk to our customers, whether they're medium small, medium or really large enterprises, what we tend to find is that there's just fragmentation of data everywhere. You've got network file shares, you have content management systems, you have personal sharing tools. And if that wasn't enough, what ended up happening is we then saw a growth of communication and productivity systems, you know, amazing products like Teams and Zoom and Slack. But each of these have the risk of creating more fragmentation of our content. And then when you have a line of business applications like all of the cloud platforms that we're now seeing implemented in the enterprise, ServiceNow delivering amazing workflows inside of organizations. We have Bill McDermott at Box at our CIO event. We had Chuck Robbins just earlier today at Boxworks talking about where WebEx is going in the future of work, but each of these applications has the risk of creating more silos of data. And so, we have to fundamentally solve this problem. And now is really the time where that comes into play. So, what we're seeing is this massive growth in sensitive content moving to the cloud. We are seeing all new ways of working beginning to emerge and people are working from more applications than ever before. So the era of data silos and content silos no longer works. It creates too much cost. It slows down the business and it creates significant security and compliance vulnerabilities for organizations. So, we need a different way to think about content and that's obviously what we're building at Box. We need one platform for secure content management, workflow and collaboration all in one place. So instead of having disparate technologies and tools that bring together just components of this that then lead to customers having this sort of array of solutions, we need to be able to have one platform that can solve these problems. And that's what we've been building out at Box now for 15 years and where we're actually seeing the innovation just continue to accelerate on the capabilities that we're delivering. So, the foundation of Box is really our platform. This is things like storage and file and folder management, collaboration, metadata capabilities, workflow with Box Relay, and that's backed by a level of data security that is unmatched by the rest of the market. The ability to have encryption key management, the ability to have data loss prevention policies with Box Shield or automatic threat detection so you can discover anomalies about how content is shared in your organization or data governance and document retention. So, all of this is in the core of our platform and this is really how we've differentiated Box now for many years. And what we're enabling is all new ways to work with your content that is in the Box platform. We're delivering all new innovations for end users through our Box applications and our first party experiences. We're enabling new integration points with all of our third party partners, whether it's Office 365, Zoom, WebEx, G Suite and many others. And then we have custom integrations with various line of business systems and other applications that our customers are developing. So these can be a custom customer portal. They could be a mobile application for field operations. It could be a wealth management portal in investment banking. And so ultimately, what you're seeing is the ability to store content once in one central repository, get rid of those fragmented systems and then make that content accessible to end users through partner applications and through box first party applications and then ultimately on out to custom applications that are built by the enterprise. So, that's really where our platform has where we've been innovating on our platform. And what this is leading to is just incredible outcomes that we're seeing from customers, both pre and post COVID. At Nike, it's really about being able to reduce the risk of data leaks and loss of information in a very collaborative R and D and marketing set of processes. At Disney and Pixar, it's about being able to collaborate internally and externally with employees to be able to provide secure content access from anywhere. At GE, it's about enabling 300,000 employees to be able to work from a variety of applications by being able to store their content once and access it from things like Office 365, Salesforce and many other technologies. And what has been so incredibly exciting for us at Box is right at the start of COVID, amidst obviously such an incredibly challenging backdrop of the healthcare crisis, economic challenges. We saw so many customers come to us and say, hey, Box is fundamental to our operations right now. We're able to run our business in a secure way and with the level of resilience that we need to be able to stay secure and to be able to be operational in this environment and that was incredibly great to hear. And when we look at our product strategy, when we look at the innovation we're driving, we see that our product strategy is really delivering on an ever growing market that we're now able to go and capture. When we started the business, really all we could go after was just basic data storage and data sharing. And over the past few years, we've been able to expand our total addressable market to include the ECM market. And so a lot of the traditional enterprise content management use cases, we've been able to now go after more of the data security spend around GRC software spend and data security like data loss prevention and threat detection. And of course, we can now address more content collaboration use cases. So as you want to be able to share and collaborate around content in an enterprise, we power those use cases. So we're going after a $55,000,000,000 market with a best of breed platform with a singular cloud architecture with no legacy technical debt or software on one data model in one platform that we're really, you know, seeing the benefits from. And that benefit is being seen by across the industry. So, whether it's Gartner or Forrester or IDC, we're seen as the leader in content management and continuing to drive more and more leadership in this market going forward. So, we're very excited about that set of positions. And we've been methodically building out our CCM platform over time. So, we while we started really in that enterprise file sync and share space that we helped create as a category, the evolution has really been to be able to provide broad based cloud content management for customers. So, like clockwork, every year or 2, we've been delivering more and more advanced capabilities on top of our foundation platform, Box KeySafe going back many years and Box governance and then we introduced our platform APIs that we could help monetize, data residency with Box zones, GXP validation for the life sciences industry. And then just last year, we were able to deliver both Box Shield and Box Relay to solve advanced data security, compliance and workflow automation capabilities. And we're now bringing together the bulk of this value proposition with our suites. So instead of going to customers and really thinking about it as a one off conversations with our customers of buying each individual add on product, we're now starting to pull together the full platform of capabilities with our suite strategy, which we'll certainly get into in a little bit. But we've been methodically building out our CCM platform and as we've gone along that strategy, we've been able to increase the total addressable market and addressable market from being able to service that market over time. And the pie has only been able to get bigger as we're expanding. So there's 3 big areas that we're going to be investing in. And if you were able to tune into Boxworks earlier today, you'll have heard about these big updates. The first is on frictionless security and compliance. The second is on seamless internal and external collaboration and workflow. And then finally, our mission of being integrated with all of your applications. And we have a very long term vision for where we're going with our product strategy. In security and compliance, it's about being able to apply precision based controls to content, be able to detect any threats around that content. And so if there's unusual activity happening on content, you can imagine inside of financial services, if there's any type of unusual activity happening on banking data or financial records, you want to be able to alert the security team to that. So, being able to have threat detection built natively in the Box. And then smart compliance. Can we actually make it so when content is in box, you're automatically compliant with whatever industry regulation you face, whether that's GDPR, CCPA, GXP, HIPAA. So, we're building in more and more smart compliance solutions into our platform. The second big area is really around workflow automation and how we help our customers collaborate. So we want to make sure that, 1st of all, as more data comes in the box, you can instantly find and organize that information. So we see that the growth of content in the world is growing both with people inside and outside of the enterprise and then be able to automate both with people inside and outside of the enterprise and then be able to automate repetitive work, whether that's client onboarding, digital asset review and approval, contract management, all of those types of use cases from a workflow standpoint. But that's really just a start. So those are the core capabilities built into Box. Now we have to be able to take content in those use cases and plug them into all the applications that our customers are using. And so that's really where our platform strategy and our API strategy comes into play, where Box gets integrated into all of the applications with one content layer for all of their SaaS products, unified integrations experiences that they can build on top of and then really world class developer tools to make developing on Box incredibly seamless. So at Boxworks, we're incredibly excited to update across all three of these dimensions. I'm just going to preview a few of these things offline. You can look at our press release or our product keynotes to go into this in more detail. We made significant advancements to Box Shield and automated classification. Part of this is some of the updates that we announced last month as well as new features around exception handling and more advanced capabilities from an automated classification standpoint. We're going to be integrating with Microsoft Information Protection. We know that customers want to be able to to have multiple places where, they have their security classification policies. So we want to make sure that Box Shield can listen to those policies and make sure that they keep their customers can keep their content secure in one place because of those policies. We also are continuing to further our partnership with IBM. So integrating with QRadar from the IBM Security Organization. So as customers have a SIEM environment where they want to see security alerts and events happening across their IT stack, bots will then integrate deeply into the QRadar environment to help protect our customers. We're driving a lot of innovation on our core end user experiences and collaboration and workflows. So, we launched an all new version of Box this summer and we are continuing to march along with more and more innovation. So, better ways of getting to your files, more streamlined ways of being able to collaborate. This version is rolling out now to all customers in GA and we're seeing pretty heavy adoption as customers are beginning to drive this new version of the product into their organization. So, we're really excited about where the all new box is going. We also are delivering all new annotations capabilities. So, one of the big benefits of Box is that all of our features work across the vast majority of content types that you have stored in our system. So instead of just being able to use one product to annotate on a PDF file or a Word file or an image asset or other content types in Box, you can collaborate, you can comment, you can annotate, and now you can you can have mobile annotations on nearly every file type. So you can imagine things like digital asset reviews, contract review and approvals, being able to work on design files in an engineering environment in the defense industry. So, all of that collaboration now can happen more and more within inside the box environment, all done natively and seamlessly within our product. And then we are driving further innovation on our workflow automation capabilities. So we don't want to just be the place where you're doing back and forth collaboration on files. We also want to streamline the workflow around that content. So whether that's a new employee that's being onboarded into your company, a new partner that you're onboarding, a contract that has to be reviewed, digital assets that have to be reviewed. We have a workflow engine with Box Relay that now lets you drive all of that automation directly in our platform. This summer, we were really able to release all new features like a built in template library and now we're expanding on those capabilities to advance these services for our customers. So, the ability of custom templates, scheduled workflows so you can run workflows on a regular basis and a lot of extensibility options with our APIs and our platform. So you can now build on top of the Box Relay platform capabilities. And then finally, we want to make sure that we can integrate across all the applications in our customers' environments. The really big way that we make that easy for customers is by letting them discover the applications that they can work with. So, we have an app gallery that we're launching early next year that will make it really, really easy to get access to all of the box applications that we integrate with. We now have around 1500 integrations and so we want customers to be able to discover all those apps very seamlessly. We also made a significant set of updates certainly this summer, but also more so coming this fall around Box or Microsoft Teams. So as customers are collaborating in platforms like Webex and Zoom and Teams and Slack, we're going to make sure that we have native integrations into all of those platforms to make it as seamless as possible to communicate, to collaborate on your content stored in Box from those applications. So, we're excited to continue to drive the progress with both Teams, with Slack, WebEx and Zoom going forward. But today, we made some very compelling updates to our Microsoft Teams strategy. And when you put all of that together, the ability to secure your content centrally, drive workflows on it, annotate on that content, extend it externally and then make sure it's accessible from any application, There's there's literally, an unlimited set of use cases that we're seeing from customers across every line of business and in every industry. And more of these use cases take us into deeper and deeper parts of these business processes. So again, really going from just being about secure sharing and collaboration to now moving into the full content management of that organization and then ultimately into the workflows around their content. So, if it's in sales, it's around being able to drive automated sales processes and enablement and better productivity in the sales team. In marketing, it's around digital asset review and approval and digital asset management and R and D, about collaborating across the supply chain with your partners and the broader ecosystem. So we're working to now power a broader set of use cases with our platform. And I think the most exciting thing about Box right now in 2020 certainly emits again a very complicated backdrop and certainly economic environment is that really we are just getting started with our opportunity. When we look at where we are today and where the world is going, in many respects, we're now at the start of another step function of digital transformation going forward. For Box directly, if we just look at our current paid seats within existing enterprises, we have 7x the opportunity of seats that we can go monetize from within our current install base as we drive more usage, more adoption and more of the use cases that I just talked about. So we have a lot of opportunity just within the install base And then there's even greater opportunity when you expand from today's 100,000 customers and you look globally to all the customers that we can be serving. We're seeing more and more product traction on our CCM platform capabilities. So whether that's Relay or Shield or Governance, Dylan will go into some of that traction that we're seeing in a minute. And then, of course, again, we have multiple vectors of expansion from here. When we think about the number of global digital workers, over a 1000000000 global digital workers and even in this the segments that we serve directly today in the markets that we serve, there's 100 of millions of digital workers that we can go that we can go after. So, really just at the start of a significant wave of digital transformation that we're well positioned for. And what we are what we've been building out and certainly what we've really been trying to keep investors up to date on is how our go to market strategy has been evolving to make sure that we can actually capture this opportunity. So, our go to market strategy really enables us to reach all customer segments through a highly efficient land and expand motion. The first part of that strategy is that we land and acquire new customers through a repeatable sales motion, digital experiences that we've only been further enhancing because of the COVID environment and then robust partnerships, whether it's with technology vendors or resellers and system integrators. We then work to drive greater adoption within our customers. So we know that the only way that we get paid is if our customers are successful with our product. So we have to drive greater and greater adoption of the platform and then into deeper and higher value use cases, which is again what our new capabilities allow us to go solve. And then finally, we're able to then expand with our customers as we make them more successful. And this is where we can expand either with selling more seats to those customers or our add on products. And more and more, we're actually not seeing a trade off between those two things because our customers are going deeper and wider with Box at the same time. You know, we are continuing to see great examples of this. So this was an example deal of a customer that is now paying us a little over $2,500,000 and they became an enterprise wide digital business suite customer at the end of last year. And this has been a large technology customer that we've worked with now for over 7 years and they've been expanding methodically as they have more use cases, more users in their organization and they go wider with the platform. And so you can see like clockwork, we're able to expand both the seat penetration as well as the amount of products that that customer is growing with over time. So we want every single one of our customers to look like this canonical example customer. And so driving more adoption, driving more powerful use cases and then more expansion opportunity over time. And we're going to do that, of course, through, again, a broad distribution strategy. We certainly primarily sell direct to customers, but in many cases, we go alongside partners to be able to make sure that our value proposition is complementary to other technologies that that customer is using. So we have a strong array of technology partners, again, you know, across Cisco, Zoom, G Suite, Office 365, Salesforce and many others. And then we work with system integrators and resellers. And so, technology companies that are building on top of the box platform or where we're integrating more deeply with our customers to be able to go and power their digital experiences. And we're just continuing to again hone these the components of this land and expand strategy and this go to market strategy. So in terms of acquiring new logos, we're going to continue to do this in a very efficient way. We're doing it through our digital acquisition engine, through our partner ecosystem. We're going to grow in our core international markets. So we're still very, very focused in the key markets that we're in today and we're going to just continue to double down in those spaces right now as we drive more repeatability of that motion. And then we want to make sure that we're going after the key industries and verticals where we see the most opportunity. And there's fortunately, because of the diversification of our customer base, there's a lot of opportunity, in a range of industries, whether it's financial services, healthcare, the public sector, the tech industry, professional services, and so you're going to see us go after key industries to really drive growth. We're going to continue to drive really industry record level of adoption within the product. So we want to make sure that all of our customers are successful with Box. So we have to make sure that we're driving adoption both through our product experiences, with consulting, with customer success, driving higher value use cases, getting stickier within the organization. And then ultimately, we want to expand with our customers. This is really where our suite strategy comes into play. So we want to make sure that we're pulling together all of the capabilities of Box and ensuring that customers can buy that full platform suite in a single transaction. So, continuing to tune and optimize our packaging to make it easier to get the full value of our platform, yes, when we go to sell to our customers. And this is also making the sales motion more efficient. So instead of having bespoke one off sales processes, we want to be able to bring all these capabilities together, in a single sale. We're going to keep focusing on driving more enterprise wide deals. So whenever possible, we want to go wider within a customer, not just selling out on product but more seats and our ELA strategy helps with that. And then certainly driving more and more growth intercompany. So as Box gets adopted more, how do we make sure that it's spreading inside and outside the organization to drive more expansion opportunities. So, we're going to continue to double down on this land, adopt, expand motion and this is ultimately what drives that repeatability of our sales model. So just to recap, we're going after what we believe is one of the largest markets in software that is really ripe for disruption. The majority of spend on document management and storage technology is still on prem. We know that's going to move to the cloud and we have the best platform and multi tenant architecture in a cloud platform to be able to help serve our customers. Going to make sure that we're continuing to innovate on this product with the best of breed platform capabilities that we launched today and that you're just going to continue to see us innovate on. We are, again, continuing to tune our go to market model to drive repeatability and make sure that we can scale to serve that full total addressable market. And we want to make sure that we're driving highly profitable growth, again, as we evidenced this year, but certainly what we're going to be driving going forward. So, that's just a brief recap and I'm excited to hand it over to Dylan to talk about how we're going to be driving profitable growth going forward. Thanks, Aaron. So as you heard from Aaron, we've made significant progress in evolving our product portfolio and go to market capabilities over the past year while also delivering significant profitability improvements. We built a strong foundation to continue driving profitable growth in the years to come. Today, I'm going to walk through how everything Aaron's been talking about flows through our underlying business model and what we're seeing in the business that gives us the confidence that we're well positioned to capitalize on our leadership position in cloud content management. First, we'll look at the various components of our proven business model and how the underlying economics have been improving over time. Then we'll dive into the strong momentum that we're seeing across our customer base with a focus on the traction we're seeing in the adoption of our more advanced and newer product capabilities. After that, we'll discuss how this has allowed us to accelerate margin expansion this year and where we're focused to generate additional margin expansion going forward. And then finally, we'll look at how we plan to drive profitable growth in the coming years as we go after our massive market opportunity. Our strong business model is the foundation for our ability to drive profitable growth as we continue to scale toward $1,000,000,000 in revenue. More than 95% of our revenue comes from recurring subscriptions. And combined with our 5% annualized full churn rate and with about 3 quarters of new bookings coming from existing customers, we have more visibility than virtually any other company in software. Our horizontal platform serves customers of all sizes, which has allowed us to build and scale a highly diverse blue chip customer base to fuel our future growth. Our product differentiation, strong pricing and cost structure optimizations all support high gross margin, which has been trending upward over the past year. And finally, the economics of our customer base remain strong with a net retention rate of 106% over the past year. And as our customers increasingly adopt our more advanced product capabilities to support higher value stickier use cases, our underlying customer economics should only improve over time. Now I'll drill into spend a bit of time on what our revenue base looks like today. So as mentioned, the vast majority of our revenue is recurring, although we do expect the services component of our business to trend slightly upward over time once we move through some of the impacts of COVID-nineteen and as we continue to sell larger and more strategic deals to our customers. International markets now account for 28% of our revenue. That's up from about 25% a year ago, which has been driven primarily by continued strength in Japan. And over time, as we improve our EMEA performance and further tap into our large global opportunity, we expect that international can be a material growth driver for us. We have a very diverse customer base by industry as well, with no single industry contributing more than 15% of our revenue. We also don't have much exposure to the industries that have been most heavily impacted by COVID-nineteen, which collectively make up about 10% of our total revenue. We tend to see the most success in industries that are focused on security and compliance as well as secure external collaboration. So as such, our top three industries are financial services, professional services and healthcare and life sciences. Over the past year, we've also been seeing some strong momentum in the public sector and our recent announcement of FedRAMP High high certification should help us continue the momentum that we're seeing here. And finally, we're focused on serving large enterprises, but we serve a wide range of 2,000 employees and now accounts for about 55% of our revenue. 2,000 employees and now accounts for about 55 percent of our revenue. Our mid market segment covers customers with 500 to 2000 employees and our SMB and online sales segments serve customers with fewer than 500 employees and combined account for a little less than 30% of total revenue. So while we're not immune to macroeconomic factors, our highly diversified revenue base drives a resilient business model and has allowed us to mitigate the current pandemic's impact on our growth trajectory. Looking back at how our business has scaled since we went public, we've been steadily growing our revenue while achieving margin expansion. Last year was an important milestone for us as we delivered our 1st full year of non GAAP profitability. And this year, we've been able to accelerate those profitability improvements, now expecting to deliver operating margin well ahead of the guidance we issued entering this year. So this year, our fiscal 2021, we're on track to generate 11% to 12% of operating margin expansion year on year, landing at 12% to 13% for the full year. Our growth rate has been stabilizing. And as mentioned, we have strong visibility into future growth, which is captured in the RPO trends you're seeing here. RPO is a meaningful indicator of the underlying growth we're seeing in the business, although it is still a fairly seasonal metric given the higher volume of bookings and renewals that we tend to see in Q4. Total RPO is up 13% year on year, which is made up of about 10% growth in short term RPO and about 20% growth in long term RPO. And the latter has benefited from the positive trends that we've been seeing in average customer contract durations. As the average contract duration of deals that we signed over the past year is about 23 months, which is up year on year despite the environment we're in as our customers continue to be boxed as a critical component of their long term IT strategies. Turning to our total gross margin, we've been seeing a steady upward trend over the past year with software gross margin now over 75%. This improvement has allowed us to grow gross profit 15% year on year. And recently, our gross profit has been growing at a faster clip than revenue, which is a trend that we expect to continue in the coming years as we continue to expand gross margin. As we've now completed our data center migration project and grow into this expanded data center footprint, we're beginning to generate economies of scale. We're also benefiting from the public cloud negotiations that we completed at the tail end of last year. And the strong pricing trends that we're seeing have also contributed to this gross margin improvement, which we'll dive into now. So pricing power, as mentioned, has been a key driver of our gross margin improvement. Even as we're selling larger deals, which come with volume discounting, this has been more than offset by the pricing improvements that we're seeing, with most of that coming from the impact of increasing add on product traction. As a reminder, we tend to see some seasonality in the price per seat for deals in period due to the seasonality of our larger deals and volume discounting, particularly in Q4. Still, the overall pricing of new deals in each period has increased year on year in 8 of the past 9 quarters, growing by about 10% on average over the past year. And this dynamic has allowed us to steadily improve the average price per seat across our installed base, which is more than $100 per year across our business customers and is represented by that lower line. And now we'll dive into some of the trends that we're seeing related to our cloud content management strategy. Last year, we highlighted the importance of migrating more and more customers to use Box for more sophisticated stickier use cases, leveraging the product introductions we had made or about to make at the time. This year, and as Aaron talked about, we've solidified our product portfolio and our go to market strategies to support customers realizing the full vision of our CCM solution. We're very proud of the results we've demonstrated over the year and as our strategy has enabled us to steadily grow our enterprise customer base through strong product adoption trends. Aaron highlighted the land, adopt, expand framework that we've been using and how we think about growing and retaining our customer base. And I'll now highlight how this translates into our overall growth drivers and the core levers that we're focused on through our next phase of growth. Within our existing customer base, we have the opportunity to generate significant growth with 7 times seat growth potential looking at the opportunity even our existing customers versus those users who are paying us today. At the same time, we're well positioned to continue evolving how our customers use Box through the adoption of our recently expanded CCM product portfolio. And while our current focus is on growth through our existing customers and in more established markets, over time we'll be addressing a massive global opportunity. And across all of these growth opportunities, we'll continue to focus on improving sales productivity and our overall sales and marketing efficiency. As our product offering evolves to address increasingly valuable use cases, our largest customers are viewing Box as a more and more critical component of their IT strategies. And that's allowed us to capture more value from these customers, which is leading to larger deals. So we've been generating more of our business from enterprise customers over time. And our 100,000 plus customers now represent 60% of our total recurring revenue. And all of these customer categories that you're seeing here have grown consistently over each of the past 2 years. I'd highlight one of the trends driving this is that a few years ago, an SMB customer wouldn't have reached $100,000 in annual contract value with our normal pricing on corebox than what we had at the time. However, as we built out our product portfolio and are increasingly selling suites and platform into these customers, they can and often are doing just that. So our 6 figure SMB customers have tripled over the past couple of years and now account for about 10% of our total $100,000 plus customers. And these overall trends that we're seeing in large deals highlight the importance of our land, adopt, expand strategy as nearly half of our $84,000,000 plus customers grew to that size, not with a single or ever having a single $1,000,000 transaction, but rather with a series of consistent upsells over time. Customer expansion is the underlying driver engine driving growth across our entire customer base. As I mentioned earlier, we can grow our paying business seat count by 7x without signing up a single new customer and we're still only scratching the surface of our overall market opportunity that you're looking at here through digital workers. And that represents the core geographies that we serve today. So that includes North America, EMEA, Japan and Australia, where there are 45 times more digital workers than the paid business seats that we have currently. It excludes the markets that we're not in as well as education seats. So we've been seeing strong momentum in seat expansion across our enterprise customers, particularly this year as the importance of remote work has led to heightened pain points around file access and content security that Box is uniquely positioned to address. So in addition to the seat growth, we have a significant growth opportunity from the adoption of add on products. We went public 5.5 years ago as a single product company and since then are increasingly moving into more advanced use cases. So as a reminder, in terms of the impact of this, when customers purchase an add on product, we tend to see an increase in contract value in the 20% to 30% range, what they'd be paying versus what they'd be paying for core and a rough doubling in price per seat and contract value when you compare the price and values of customers adopting suites versus just the core. So as Aaron talked about, enhancing Relay and Shield has been a core focus of our product innovation over the past year. Our no code content workflow solution, Box Relay, automates everyday processes like digital asset reviews, work order approvals, regulatory reporting approvals, grant reviews and the like. We just announced custom workflow templates that process owners can now create and publish for their enterprise, simplifying rollout and standardizing business processes and using workflow best practices. And so that's something that should continue to drive the value and traction of Relay in the market. And as for Shield, earlier this year, we added both native malware capabilities and intelligent automated classification. And today, we announced additional administrative controls to further tune and improve security without impacting the end user experience as well as integrations with Microsoft Information Protection and IBM's QRadar security analytics solution. So these new products have seen strong early traction, especially Shield, which is the fastest growing add on product we've ever launched and was attached to a full 50% of our 100 ks plus deals last quarter. And all of these more recent introductions have seen strong more than 3x growth over the past year since they were introduced with the breadth of our portfolio being packaged into suites, which we launched about a year ago to deliver holistic solutions and simplify our overall go to market motions. So the traction that we're seeing in these newer products really highlights the progress we've made in helping our customers to leverage our full product capabilities. And that's now 60% of our revenue versus about 50% a year ago. And those add on products now directly contribute 22% of our recurring revenue, up from 19% a year ago. As you can see, we've seen the strongest growth in the segment of customers who have adopted 2 or more add on products, which now is about the same size as the revenue associated with customers who have only adopted a single add on product, which is a very different distribution than where we were a year ago. And now in terms of the new deals we've been selling, the average customer is purchasing 1.9 add on products, which was about 1.3 year ago. So increasingly, primarily driven through suites, but also just the new products that we have in the market, we've been seeing some really strong trends there. So we've been very successful in cross selling add on products to our core only customers over the past year as well, which will continue to be a huge focus area for us going forward. And this encouraging trend is particularly important for our ability to drive profitable growth as the data shows that the more add on products customers adopt, the better those customer economics are. So as you can see, increasing CCM product adoption has a material impact on our underlying customer economics from deal sizes to net retention to gross margin. We also tend to see much higher win rates in deal opportunities with add on products versus core only opportunities as we're that much more differentiated. And as a reminder, in many cases, growth in these add on categories comes directly from our core only customer base. So as we increasingly drive this conversion, the economics of each category may move around a bit. But still, if we're successful in continuing to drive this momentum, that mix shift will lead to a stronger overall financial profile, including higher average contract values, healthier expansion of retention rates and greater profitability. So these customer based dynamics, fueled by the continued momentum in our CCM strategy, will be the foundation for us to deliver profitable growth in the years to come. Now we'll dive into how we've been expanding our overall operating margins and the key areas we'll be focused on going forward to drive continued margin expansion and profitable growth. As we outlined going into this year, we set out to accelerate margin expansion through a focus on workforce expenses, gross margin improvements and overall cost discipline. We've been very pleased with how we've been performing in each of these areas. We've been able to efficiently scale our workforce expenses through a combination of leveraging lower cost regions and driving disciplined headcount growth. So this year, we expect to maintain roughly flat headcount as we reallocate resources and leverage the investments that we made in system automation. On the gross margin side, as you saw earlier, that trajectory has been improving over the past year, which has been supported by strong pricing trends. This year, we've executed against several key projects to improve our infrastructure utilization and the cost of delivering our service to customers by delivering different innovations in areas like storage, compression and density, file conversion and more efficient search. So entering this year, we also renegotiated key contracts to reduce our public cloud cost infrastructure. And finally, we've been taking a more rigorous ROI based approach across all areas of spending. That includes things such as rationalizing marketing programs and events, reducing outside consulting spend and streamlining T and E. And we're very proud of the results that we demonstrated across these categories and we're now committed to delivering an 11% to 12% improvement in non GAAP operating margin year on year resulting in 12% to 13% margins, which is a full 300 basis points higher than the expectations that we laid out entering this year. And of that improvement, that 300 basis points, a little less than half was driven by savings that were related to COVID-nineteen like T and E facility spend, certain in person events. However, even as the world returns to be a bit more normal, we don't expect spend in any of these areas to return to pre COVID levels. So the significant majority of the operating margin improvements we've shown this year will carry forward to future years. So this year, we've been able to drive leverage across all areas of the business with the greatest improvement in sales and marketing spend as a percentage of revenue. As for sales and marketing, we're on track to deliver 800 to 900 basis points in sales and marketing leverage this year, which is more than 400 basis points higher than the expectations we set for the year at Analyst Day a year ago. Over the past year, the way we've been able to do this is we've been reallocating resources from lower performing to higher performing regions, which has had a positive impact on our overall sales force productivity and allows us to deliver against our growth targets without increasing the total size of our sales force this year. This overall improvement in sales productivity has been driven primarily by the double digit improvement we've seen in our enterprise salesforce productivity as well as by the impact of our newer products and by simplifying our overall sales motions. And in terms of where we have been growing, the hires we've made are ramping nicely with solid improvements in the productivity, the bookings per AE of our ramping reps across all segments. So as possibly impact future overall sales productivity. And in addition to sales productivity, we're also generating increased marketing leverage by shifting our focus toward more efficient digital channels. And then finally, as we've discussed previously, sales to existing customers are significantly more efficient and profitable than sales to entirely new customers. So as we continue to drive growth from our install base and as our customer base continues to scale, that will drive additional leverage in our overall business model. So now zooming back out to our multiyear trajectory, the profitability improvement initiatives we've been discussing have enabled us to deliver accelerated operating margin and free cash flow margin improvements this year. So in addition to the double digit improvement that we talked about and expect to deliver in non GAAP operating margin, we're on track to deliver even stronger improvements in free cash flow margin this year expecting to generate an improvement of roughly 16% year on year. So most of that improvement is coming from the same components of our operating margin improvements. But in addition, as CapEx and capital lease purchases have normalized this year versus last year's elevated levels due to our data center migration project, that has further benefited our trajectory of free cash flow margin improvement and we're now at more kind of stable normalized levels. Although we do expect CapEx and capital leases combined to continue trending down as a percentage of revenue over time. So while we're pleased with the overall operating margin and free cash flow margin improvements we've been able to deliver this year, we're just getting started. Now I'll walk through how we'll deliver continued margin expansion as we drive profitable growth over the next 3 years. This year, we made significant improvement in the combination of revenue growth and free cash flow margin, which was a big focus area and commitment that we made at Analyst Day a year ago. So we continue to be on track and are committed to delivering 25% in this combined outcome despite the headwinds that COVID-nineteen has created on our revenue growth rate, particularly through its impact on smaller customer demand and payment and our professional services revenue. And as these normalize, that will only help support continued improvement in both these areas. Going forward, we expect to drive consistent improvement in this combined results, improving by about 500 basis points annually in revenue growth plus free cash flow margin over each of the next 3 years. And so while some of this dynamic is going to be impacted over the medium term by the timing and slope of the recovery related to COVID-nineteen. Even factoring in these dynamics and the uncertainties of the current environment, we're confident in our strategy and path to deliver 40 points of combined revenue growth plus free cash flow margin in FY 'twenty four, 40 percentage points. And on that path, we have multiple levers for continued operating margin expansion, which will allow us to double operating margins over the next 3 years. So many of these levers are continuing to execute and evolve in the areas that we've already been talking about and begun to execute on previously. Going left to right, starting with workforce strategy, we will continue to shift resources and headcount growth to our higher performing regions. Additionally, we're on track to open our 1st engineering center of excellence outside the U. S. Or the Bay Area in the back half of this year in Poland, which will contribute to our ability to scale our R and D investments more efficiently going forward. Will also continue to optimize our data center footprint and further leverage public cloud providers to drive hardware and software efficiencies. And we'll continue to optimize our overall infrastructure and cost to serve, which will be supported as we expand customer use cases through the sale of our CCM product portfolio. We'll also be taking a and continue to take a rigorous approach to expense management in areas like T and E, Facilities and Events and continue to leverage more automation and digital processes such as digital marketing to drive more efficient demand and overall kind of ways that we work with and support our customers. For the reasons that I highlighted earlier, we expect to drive further improvements in sales force productivity, particularly as our CCM product portfolio continues to gain traction in the market. And finally, and as a reminder, the strong expansion of renewals and those dynamics drive operating leverage by contributing higher margins than acquiring particularly as customers purchase our higher margin add on products. And as such, we expect the inherent business model leverage resulting from greater customer expansion and renewals to continue in the years to come. And as we execute against all of these areas and as we continue to build on the strong CCM momentum that we've been talking about, this results in our ability to drive significant improvements to our financial profile over the next several years. As discussed earlier, we're committed to delivering 40% in the combination of revenue growth plus free cash flow margin in FY 'twenty four. We're seeing our growth rate stabilize despite some of the short term impacts of COVID-nineteen. And as we get through this current environment, we believe we can improve our growth rate in the coming years to be growing in the low to mid teens 3 years from now in FY 'twenty four. At that time, we expect to deliver gross margin of roughly 75%. Note that this represents our total gross margin as over time we expect professional services revenue and its corresponding lower gross margin profile to become a somewhat larger part of our business. From an operating expenses point of view, we expect to drive leverage and a reduction in spend as a percentage of revenue across all areas of the business. And of the improvement between this year's guidance and our FY 'twenty four target, we expect to generate roughly half of that improvement through sales and marketing and the other half through the combination of R and D and G and A. And when you put that all together, it results in significantly higher operating margin in FY 'twenty four in the range of 23% to 27%, which represents a 10% to 15% improvement versus the margins that we expect to achieve this year. We have a consistent track record of improving our profitability and we're confident that we'll continue to do so in the coming years while delivering healthy growth. And as we execute against our market opportunity while improving our financial profile, we believe that we'll be able to create significant shareholder value. And again, as a recap, including what Aaron highlighted, we're going after a large market opportunity with a very differentiated best of breed product. We are building and this is all supported by a repeatable and scalable go to market engine and all of this contributes to our ability to drive profitable growth. So our large in sum, our large market opportunity combined with our CCM momentum and a strong underlying business model put us in a strong position to deliver healthy long term revenue growth and profitability improvements as we continue to build on our leadership position in the cloud content management market. And we're confident in delivering significant margin expansion as we continue to go after this market as we're the only cloud platform with the opportunity and ability to do this. And with that, let me turn it over to Alice to moderate our executive Q and A session. All right. We'll now take questions from our audience. You can submit your questions through the Q and A chat box or use the raise your hand button to ask your question live. If you raise your hand, I'll go ahead and call on you and just make sure you're not on mute. We'll take our first question from Rishi Jaluria of D. A. Davidson. All right. Hey, Aaron, Bill and Alice, thanks so much for doing this. Really appreciate you taking my questions. Just 2 from my end. First on the self-service business, I think you said it's about 9% of PCB. It feels like that's a potentially important driver to getting greater sales efficiency and generating warmer sales leads. Any plans to grow the self-service side of the business and any particular investments you can make to make that a more significant part of the business? And then the second question is on, when you're talking about the market opportunity, you talk about there being 7 times potential seat expansion within existing customers. Just want to get a sense, how are you quantifying that? Is that just based on existing seats in your customer base divided by total employees? Or are you doing a little bit more and kind of limiting that specifically to consider to be consider to be effectively a digital worker, so somebody who's using technology to do their job. So, for instance, we would maybe not classify certain parts of the federal government if they're in the field or in certain retail institutions that as the seat population we can go after. We actually have, in many cases, monetized those users, but we wanted to be a little bit more conservative on the seat opportunities. So that's Southern X is sort of seats that look like the seats we've already sold to, but now within our existing customer base as potential upside. On the digital front, we do I concur with you, it's a huge opportunity. We had some, I think, moderate investments coming into this year around digital. We knew we wanted to get better at a self serve engine, at a minimum just because customers want to buy that way. You don't always want to hop on a sales call when you just need to add 10 or 20 or 30 seats. You want to be able to get going in the product right away. So, there's a lot of enterprise value enterprise oriented value when you can have a great digital onboarding approach. Then when COVID hit, it became even more strategic for us to put more emphasis in this area because now you have customers all around our key markets that want to be able to instantly get onboarded, start using Box right away, be able to expand it. So, I think we're actually just getting started on the digital opportunity. It's already a nice recurring revenue stream that is very attractive financially, but it certainly can expand from here as we invest more in being able to sell the full suite online, be able to drive more upsell motion within the existing install base, some of the tactics that we don't actually even do today. So, we think we have some healthy upside in the digital space going forward that will drive greater efficiency in the sales motion. Great. Thank you. Thanks, Rishi. Our next question comes from Ittai Gedron. Ittai? Hi, Alice, can you hear me? Yep. I can hear you just fine. Okay, very good. Excellent. Thanks guys for hosting the event. Really appreciate it. The input is quite interesting. I guess I had a couple of questions. Firstly, from a big picture standpoint, you've talked about the 7x opportunity you have within your install base to increase your seats. Help me understand why is your solution is not one that's being viewed as one that can be that can have kind of enterprise wide adoption very quickly. I'm not talking about Zoom, which naturally, given the situation, had to be adopted very quickly. But you see other solutions like Slack get adopted very quickly. Why Box cannot is not in that same category? And then I have a follow-up. Yes. So, I think that depends on the use cases that we're going after. So, I think traditionally in the content management market, customers usually saw it for specific business processes. So a lot of times you might say, okay, if I'm a large technology player, I'm going to go really drive secure workflows in the R and D department. Or if I'm a major retailer, I have supply chain operations and field operations where they need content management. So I think in the history of ECM, it's largely been a line of business or department specific technology. I'd say we're the 1st company that's brought ECM to the masses in their organization, which is why we do have so many customers that adopt us enterprise wide. But to some extent, that requires some education of the customers. It's also required us to make sure we have a good licensing model that's attractive to help customers ramp up because they might not know the different the distribution of usage right away. So we want to make it easy for them to ramp into an enterprise wide model. So I think that we're getting closer to companies realizing that this needs to be a platform capability across the organization, but we have to make sure that that is well understood by our entire customer base. Some cases, that requires us to go back and sell to those customers again, making sure that the packaging is built in the right way. Obviously, suites and our add on product story helps with that. But I'd say it's on us to go change how the market thinks about the content management space as an enterprise wide solution. And I think we're going to be certainly working to do that pretty aggressively. Okay. And as I think about your financial targets all the way through fiscal '24, your revenue target at the time 12% to 16% is nice. But I guess when I put it in the context of the fact that you're already growing over 10%, clearly there's ASP increase that you're seeing from the uplift into suites and things like that. So can you tell me what's the implied seat expansion you have over the next 3, 4 years? And is there something a little bit more, how shall I put it, radical that you can take to accelerate seat adoption of your customers? Yes. So, great question. I think on our target growth rate, again, I think as we did last year, we want to be thoughtful about putting out long term reacceleration targets out there, especially ones that tied to the ultimate bottom line target. So, wanted to make sure that it was very clear that our plan is to hit 40% on free cash flow margin and growth rate and not have that depend on a massive kind of reacceleration change from where we're at today. That being said, our strategy is one that is very much oriented around how do we get customers to expand Box across our organization, really be able to drive greater and greater penetration of those add on products. So, in terms of kind of creative ways to do that, I think between our suites and our ELAs, which in many cases are actually converging for customers in the same conversation, that's going to be a major component of what we how we think about going to market going forward. I can imagine some incentive structure and compensation model evolution as we think about going forward. So, you know, now that we've got the product portfolio, much of the packaging worked out, although there's spice in areas we can even tune it further to make it more attractive to customers. I think as we head into the rest of this year and going into next year, we certainly are going to get more creative on how we go wider with those customers with our full suite of capabilities. But note that every single day, all day long, we think about how do we drive profitable growth at greater levels, and we are working backwards from the strategy that can go out and drive that. So, we want to make sure that we're simultaneously improving the profitability of the business, but ultimately working backwards from the size of this market and how much we want to grow to be able to go address it. Okay. Good luck, guys. Thanks. Our next question comes from Phil Winslow of Wells Fargo. Go ahead, Phil. Sorry, I was muted. Thanks for taking my question. Last year, you disclosed that cost of customer acquisition for a new AR had fallen to $1.60 per $1 new AR and then that was versus $1.65 prior year and $2 in the first half of twenty seventeen. Clearly, as you pointed out, productivity has improved over the past year. Can you give us an update on where that CAC ratio stands today versus the 1.6 dollars from last Analyst Day? And then when you think going forward, what are the levers you still have to pull to continue to improve that productivity over the next couple of years? Thanks. Sure, Phil. So we are on track to improve those ratios for a lot of the underlying trends we're talking about both from a sales force point of view and other areas of sales and marketing spend, we are generating efficiencies in terms of the cost to support the acquiring a new business. But given how our business and our go to market focus areas have evolved, we've been placing less emphasis on landing customers. And so focusing the trends and what we talk about around the trends that we're seeing in overall customer economics, sales productivity and sales and marketing efficiency, as especially with a different mix shift between new customers' expansion renewals and a different renewal motion, even comp model in some cases, there isn't really an apples to apples comparison for the way our business is structured and what we disclosed last year, but the overall trends have been positive and consistent with sales force productivity. In terms of the levers going forward, while we've been really pleased with the results we've seen in the enterprise business and that the areas that had been performing well even as we've kind of added resources by kind of funding them from areas that we communicate the value, the differentiation, the value of our add on kind of communicate the value, the differentiation, the value of our add on products, we do think that that and increasingly selling Box through suites as a pricing impact mechanism is a big driver of performance and we see a very direct connection between the reps who do that well and the overall productivity levels. And then similarly, and this kind of productivity and then tenure and kind of composition of Salesforce are also what related. But one of the trends that we're beginning to see is because we're seeing higher levels of success in the sales force that leads to stronger overall retention of the sales force and that drives more tenured reps, which are more productive on average. So some of it is a function of just what we're selling and how consistently we can sell that. Some of it is a function of just the kind of mechanics and composition of our sales force, but certainly ties back to a lot of the key growth drivers and kind of parts of the product and sales and marketing strategy that Aaron highlighted as well. And then just one follow-up for Aaron. One of the sort of follow ups of COVID-nineteen seems to be an accelerated shift cloud. How have your customer conversations changed when you think about sort of traditional ECM use cases? Are you seeing that as well in your business and what are customers saying now? Yes. So, I think in terms of if you think about the traditional ECM use case of I'm running some storage infrastructure, document management software, VPN technology, added data security technology. I might have to invest in 3, 4, 5 different systems just to be able to enable content management and the ability to collaborate around content in my enterprise. So, we think that just makes no sense as you move that information to a modern way of working. And if you think about the modern IT stack, you know, when you think HR systems, you think maybe Workday and Oracle or SAP in the cloud. When you think CRM systems, you think Salesforce and Microsoft Dynamics in the When you think about ITSM, you think about ServiceNow, in the cloud. So we don't believe that you're going to be thinking about document management and content management in an on prem environment in, you know, 1, 2 or 3 years from now. I think customers are really starting to recognize that. We've seen some surveys, from customers in the content management space that post COVID, some of the biggest problems they're running into, are employees being able to find the information they need to do their job, the ability to collaborate in a secure way with legacy solutions. So these are all going to catalyze more growth into the cloud, and we are the only multi tenant platform that has one source of truth for content that brings together work workflow security and collaboration with the the integration strategy. So as customers really, kind of do their homework and look at what type of platform is going to enable them to have a real system of record for the for content in the cloud, we believe that we're going to stand up very well against as customers look at that. So, I think this will be a catalyst to more migration from on prem systems to cloud environments. Great. Thanks, guys. Thanks, Phil. And our next question comes from Brian Peterson of Raymond James. Brian, go ahead. Asia is on mute. Hey, Brian, you might be on mute. Might be on mute. Hey, Brian, any chance you could talk a little bit louder? Can you guys hear think about at a high level the sales capacity assumption that kind of goes into that? Is it modest growth? Is it kind of double digit growth every year? Or is it just mostly based on productivity improvements? Yes. Yes. So I can hit that. I would say that is, those growth expectations are not based on having any sort of material impact from new products that aren't already in the market today. Similarly, it's an organic growth model. So nothing about acquisitions or anything. It's really just kind of building on the elements that we have in the business today. And as it relates to the overall sales force growth that supports that, we do expect after maintaining headcount flat in the sales force this year, to continue growing that again in future years, but really commensurate with the type of opportunity, the productivity trends that we're seeing in the business. And we do expect because of the dynamics we talked about and our kind of confidence in our ability to improve sales productivity over time, we think those that growth rate of the sales force, while it will be growth, expect that to be more metered than the revenue growth that we're generating. And so to continue to generate sales and marketing leverage over time over that period as well. Great. Thanks, Bill. Okay. Our next question comes from Erik Suppiger of JMP. Go ahead, Erik. Eric. There we go. Go ahead and unmute, Craig. There we go. So just on the enterprise wide licenses, can you talk a little bit about how much of that how much of your revenue is coming from those currently? Where you would like that to go? And at what point does it make sense for a customer to transition to an enterprise wide relationship? Yes. So maybe I'd start just noting that it's a pretty small component of the business today. So we are certainly seeing an uptick kind of elevated volume in those types of conversations with customers. Particularly, it's been really fueled by a lot of the demands and now increasingly relevance of a box and everything we do to support remote work across a much broader set of employees as there's a huge opportunity as we talked about in terms of seat expansion where on average it's 7x in our install base in terms of number of total applicable workers out of those who are paying business users today. And then maybe I'll turn it over to Aaron to kind of talk about where we're seeing that success and the strategy around it. Yes. I think it's certainly, it's a lot of this right now is coming from customers where they've had a healthy expansion rates. I showed the example of a major technology vendor that had a pretty wide step up in their deployment at the end of last year. And so when you think about a customer that has been driving kind of that healthy land and expand motion and ultimately is at a point now where they're saying, okay, we need to standardize on a platform across the enterprise. This is really where our ELA ELI strategy comes into play. So, we do want to try and encourage customers to be adopting Box enterprise wide as Ittai kind of brought up more and more. But we also know there's a huge opportunity of healthy customers that have been expanding to be able to get them into ELAs as a pretty consistent pattern. So we're seeing this just recent deals being in the defense industry, in financial services, in the technology industry. So customers really across sectors that want to be able to have a standard cloud based content management platform across the enterprise, we think this is a great play for and we're going to just we're working aggressively to try and make it simpler and simpler and simpler to buy bots in this kind of fashion. Is there a number of services where it becomes a logical transition? Honestly, it's usually more about how much usage they have across their organization and how rapidly that usage is increasing. We have some customers that only had a single kind of the core product, but we were able to expand them into the full suite and an ELA just because they were a healthy customer adopting us pretty broadly and we wanted to be able to get them into better security, better data governance, better workflow. But, I think there I think we'll start to see trigger points, as we look at the data more around, okay, 1 or 2 products and then it makes sense to get them into the full suite in an ELA. But the ELA is really around the customer having a recognition that, okay, I want to have one platform across my business that's available to all of my teams. And that's either driven by adoption that they're seeing or by our sales motion really kind of checking a few of the line of business boxes and getting the customer to see the full potential of the platform. Thank you. Great. And our next question comes from Josh Baer of Morgan Stanley. Great. One for Aaron. Back at Boxworks last year, I think you talked about win rates for core around 50% or maybe a little bit less. And for customers that had 1 or 2 add on products, win rates jumped to 2 thirds. I'm just wondering if there's any update there given the introduction of suites over the last year or maybe how anything's changed in this environment? Yes. I think I don't have the very updated data on the win rate on the 2 or more product side. But in general, I think our win rates have held in. If anything, As we have more add on products in the suites, it does increase our ability to win against customers. And in many cases, those customers are already more qualified in to the pipeline because they want to be able to use Box for workflow and data security. So almost by definition, they're not really comparing us at that point to a lot of competition given that those capabilities build on top of the core offering. So I think you're going to just see greater and greater velocity of us getting customers into those add on products, which, of course, will then have almost arbitrarily high win rates. Yes. And just to build on that, would echo that we have seen, seen really stability across all those different kind of categories of deals and the win rates that we've seen over the last year. And that is both kind of in aggregate as well as versus specific competitors. What I would say is that as you could imagine based on the trajectory and the kind of composition of our overall opportunities, we are seeing more and more of those opportunities involve 1 or more add on products. So that kind of mix shift is actually a tailwind to our total win rates. But in terms of the underlying dynamics, those have been strong and stable over the last year. Awesome. And then if I could ask one for Dylan. If you could double click on the digital self service engine, just what are some of the recent efforts there? How is that business trending, growing and how did the unit economics differ from the rest of the business? Yes. So I think about it as the biggest change is around the economic side to start there as really around those customer acquisition costs and really just the efficiency to kind of work with our customers. In some cases, and when we say digital, we've made a pretty broad set of changes where it's not just kind of impacting the economics of the customer or the acquisition funnel, but even just all the ways that we more efficiently educate throughout the business, hosting webinars that might have been through kind of lengthier and less well attended in person events, things like that. So it really expands the reach and the efficiency to get our market our message out to customers. And we are seeing from an acquisition point of view, the biggest impact on our smallest customers who will often who will never speak to a sales rep and just do everything online, which has been more efficient. But that's actually an impact across the way that we serve and support our customers across the entire customer base. Great. Thanks. All right. Let's go into some of the questions in our Q and A chat. First question, can you rank the main drivers for growth reacceleration starting year? Yes. So, on the timeframe question, that's a little bit unknown just because again there's a the broader macro environment is driving different types of trends between the SMB business, our professional services revenue line. So, without sort of kind of getting specific on the timeline, you know, I think the things that will drive reaccelerated growth from here are really, again, the continued momentum that we're seeing on our add on products, on being able to pull together our capabilities in a single package with suites as well as additional pricing and packaging optimization and then being able to go wider in customers. And so what we're what we're seeing and every single customer call I'm on right now and we've had a number at Boxworks, but every single day we're talking to, you know, plenty of customers across the business. Customers are looking for Box to become more of a system of record for their content. How do we how do companies have a single hub for content and collaboration that can then integrate into the other applications they're using? So whether it's a sales team that wants to be able to enable everybody on the right sales assets, a marketing team that wants digital asset management, an HR team that needs to distribute out policies, an R and D team that needs to be able to work across their supply chain, that ability to have one single hub for secure content management and collaboration connected to Microsoft Teams or WebEx or Zoom or Slack or Salesforce. This is really what's going to continue to drive growth. So, I think I think we we're seeing, again, the kind of death knell for legacy document management systems, and there's going to be a propelled push toward cloud environments and cloud solutions. And our job is to win, you know, a pretty high rate of those customers that are moving from on prem to the cloud as well as expand within our existing installed base. All right. Our next question is, you guys have done a good job reducing non GAAP expenses. Do you plan to reduce stock compensation, stock based compensation? We do. And so as you've seen, the expectations we've set for this year, even relative to what we've laid out entering the year, have improved from a stock based compensation point of view and overall GAAP EPS expectations is where that shows up even above and beyond the improvements that we've outlined from a non GAAP point of view. That's based on as we have more visibility and as we've managed in the business has what's caused us to bring that forecast down even in the short term. And then over time, we do expect stock based comp to decrease as a percentage of revenue as we manage our overall dilution. And a couple of the primary drivers of that are, first of all, our overall headcount growth that we've been metering. But increasingly, as we hire in lower cost locations, the sort of market equity and equity demands for a lot of the employees that we'll be hiring, we expect that to help drive an improvement here as well based on kind of the composition of our employee base, particularly between areas like the Bay Area and areas like Poland where you see a pretty stark difference. Thanks, Dylan. All right. Well, that concludes the Q and A portion of our events. We really appreciate you taking the time to spend with us today for our investor breakout session as well as Boxworks Digital. If you have any follow-up questions, please feel free to contact the Investor Relations team at irbox.com. Have a great day. Awesome. Yes, I just want to chime in and say thanks a lot for everybody taking the time today. And anything that we can help follow-up on, please let us know. And hopefully, you'll have a chance to tune into some of the, again, sessions that got recorded today around our product strategies, some of the keynotes, and we're obviously looking forward continue to transform how companies work in the cloud by delivering a completely new way to help them manage their content. So, looking forward to chatting soon. Take care. Thanks, everyone.

• Slides