Earnings Call: Q2 2022

Aug 25, 2021

Good day and thank you for standing by and welcome to the Box Inc. 2nd Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' remarks, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Cynthia Hiponia. Please go ahead. Good afternoon, and welcome to Bakkt's 2nd Quarter Fiscal 2022 Earnings Conference Call. I'm Cynthia Hiponia, Vice President, Investor Relations. On the call today, we have Aaron Levie, our CEO and Dylan Smith, our CFO. Following our prepared remarks, we will take your questions. Today's call is being webcast and will be available for replay on our Investor Relations website at box. Com/investors. Our webcast will be audio only. However, supplemental slides are now available for download from our website. We also post the highlights of today's call on Twitter at the handle boxincir. On this call, we'll be making forward looking statements, including our Q3 fiscal year 'twenty two financial guidance and our expectations regarding our financial performance For fiscal 2022 and future periods, including our free cash flow, gross margins, operating margins, operating leverage, Future profitability, unrecognized revenue, remaining performance obligations and billings and Our expectations regarding the size of our market opportunity, our planned investments and growth strategies, our ability to achieve our long term revenue and other The impact of the COVID-nineteen pandemic on our business and operating results, the KKR led investment in Box and any potential repurchase of our common stock. These statements reflect our best judgment based on factors currently known to us and actual events or results may differ materially. Please refer to our earnings press release filed today and the risk factors and documents we filed with the Securities and Exchange Commission, including our most recent quarterly report on Form 10 Q for information on risks and uncertainties that may cause actual results to differ materially from statements made on this earnings call. These forward looking statements are being made as of today, August 25, 2021, and we disclaim any obligation to update or revise them should they change or cease to be up to date. In addition, during today's call, we will discuss non GAAP financial measures. These non GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from our GAAP results. You can find disclosures regarding these non GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and in our related PowerPoint presentation, which can be found on the Investor Relations page of our website. Unless otherwise indicated, All reference to financial measures are on a non GAAP basis. Lastly, while we recognize there's been news around our upcoming Annual Meeting on September 9, The purpose of today's call is to discuss our financial results. We ask that during the Q and A portion of this call, you keep your questions focused on our performance. With that, let me hand the call over to Aaron. Thanks, Cynthia, and thank you all for joining the call today. We achieved strong second quarter results across all metrics, marking our 5th consecutive quarter of achieving both revenue and non GAAP EPS above our guidance. We delivered 2nd quarter revenue growth 12% year over year, a 2nd consecutive quarter of accelerating revenue growth, billings growth of 13% and RPO growth of 27%. From our business performance and building momentum, it's clear that enterprises are increasingly making strategic Long term decisions on how to support a remote workforce and digital processes, while still maintaining a high level of security and compliance policies. As a result, more customers are turning to the Box Content Cloud to deliver secure content management and collaboration built for this new way of working. Our strong momentum is best illustrated by our customer deal metrics in the 2nd quarter. Our net retention rate was 106%, up from 103% in the prior quarter. We had 74 new deals over $100,000 up 16% year over year. And we had a 73% attach rate of Suite on deals over $100,000 in the quarter, up from 49% in the prior quarter and up from 31% in Q2 fiscal 2021. We view these strong customer metrics as evidence that we are on the right product strategy, one that is well aligned with the 3 major changes happening around the future of work in the enterprise. First, hybrid work is going to be a necessity going forward. 2nd, digital transformation is driving significant change across all industries. And 3rd, cybersecurity and privacy threats are increasing at a growing rate as we've seen with recent ransomware attacks. These trends have major implications for how companies work with their content. Content is at the heart of how leading life sciences firms discover, Develop and deliver new drugs and treatment, how banks collaborate with and onboard new clients or close deals, and how consumer product organizations ideate on, manufacture and scale new products, whether it's a CAD design, a sales presentation, Marketing asset, research study, legal contract or financial data content is our customer's business. Today, enterprises have to purchase and integrate a mix of solutions from disparate vendors to solve the entire content management lifecycle. This leads to broken processes for users, security risks due to the gaps between tools, fragmented data and increased cost Our vision for the Box Content Cloud is to integrate and power the complete content lifecycle From the moment content is created through the entire content workflow, by leveraging our product leadership and content management, Our content cloud will continue to extend into key elements of this lifecycle, including e signature, content publishing, Critical to our success is our ability to execute on our product roadmap, which expands our total addressable market and adds value to our core platform with new product innovation. This is why we were pleased to deliver on our product roadmap with the launch of BoxSign to select customers in late July, capitalizing on the trend of more transactions moving from paper based manual workflows to the cloud, while also addressing an incremental multi $1,000,000,000 market. BoxDyne was developed through the acquisition of SignRequest, a leading cloud based electronic signature company and a good example of our disciplined approach to M and A. Our decision to acquire this particular technology versus developing internally was driven by time to market, With e signature being the number one requested feature from customers last year. Initial response from customers has been very positive And we are rolling out BoxSci to all business and enterprise customers throughout this fall with a significant roadmap of innovation ahead. Also, Over the quarter, we made meaningful updates to our governance functionality to help support customers' legal hold and document retention needs, as well as new features within Box Shield to protect the flow of content with advanced machine learning based security features. Our security, compliance, data governance and privacy capabilities remain one of the most critical reasons customers choose the Box Content Cloud And our innovation here is only accelerating. In addition to these and many other product updates in the quarter, we continue to integrate deeply across the SaaS landscape. A key part of our Content Cloud value proposition is interoperability and strong partnerships with leading technology companies. This is critical to our success at scale. Building on the great work we've done with so many amazing partners, including Slack and Microsoft, In the Q2, we announced a new integration with ServiceNow's legal service delivery application to modernize legal operations, which benefits customers by bringing together ServiceNow's advanced workflow expertise to minimize manual processing while ensuring confidential legal content is secured on Box's Content Cloud. And we also announced new and deepened integrations with Box for Cisco WebEx to make it easier for customers to work securely and effectively in the cloud. And we're just getting started. To address our $50,000,000,000 as the leading independent vendor for cloud content management. Of course, evolving our product strategy to meet today's enterprise remote and Hybrid workforce needs and strengthening our partnerships with leading technology companies are only part of our strategy to drive growth. We have also been methodically enhancing our land and expand go to market model to deliver our full platform to our customers. To accelerate growth, over the past couple of years, we've been actively implementing a number of strategic go to market initiatives, including optimizing pricing and packaging, improving sales segmentation and territory planning, driving efficient marketing programs and pipeline generation, Increasing sales enablement and doubling down our focus on key verticals such as life sciences and financial services and the federal government And the success of our go to market initiatives and the growing demand for our more advanced capabilities drove our strong suites adoption in the Q2. This is why we've been working aggressively to sell the full Box platform through our suites offering to bring all that Box has to offer to our customers. We know that when a customer adopts our multi product offerings, we see greater total account value, In late July, we also announced a new simplified product addition for our enterprise customers called Enterprise Plus, which includes Shield, Governance, Relay, Platform, Box Sign, the ability for large file uploads and enhanced support and consulting credits. You can see the success of our go to market efforts most clearly when looking at our Q2 customer expansion. For instance, 1 of the largest banks in the world purchased a 7 figure deal with multiple products, including Keysafe, Governance, Relay, Shield and Platform to support new use cases for Box, including claims processing and loan origination in a more secure virtual environment. The bank has also standardized on Box for internal and external collaboration. An innovative biopharmaceutical company did a 6 figure expansion with FOX to support its growing workforce following multiple acquisitions to help power its mission to transform the way that drugs are manufactured in the U. S. With Fox, the company's workforce is able to improve collaboration, security and GxP compliance, providing them with a scalable and that has been a Box customer since 2017, expanded its use of Box with a 6 figure ELA and the purchase of Enterprise Plus. This will enable them to have a proactive approach to internal threat detection on content, be more prescriptive with security controls around content and automate more than a dozen critical business workflows. These deals showcase the simplicity and power of our business model. We are focused on that drive up customer value and retention. Over the past year, we have been executing on our strategy to reaccelerate growth, while also driving continued operating margin improvements. And our results in the 2nd quarter demonstrate that our strategy is working. As a result, we have raised our guidance for the full fiscal year 2022 and are reiterating our long term targets of 12 percent to 16% revenue growth and 23% to 27% non GAAP operating margin in FY 2024. Our strong second quarter results and our confidence in our outlook for this fiscal year and beyond are the direct result of the leadership of our Board and the hard work and execution we've been driving as a company. I could not be prouder of the team at Box. And while we still have so much we want to accomplish, I am confident that we have the right team and leadership to execute on our strategy and targets going forward, as well as a world class Board of Directors that is focused on and committed to driving enhanced value for shareholders. With that, I'll turn it over to Dylan. Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. As Aaron mentioned, we are proud to have delivered strong top and bottom line results in Q2. We drove an acceleration across key metrics: Revenue growth, net retention and operating profit, clearly demonstrating strong business momentum as we build on our Content Cloud vision. Revenue of $214,000,000 was up 12% year over year, an acceleration from our Q1 revenue growth of 11% and above the high end of our guidance. Our content cloud offerings are increasingly resonating with our customers as shown by the strong suites traction and net retention rate we achieved in Q2. As our customers are increasingly adopting products With more advanced capabilities, 61 percent of our revenue is now attributable to customers who have purchased at least one additional product, up from 56% a year ago. In Q2, we closed 74 deals worth more than $100,000 up 16% year over year. A record 73% of these 6 figure deals were sold as a suite, up from 49% in Q1 and from 31% in the year ago period. Suites have enabled us to streamline our sales process and drive greater adoption of multiproduct solutions resulting in customers who are larger, stickier and have a greater propensity to expand over time. We couldn't be more encouraged by our traction here. We ended Q2 with remaining performance obligations or RPO of $922,000,000 up 27% year over year, an acceleration from the prior Q2's RPO growth is comprised of 16% deferred revenue growth and 37% backlog growth, demonstrating Box's stickiness As we continue to sign longer term agreements to support our customers' content strategies, we expect to recognize more than 60% of our RPO over the next 12 months. Q2 billings of $213,000,000 were up 13% year over year and well ahead of our previous expectations to deliver a growth rate in the mid single digit range. This billings result reflects the strong sales that we saw in enterprise and SMB with both teams generating double digit year over year sales productivity improvements. Our net retention rate at the end of Q2 was 106%, up 300 basis points from 103% in Q1. This result was driven by strength in customer expansion and a stable annualized full churn rate of 5%. Based on the strong momentum we're seeing in customer expansion and retention, we expect to deliver additional improvements in our net retention rate over the course of this fiscal year. Turning to margins. Gross margin came in at 74.5%, up 100 basis points from 73.5 percent a year ago. Q2 gross profit of $160,000,000 was up 13% year over year, exceeding our revenue growth rate. We continue to benefit from both our ongoing shift to cloud data centers and the hardware and software We are generating in the infrastructure we manage. Our gross margin expectations for the full year of FY 'twenty two continue to be approximately 74%. Our ongoing efforts to improve profitability are paying off as we continue to unlock leverage in our operating model. Q2 operating income increased 47 year over year to $44,000,000 which in turn drove a 500 basis point improvement in Q2 operating margin to 20.6%. We continue to deliver profitable growth and disciplined expense management. This year, we've made significant progress And building out our engineering center of excellence in Poland, which will help us drive additional operating leverage and efficiencies over time as we transition certain engineering functions away from higher cost California locations. This resulted in our Delivering $0.21 of diluted non GAAP EPS in Q2, above the high end of our guidance and up from $0.18 a year ago. I'll now turn to our cash flow and balance sheet. In Q2, we delivered cash flow from operations of 45,000,000 up 39% from the year ago period. We also generated free cash flow of $30,000,000 a year over year improvement of 124%. Capital lease payments, which we include in our free cash flow calculation, were $13,000,000 down from $14,000,000 in Q2 of last year. For the full year of FY 'twenty two, we continue to expect CapEx and capital lease payments combined to be roughly 7% of revenue. As a result, we ended the quarter with $779,000,000 in cash, cash equivalents and restricted cash. We completed our modified Dutch auction tender offer at the end of June for an aggregate cost of approximately 238,000,000 and our Board subsequently authorized a $260,000,000 share repurchase program. As of August 24, 2021, we have repurchased 2,900,000 shares of Class A common stock at a weighted average price of $23.89 for a total of $70,000,000 Combined with the modified Dutch option tender, We have repurchased a total of 12,200,000 shares for a total of 308,000,000. With that, I would like to turn to our guidance for Q3 and fiscal 2022. As we announced a few weeks ago, Based on our strong Q2 results and our continued business momentum, we raised our full year revenue, operating margin and EPS guidance. Note that our share count and EPS expectations factor in only the shares that we have already repurchased to date. While we expect to opportunistically purchase additional shares through the remainder of the year under our ongoing share repurchase program, the amount Q3 or FY 'twenty two outlook. For the Q3 of fiscal 2022, We anticipate revenue of $218,000,000 to $219,000,000 representing 12% year over year growth and a 3rd consecutive quarter of revenue growth acceleration at the high end of this range. We expect our non GAAP operating margin to We expect our non GAAP EPS to be in the range of $0.20 to $0.21 and GAAP EPS to be in the range of negative $0.09 to 0 point 0 $8 on approximately 162,000,000 and 154,000,000 shares respectively. We expect our Q3 billings growth rate to be roughly in line For the full fiscal year ending January 31, 2022, We have raised our full year revenue guidance and we expect FY 'twenty two revenue to be in the range of $856,000,000 to 860,000,000 up 11% year over year. This is an increase from last quarter's guidance of 845,000,000 to 853,000,000 and represents an acceleration from last year's revenue growth. We expect our non GAAP operating margin to be approximately 19.5%, representing a 4 10 basis point improvement from last year's result of 15.4% and Sizable increase over our previous guidance of 18% to 18.5%. Due to our strong top and bottom line momentum, We now expect our FY 'twenty two non GAAP EPS to be in the range of $0.79 to 0 $0.81 on approximately 1 1,000,000 diluted shares. Our GAAP EPS is expected to be in the range of negative $0.34 to $0.32 on approximately 158,000,000 shares. We continue to expect our billings growth rate to be above our revenue growth rate for the full year of FY 2022 and for RPO growth to outpace both revenue and billings growth for the full year of FY 2022. We will provide further details into our Q4 expectations on our Q3 earnings call. Finally, Our FY 'twenty two revenue growth rate combined with FY 'twenty two free cash flow margin is now expected to be at least 32%, an increase over our previous guidance of at least 30%. Box today is not the box of 2019. Our strong Q2 performance is the result of the business transformation we began 2 years ago. This year, we're delivering both Revenue acceleration and increased operating leverage for our shareholders proving that our Content Cloud platform is resonating with customers. We are well on our way to delivering against our previously stated target of 12% to 16% revenue growth and 23% to 27% operating margin in FY 2024 2 years from now. In FY 2024, We're also committed to delivering revenue growth plus free cash flow margin of 40%. Before we conclude, I'll hand it back to Aaron for a few closing remarks. Thanks, Dylan. Before we open it up to questions, we wanted to share that on October 6, we will be hosting tens of thousands of attendees at Boxworks, which will be an all digital event for the 2nd year in a row. This year will be another incredible event where we'll share more on our vision for the Content Cloud and will showcase major product advancements. Attendees will also be hearing from an outstanding slate of speakers, including the CEOs of Okta, Slack and Zoom, as well as IT leaders from enterprises like Lionsgate, State Street, USAA and World Fuel services among many others. Q2 was a strong quarter, not only in terms of achieving quarterly revenue Non GAAP operating results that were above our original guidance, but also in our metrics that showed the power of our Content Cloud platform. Net retention rate, billings and RPO growth are all leading indicators that show the success of our strategy to not only retain customers, but expand our solutions within our existing customer base to drive revenue growth and operating margin improvements and ultimately shareholder value. Dylan and I would be happy to take Operator? Thank you. We have our first question coming from the line of Brian Peterson with Raymond James. Your line is open. Hi, everyone, and thanks for taking the question. So I wanted to hit on the sales strength with large deals this quarter. Aaron or Dylan, could you maybe unpack that a little bit? And I'd be curious, How did that pipeline look for the back of the year? Because obviously the execution has been strong, but what are you seeing in terms of pipeline generation? And how are those customer conversations maybe changed a little bit with the Suite's offering. Yes. Thanks, Brian. This is Aaron. We were certainly very happy about the Q2 and overall the first half When we look at our big deal metrics and our suites adoption that we've seen and as we look forward and as I think you can tell Evidenced in the revenue guide up, we're also feeling really confident about the back half of the year and the momentum that we're See on suite expansion, the large deals that we're now seeing in the pipeline. And even within the large deals, the 100 ks deals in Q2. We also saw a very healthy number and an increase on the $500,000 plus deals as well. So just nice set of Trends within the customer base right now that we're seeing and overall customers are fully expanding into our multi product plans and we're going to keep doubling down on that momentum. Got it. And that's a good segue into my next question. Just how are you guys thinking about incremental go to market investments going forward? I know Sales productivity has been in focus. It looks like that's ramping up. Just curious how we're thinking about headcount investment going forward? Thanks, guys. Yes, I think the message that we had in the past couple of earnings calls, I would say, is consistent. We're incrementally investing in go to market Right now, and we certainly saw that in Q2 over Q1. And I think the key is that we're going to make investments into the highest Productivity regions, the highest productivity segments, the areas where we're seeing increasing momentum. But in Q2, I think we saw that in a number of areas around the world and across segments. So we're really happy about the results and we're going to incrementally invest Certainly consistent with our operating margin targets that we've called out, but we want to make sure that we're doubling down in the areas of growth right now that we're seeing. Thank you. We have our next question Then coming from the line of Steve Enders with KeyBanc Capital Markets. Your line is open. Okay, great. Thanks for taking my question. I get a better sense for what you are seeing out there on the macro side, impressive growth with RPO of 27% and bookings up 39% there, but I guess what would you kind of attribute the strength to in the quarter on that front? Do you think it's more The macro driven and the markets coming towards you? Or is this a proportion of better sales productivity, better execution on your front? Yes. Thanks, Steve. I think it's certainly been many quarters of work to get here. And we also are Absolutely seeing very favorable megatrends within our customer base of major moves to the cloud, Massive push toward remote and hybrid work, significant issues around cybersecurity challenges and then broad digital transformation tailwinds. And so when you add up those 3 or 4 mega tailwinds in our market specifically, and then having the right product that we're building out with the right message around Content cloud and then the right team that's able to deliver that product, I think all we're just seeing a confluence of events that are certainly contributing to these positive results. On the macro front, we have seen and I think we've seen this across our peer group and I'm sure all of you have seen it as well. The macro environment has certainly improved Marketly in the past year from a year ago, customers were worried about the shutdowns that they were doing, the layoffs that they had to enact, And that was causing a decrease in IT spending in some sectors of the IT environment. And a year later with Certainly a strong macro environment, but more importantly, very strong tailwinds in digital transformation and remote work. We are absolutely capitalizing on that with again the right team and the right product. And then when you get one level even more specific, If you look at our multiproduct plans, this is again, this has been a couple of years of that finally really coming together nicely. Box Shield is performing incredibly well. Box Relay is helping us advance our workflow story, having an open platform that customers can build on and integrate with Many of our largest deals in the quarter on both our $500,000 plus deals and our 7 figure deals We're customers that were buying into the entire suite of our technology, building custom applications, integrating us across their software landscape and fundamentally driving new digital experiences for their employees and their customers and partners. So I think we are we're benefiting From again the right platform and having this content cloud where the market is heading toward. And just to build on that a bit, this is Dylan, because you asked about Sales productivity is, as we've shared, our strategy has really been to focus our go to market and sales, in particular, investments in higher performing Regions and geographies, that strategy is definitely paying off and is the approach that we'll continue to take going forward. So for both enterprise and SMB, In Q1 and Q2, we saw a strong increase in the percentage of AEs achieving quota as well as a strong year on year improvement in sales force productivity. So we have been, as Aaron mentioned, incrementally been adding to that sales force and remain on track to grow the size of that sales force In the low teens as a percentage this year. Okay, perfect. Great to hear. And just on BoxEye, I know it's only been for about a month now, but What have you seen in terms of adoption or interest within that product so far? Yes. The interest has Absolutely been very strong and overwhelming. We are in the midst of rolling the product out to our customers throughout this fall. The Customers that we're getting it out to are starting to adopt it. I was on a call with a Fortune 500 customer yesterday and this was The main topic of conversation was being able to roll out BoxSci into all of their end users and also through the API. So we're seeing a lot of great use cases emerge. It's getting us into new conversations. It's also helping drive further retention and renewals of customers because Customers are getting a fuller suite of functionality in the same platform. And when you look at the categories that are adjacent to content sharing and collaboration, whether it's Advanced data security, workflow automation, e signature, content publishing, content analytics, you can see multiple categories that our Lifecycle in a single architecture and that message is resonating very well right now with customers. We're becoming a much more, I think, strategic vendor for them And we're having much more strategic conversations because of that. Okay, great to hear. Thanks for taking my question. We have our next question coming from the line of Matthew Kos with JPMorgan. Your line is open. Hi, good afternoon. Thanks for taking my question. Dylan, on the sales productivity, I think you mentioned last This quarter you expected the improvement in productivity to ramp at a more measured pace. And I just want to dig into this to see, Did sales productivity truly exceed your expectations this quarter? And if so, what happened that you maybe changed Versus your expectations last quarter? Sure. So last year, as a reminder, we improved overall sales force productivity by 13% Year over year and that was primarily driven by enterprise because of some of the challenges we saw with COVID in the SMB segment In the middle part of the year, in the first half of this year, we've seen even stronger growth in both enterprise And SMB, so that has outperformed our expectations. And I think as Aaron had talked about, we're really seeing the traction of our newer products boosting that performance As well as a lot of the regions that we've been investing in are outperforming as well, and that's what gives us the confidence as we look at the business On a region by region, geography by geography basis, in continuing to grow the sales force in most parts of the business, Certainly, where the productivity trends have been strong and where we are seeing the greatest momentum in suites and large deals. So as mentioned, we do have more expectations for the rate of sales force productivity improvements going forward, but we do expect to continue improving that metric in both enterprise and SMB, even as we grow the size of our sales force. Got it. Okay. And then can you share how many of your reps Are ramped currently maybe versus last quarter or this time last year? Well, we don't break out the specific numbers, I will say that we entered this year and have a higher percentage of reps who are ramped versus the same time a year ago, especially as in those higher performing regions, we tend to see stronger sales force retention. Okay. And then last one for me. Can you help parse the demand that you're seeing now? How much of the demand can you attribute to maybe Pent up demand or business that might have normally closed last year or in a more normal environment versus Anything where you're seeing a secular surge that might suggest something is truly changing, or maybe, Aaron, it's as simple as what you alluded to earlier, sort of the multiyear effort behind As what you alluded to earlier, sort of the multiyear effort behind the product strategy is really taking hold. Just trying to figure out what's Maybe pent up versus what's secularly different? Sure. Thanks, Matt. Yes, I Certainly anecdotally, even given my dozens of CIO interactions in just the past month or so, 100 in the first half of the year, I think we're seeing sustaining trends across the business. When I look at the sectors that are buying and expanding financial services, life Sciences, healthcare, the technology sector, professional services, federal government, and the trends are remarkably consistent Across the CIO conversations, every single CIO, whether you're the CIO of a 500 person company or a 500,000 person company, You're trying to figure out what is the future of your workforce and what's your future of your workplace. You know that you're not going to have any analog processes going forward. That you're not going to have any on premises infrastructure for the most part. I mean, there's certainly going to be some lag to that. But for the most part, you're moving to the cloud. That you're dealing with massive cybersecurity and ransomware and data privacy challenges. And so as you're thinking about this modern architecture, you have major vendors that you have to make sure work together. You've got A Microsoft stack, you've got a Google stack, you have a Salesforce stack, you have a Slack stack or a ServiceNow stack. And fundamentally, you need a platform that And when I look at the trends that we're seeing within our customer base, these are long term architectural Our architecturally driven trends that we believe will sustain and we're just seeing that tailwind pick up and that's why Again, we are really focused on driving this continued performance. Thank you, We have our next question coming from the line of Chad Bennett with Craig Hallum Capital. Your line is open. Great. Thanks for taking my questions. So if we look at RPO, Non current RPO has grown significantly above from a growth rate perspective current PO for I think on the order of 6 quarters now. And my guess is in this quarter it was Significant in terms of delta between the 2. You guys have talked about from a Strategic selling standpoint, moving to suites and getting the sales force comfortable with that and kind of making sure the Kind of repeatability of that sale improves and it certainly looks like it did this quarter. I guess, can you give us an update on how that impacts contract duration? Obviously, you're signing more multiyear deals, Which show up in that longer term RPO number. And since the attach rates went up so much this quarter, it'd be good to get some Perspective on where they are now versus a year ago? Sure. So as you see, we did Generate improvements in our in all components of what contributes to RPO growth, both on a year on year and quarter over quarter basis. But to your point, a lot of that was really due to the outsized backlog growth, which was driven by the large multiyear contracts and the higher volume of those We're seeing, especially as customers are increasingly signing those longer term contracts. On average, we have seen, to your point, that that's led contract durations to improve by a little more than a month over the past year because we do see longer contracts, as you'd expect, for our customers who are adopting More sophisticated solutions and our add on products. And so as we see more of these customers adopt suites and move into that category, That is one of the big things that's driving that mix shift, longer durations and then contributing to the backlog growth as well as overall RPO growth. And that increase or impact of a month, Dylan, is there a rough Are we at kind of 1.2, 1.4 just in terms of duration these days? Just for some perspective. Yes. So it's a little more than kind of year and a half on average for kind of total contract duration or average contract duration. Again, those suites and core plus customers tend to be on multiyear deals. And so while we also do see some variability quarter to quarter In those in our RPO growth, what this is also being driven on it by and Aaron hit this is there are some customers who are Early renewing their contracts, resetting those for longer durations once they really buy into that broader suite strategy. And it's really a function of Bigger customers were betting on us for the long term. Okay. And then just in terms of When you speak of acceleration in the business and in particular revenue growth, Obviously, we want to be conservative in guide and expectations going forward. But I mean the secondary metrics have looked really good relative to Real time revenue growth, let's just say the last two quarters, and the guide forecasts kind of roughly the same type of growth rate you've seen This quarter and last quarter in the second half. Is there anything that I know last year, I think this time we're Talking about maybe professional services being a headwind and SMB being a headwind. Is there anything in your guide that That's a headwind to the revenue growth rate that we might not be seeing? Thanks. Yes. So your point as revenue growth The prior 12 months of business performance, as the momentum that we're now seeing on our business flows through to revenue, we do expect to see a continued upward trend over So ending the year as implied in our guidance for Q3 and the full year at a higher growth rate than either our Q1 or Q2 Actuals or Q3 guidance, and that's really what gives us the confidence in improving our growth rate over time. On the headwinds, we are continuing to see both from a revenue point of view because it's trailing 12 months, Some of the impacts of the middle of the year in COVID, at least from a near term point of view going forward. And then we do even now I'll continue to see some pressure on our professional services business. So that continues to be a slight headwind to the overall revenue growth. Great. Thanks for taking my questions. Thank you. The call has now ended. I will now turn the call back Over to Cynthia for any closing remarks. Great. Thank you everyone for joining us this afternoon and we look forward to updating you again on our earnings This concludes today's conference call. Thank you for participating. You may now disconnect.