Hello, thank you for standing by and welcome to the Box, Inc., First Quarter Fiscal 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the conference over to Cynthia Hiponia, Vice President, Investor Relations. You may begin.

Good afternoon and welcome to Box's First Quarter Fiscal 2025 Earnings Conference Call. I'm Cynthia Hiponia, Vice President, Investor Relations. On the call today, we have Aaron Levie, Box's Co-Founder and CEO; and Dylan Smith, Box's Co-Founder and CFO. Following our prepared remarks, we will take your questions. Today's call is being webcast and will also be available for replay on our Investor Relations website. Our webcast will be audio-only. However, supplemental slides are now available for download from our website. We'll also post the highlights of today's call on X platform at the handle @BoxIncIR. On this call, we will be making forward-looking statements, including our second quarter and full year 2025 financial guidance and our expectations regarding our financial performance for fiscal 2025 and future periods, including our free cash flow, gross margins, operating margins, operating leverage, future profitability, net retention rates, remaining performance obligations, revenue and billings and the impact of foreign currency exchange rates and our expectations regarding the size of our market opportunity, our planned investments, future product offerings and growth strategies, our ability to achieve our revenue, operating margins and other operating model targets, the timing and market adoption of and benefits from our new products, pricing models and partnerships, our ability to address enterprise challenges and deliver cost savings for our customers, the impact of the macro environment on our business and operating results and our capital allocation strategies including 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 the documents we filed with the Securities and Exchange Commission including our most recent annual report on Form 10-K 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, May 28th, 2024, 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 our 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 additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and in related supplemental slides, which can be found on the Investor Relations page of our website. Unless otherwise indicated, all references to financial measures are on a non-GAAP basis. With that, let me turn the call over to Aaron.

Thank you, Cynthia, and thanks everyone for joining us today. We are pleased to have delivered first quarter operating results above our guidance. This includes revenue growth of 5% year-over-year and 8% on a constant currency basis in addition to a strong focus on profitability, which resulted in operating margins of 27%, up 400 basis points from a year ago. While we continue to experience headwinds in FX that are reflected in our updated guidance, we were overall pleased with execution in the quarter. As we shared in our last earnings call, we are in a new chapter for Box, one that is driven by AI transformation. We saw this in Q1, which was defined by continued AI momentum with customers choosing Box as a platform to enable intelligent ways of working. Demand for Box AI and our upcoming more advanced capabilities continues to grow. And since we rolled out Box AI to Enterprise Plus customers last year, we have seen an increasing number of customers upgrade to Enterprise Plus in order to gain access to Box AI. In fact, we saw a meaningful increase in wins by revenue in Q1 where Box AI was central to the win than in Q4. Customer examples in Q1 include a commercial real estate firm that upgraded to Enterprise Plus for access to Box AI along with additional security and e-sign functionality. They will be using Box AI to identify patterns across client leases in addition to client analysis and generating marketing content. A leading global commerce company that moved to Enterprise Plus to gain access to Box AI and Box Hubs as they are looking to bring content together in a central location and extract the value from their unstructured content with the enterprise-grade security controls that Box provides. Over the past quarter, we've hosted Box AI connect events across major cities in the US and Europe and I've had a chance to meet with hundreds of IT leaders and business executives from some of our top prospects and existing clients. What stands out to me is how significant of an opportunity these leaders believe they have around new ways of working with their content and the power of AI. All of the insights necessary to create better business decisions and smoother business processes are living inside of an enterprise's content. It's the key data points inside of contracts that help businesses close new deals. The assets that create a major new ad campaign, the manufacturing and R&D files that enables the next breakthrough product to ship on time and the financial documents that help close the books smoothly. Yet for as important as all of this unstructured data is, and it makes up 90% of our corporate information, we've never been able to fully extract all of the value from it. We can't ask questions easily and pull insights from this content. We can't synthesize, summarize or calculate against it. And only in limited situations and often with massive investments in labor and intensive processes have we been able to automate workflows around it. But this is all changing. With the latest breakthroughs in AI, we can finally tap into the full value of our content by extracting insights from it and letting anyone ask questions of this data. We can structure the data within our content to automate our content-centric business processes and we can better protect our most important information. But we can't do this with traditional fragmented approaches to managing content. Not only are legacy ECM, document management and collaboration systems too complex and costly to maintain and often unsecure, it's also nearly impossible to leverage AI against all of these silos. This will lead to continued disruption of the traditional enterprise content management landscape. This is the opportunity that is driving our strategy and that Box is uniquely positioned to accelerate. We are leading the era of intelligent content management and our Q1 wins and momentum highlight the sheer size and potential of this opportunity. Our intelligent content cloud delivers the most secure way to power collaboration, workflow automation and content intelligence in a single platform and we've been building towards this vision for several years. To deliver the full value of content in the AI-enabled era of work and business processes, we are focused on four areas of innovation. Starting with workflow and collaboration, with the beta release of AI-enabled Box hubs in mid-May, we are transforming how companies can distribute content through an organization. Box Hubs provides a new lens into all of the content that customers collaborate on in Box with intelligent portals that simplify curation, organization and publishing, no matter the file type or where it lives in Box. This means you can put the right content into the right teammates hands when they need it most. And with Box AI for Hubs and beta also rolling out to Enterprise Plus customers, viewers can ask questions across multiple documents curated in the Hub and tap into insights from their data with AI to get answers in seconds. Importantly, this provides enterprises an instant way to deliver retrieval-augmented generation use cases in AI around large groups of content that can be instantly enabled with no code. With Box AI, customers will soon be able to extract metadata from a large number of documents and content types within their enterprise. Once you have metadata on content, you can automate almost any workflow in the enterprise, from invoice processing and contract management to digital asset management and clinical trial management. This is why we acquired Crooze back in December, and we are working aggressively to natively integrate Crooze's no-code application building and metadata features into Box to support powering content-centric workflows on Box. We'll share more around how these technologies are coming together throughout FY '25. Across security and compliance, we are working to expand Box shield features for advanced data security, introduce a new native archiving solution later this year and accomplish critical compliance levels like FedRAMP high to expand our use cases in the federal government. We are also doubling down on our open platform to support deeper integrations with Salesforce, Slack, Microsoft Teams, Microsoft Copilot, IBM's technologies, and our customer's custom-built applications. To further highlight the power of our platform, at ServiceNow's Knowledge 2024 Keynote, ServiceNow highlighted Box as a content repository to demonstrate the value of their now assist AI product. Going forward, Box is well-positioned to be the platform for providing unstructured data to SaaS and AI providers. Finally, we are working to deliver the most advanced AI within Box with the Box AI platform. The Box AI platform is a critical abstraction layer that securely connects leading AI models to content in Box. Our secret sauce is a set of AI services that we've built out for developers and our Box first-party apps, such as retrieval-augmented generation, processing documents for vector embeddings, tool use for AI agents to use within Box, model-agnostic AI management and more. Instead of enterprises maintaining many disparate back-end systems to bring AI to their content, the Box AI platform handles all of this for them seamlessly, while respecting the inherent security and content access permissions within Box. Importantly, a core part of our platform is that we can quickly bring the power of any AI model to Box content. For instance, we already have GPT 4.0 working within Box Hubs internally just a week after its release. In Q1, we announced a new integration with Microsoft Azure OpenAI, which brought together Box and Microsoft's enterprise-grade standards for security, privacy and compliance to AI. And also in Q1, as part of Box's technology partnership with Nvidia, with Nvidia's newly launched NIM microservices, Box can more easily leverage various AI models and capabilities within Box AI to improve how our customers can unleash the value of their unstructured content. Now, switching gears to go to market. As we outlined in our March Financial Analyst Day, we are focused on leveraging our go-to-market engine to bring the full value of Box to all of our customers. We continue to see the successful adoption of Enterprise Plus, our multi-product offering that brings the full value of the Box intelligent content cloud to our customers. In Q1, Enterprise Plus continued to be well over 90% of our suite sales in large deals, with suites now comprising 85% of our deals over $100,000 in Q1. We saw solid suite attach rates and large deals across all geographies. Our Q1 customer expansions and new wins with Enterprise Plus include a global pharmaceutical and medical device company who purchased Box with a six-figure Enterprise Plus deal for their core ECM platform; they will leverage Box for records management, moving off legacy technology to modernize their content strategy. This will allow them to centralize important records, HR and customer service data in Box while also meeting GxP compliance for auditable records. And a leading broadcast company in Japan that signed an Enterprise Plus upsell to build a secure content platform to prevent unexpected information leaks and to prevent ransomware attacks with shields. To bring the full value of our platform to our customers, this year we have expanded our demand channels. We are continuing our global AI connect events and other CIO events. We are introducing all new offerings throughout this year to help our customers modernize their ECM environment within Box and we are driving larger deals with customers and powering more workflows in partnership with key system integrators. For instance, in Q1, we saw a number of key wins with large customers across critical focus industries with the help and support of key partners. We are at a major moment as an industry. With AI, the role of unstructured data in enterprises has exploded and Box is at the center of this movement within the most important businesses and organizations in the world. Of course, what drives our success is not only our strategy and our platform, but the work our Boxers do globally. I'm proud that Box was recently recognized by Fortune magazine as number 18 in the 100 best companies to work for in 2024, up from number 27 a year ago. Our mission at Box is to power how the world works together. And as a company, we will look back on this as a defining period for how work was shaped for decades to come.

Thanks, Aaron. Good afternoon, everyone, and thank you for joining us today. Q1 was a strong quarter for Box as we once again delivered on our key financial priorities to drive long-term profitable growth, accelerating revenue growth in constant currency, expanding operating margins and executing a disciplined capital allocation strategy to optimize shareholder returns. In Q1, we delivered revenue of $265 million, up 5% year-over-year and 8% in constant currency. This was above the high end of our guidance, driven by strong bookings linearity. We now have approximately 1,800 total customers paying us more than $100,000 annually. Our Q1 suites attach rate in large deals was 85%, a new high watermark and up significantly from 69% a year ago. Suites customers now account for 56% of our revenue, a strong improvement from 47% in Q1 of last year. As Aaron mentioned, we're seeing strong demand for Box AI and our more advanced capabilities, which has been a key catalyst for this accelerating suites adoption. We ended Q1 with remaining performance obligations, or RPO, of $1.2 billion, a 3% year-over-year increase or 8% in constant currency. We expect to recognize roughly 60% of our RPO over the next 12 months. Q1 billings of $190 million were down 1% year-over-year and up 5% year-over-year in constant currency. Q1 billings were in line with our expectations when adjusting for an FX headwind that was 250 basis points higher than we had anticipated in our guidance. Our net retention rate for Q1 was 101%, consistent with last quarter's results. Our annualized full churn rate remained strong and stable at 3%, demonstrating continued product stickiness with our customers. We continue to anticipate exiting FY '25 with a net retention rate at or slightly above this level. Q1 gross margin came in at 80.2%, up 230 basis points year-over-year and above our guidance of roughly 79% and represents the first time we've reported 80% gross margins. As we continue to realize the efficiencies of running our infrastructure fully in the public cloud, we expect to deliver additional gross margin expansion over time. Q1 gross profit of $212 million was up 8% year-over-year, exceeding our revenue growth rate by 300 basis points. In Q1, we delivered operating income of $70 million, up 23% year-over-year, once again demonstrating our commitment to generating leverage across the business. Q1 operating margin of 26.6% was up 380 basis points year-over-year despite absorbing an FX headwind of roughly 150 basis points. Our disciplined approach to expense management is continuing to generate additional leverage in our operating model. As a result, we delivered EPS of $0.39 in Q1, up $0.07 year-over-year and well above the high end of our guidance of $0.36. This result includes a negative impact from FX of approximately $0.04. I'll now turn to our cash flow and balance sheet. In Q1, we had exceptionally strong free cash flow generation of $123 million, up 14% year-over-year. We generated cash flow from operations of $131 million, a 5% increase from Q1 of last year. Let's now turn to our capital allocation strategy. We ended the quarter with $567 million in cash, cash equivalents, restricted cash and short-term investments. In Q1, we repurchased approximately 1.4 million shares for approximately $37 million. As of April 30th, 2024, we had approximately $126 million of remaining buyback capacity under our current share repurchase plan. We remain committed to opportunistically returning capital to our shareholders through our ongoing stock repurchase program. With that, let me now turn to our Q2 and full year guidance. As a reminder, approximately one-third of our revenue is generated outside of the U.S., with roughly 60% of our international revenue coming from Japan. Since we last provided guidance, the U.S. dollar has strengthened versus the yen and the following guidance includes the expected impact of FX headwinds assuming current exchange rates. Additionally, we expect the non-cash deferred tax expenses that we discussed last quarter to represent an impact of roughly $0.01 to GAAP and non-GAAP EPS in Q2 and $0.05 for the full-year. For the second quarter of fiscal 2025, we expect Q2 revenue to be in the range of $268 million to $270 million, representing 3% year-over-year growth or 6% growth on a constant currency basis. We anticipate our Q2 billings growth rate to be in the low to mid-single-digit range. This includes an expected headwind from FX of approximately 50 basis points. We expect our Q2 gross margin to be roughly flat sequentially representing a year-over-year improvement of more than 300 basis points. We expect our Q2 non-GAAP operating margin to be approximately 27%, which includes an expected negative impact of approximately 200 basis points due to FX. This represents a 220 basis point improvement year-over-year and a 420 basis point improvement in constant currency. We expect our Q2 non-GAAP EPS to be in the range of $0.40 to $0.41, a 12% year-over-year increase at the high end of this range, even as we absorb the non-cash deferred tax expenses I mentioned earlier. Weighted average diluted shares are expected to be approximately $148 million. For the full fiscal year ending January 31st, 2025, we anticipate revenue in the range of $1.075 billion to $1.08 billion, representing approximately 4% year-over-year growth and 7% growth in constant currency at the high end of this range. On a constant currency basis, this represents a $3 million increase versus our prior guidance. This includes an expected headwind from FX of roughly 250 basis points, 80 basis points higher than our previous expectations, representing an incremental $8 million headwind. We expect our FY '25 billings growth rate to be in the low-single-digit range, as compared with our previous guidance of roughly in line with revenue growth of approximately 4% on an as-reported basis. This change is driven by an incremental FX headwind, which we now expect to have a negative impact of approximately 150 basis points to billings growth. We expect our FY '25 gross margin to be roughly 80%, representing a year-over-year improvement of 260 basis points. We continue to expect our FY '25 non-GAAP operating margin to be approximately 27%, representing a 230 basis point improvement year-over-year. We expect FX to have a negative impact on operating margin of roughly 160 basis points. This guidance is in line with our previous guidance despite an expected incremental headwind from FX of approximately 50 basis points. We are raising our EPS expectations for the full year due to our ability to generate additional leverage across the business as well as an improvement in our expected below the line income and expenses. We now expect FY '25 non-GAAP EPS to be in the range $1.54 to $1.58 representing an 8% increase at the high end of this range versus $1.46 in the prior year. This includes the $0.05 impact from deferred tax expenses that are noted previously as well as an expected FX headwind of $0.15, which is $0.05 higher than our previous expectations. Weighted average diluted shares are expected to be approximately $150 million. We are embarking on an exciting new chapter as a company driven by years of investment and innovation and building out our intelligent content cloud. Our differentiated product capabilities will enable us to power AI driven business processes around workflow, automation and enterprise content. As we prepare for the upcoming launch of a new plan offering later this year, we'll be fueling our go to market engine through the targeted growth initiatives that Aaron outlined. And with a disciplined financial strategy in place, we built a strong foundation to deliver long-term profitable growth. With that, Aaron and I will be happy to take your questions.

Thank you. Your first question comes from the line of Brian Peterson. Your line is open.

Hey guys, thanks for taking the questions. And so starting off with AI, it sounds like that's really resonating. I'm curious, do you feel like there's any targeted verticals where there's more interest there? I know you mentioned real estate, but I'm curious how broad that is? Any discussion on how people are thinking about budgets for that? Would love to get the color there.

Yes, I would say that we are observing interest across almost every vertical. Some sectors may benefit more than others in the medium to long term. For example, financial services, life sciences, and the federal government are areas that focus heavily on documents and content where AI can significantly enhance data-driven responses and streamline workflows. We've experienced strong engagement in those sectors. Regarding Enterprise Plus upgrades this quarter, we noted substantial upsells across all the verticals we target. As for your question about budgets, it would be helpful to elaborate further, but presently, the spending is largely coming from IT budgets, often replacing costs tied to legacy systems. Looking ahead a year or two, I anticipate budget increases in business areas that will achieve greater efficiency through AI; we are just at the beginning of this evolution. As AI continues to drive workflow automation and transform business processes, I expect to see further budget allocations for AI applications related to content.

That's great color, Aaron. It's great to see you guys raise the revenue outlook in constant currency. I'm curious, anything that you call out in terms of the demand environment or deal cycles as the quarter progressed? Thanks, guys.

Yes, we have noted in recent quarters some level of stabilization. This is not an indication that we are completely out of the macro challenges, but the absence of new headwinds has been significant recently. We experienced strong performance, particularly in our U.S. enterprise and federal segments, in addition to the U.S. enterprise business. While we continue to face some pressure in the SMB segment, overall, we were pleased with the performance in Q1 and are optimistic about achieving more growth as the year progresses.

Thanks, Aaron.

Your next question comes from the line of Pinjalim Bora. Your line is open.

Oh, great. Congrats on the quarter, guys. Thanks for taking the question. Again on AI, Aaron, what have you seen so far with respect to kind of the volume of queries made by users within the Box content Hubs for AI? I know it's early, but any color would be helpful. Those volume of queries that you're seeing, others tracking to your expectations so far. And the flip side of that is how has that fared versus the cost side of the equation on the gross margin side?

Yes. So as you note, Hubs has literally been around for, I think, maybe a week and a half in terms of being in beta. And so we're just getting the early data in. We're reviewing kind of initial customer use cases and scenarios right now. Hubs already is driving about a quarter or so of our total AI queries, so kind of right out of the gate it's been strong in terms of it's one of the kind of immediate use cases that the customers adopt, just because it's such a huge unlock to be able to ask questions of any amount of content. And as we've noted both in our keynotes and a little bit on this earnings call, the use cases are quite vast because really there hasn't been another product at real commercial scale where you can collect your sales materials and create a sales hub that anybody can ask questions within an HR portal with all your HR documentation that anyone can ask questions in similarly in product and engineering or equity research, in financial services. I was with a CEO of an investment bank just about a month and a half ago and this was a breakthrough product for him, because instantly now he can enable any new employee in the firm to have as much knowledge access as somebody that's been at the firm for a decade or two. And that's basically what we're able to now do with our content is. This content really becomes the digital memory of an organization that anyone can tap into. So just this ability to instantaneously make all of your employees as knowledgeable as your most experienced employees is transformational. And so the Hubs use case is going to really be a massive unlock for enabling that in every one of our customers and we think will certainly contribute to more Enterprise Plus upgrades and more volume. And I think you asked something on the kind of gross margin. Did I catch that or the cost side, did you mention that?

Yes.

Yes. So, as I think we've mentioned, we expect to be able to maintain our gross margin levels even with the addition of AI, really driven by the fact that as customers are in these higher tier plans, we tend to see higher gross margin in those higher tier plans in the first place. And then for a lot of the extremely high volume use cases, things like metadata extraction or being able to run a workflow that generates a lot of AI usage that will be all volume-based and not included in the Enterprise Plus plan or other plans. And so in those cases, customers will just be paying us for the volume and we'll ensure that we're driving the appropriate kind of margin structure that delivers our margin goals on that front.

Yes, understood. One quick follow up for Dylan. Dylan, it seems like the linearity in the quarter was a little bit better. What drove that? Are you doing something different to drive that and could that be sustainable?

I wouldn't say that we did anything significantly different. I think just a lot of energy and momentum heading into the first quarter with some of the product capabilities that we talked about. So really a continuation of some of the Q4 execution and demand around Enterprise Plus driven by everything Aaron's been talking about. So we did see certainly a stronger than we'd even expected to see start to the quarter, which led to that revenue upside that we mentioned. So certainly something we'd like to repeat every quarter, but wouldn't say that there is anything significantly different that we did this time around. I would just point to really compelling products and demand for that as well as sales execution.

Got it. Thank you very much.

Your next question comes from the line of George Kurosawa. Your line is open.

Hi, thank you for taking my question. I'm here on behalf of Steve Enders. You mentioned that AI is enhancing your value proposition against traditional ECM providers. Have you noticed any changes in your win rates or the number of opportunities in that area?

We are definitely observing an upward trend in ECM, both in full takeouts and expansion deals with customers. The Crooze acquisition has opened up various new ECM use cases for us, indicating a positive trend. As we integrate the Crooze offering more fully this year alongside our AI-driven metadata extraction capabilities, we expect to see increased momentum in replacing legacy ECM systems. This trend has been growing over the past few quarters, and AI serves as a significant catalyst for customers to reconsider their content management setups. Given the challenges of managing millions of documents in a legacy content store, leveraging AI will be crucial for effectively utilizing that data. We believe this presents a major opportunity for us to drive more movement of ECM towards modern systems.

Awesome. That's great to hear. And then a follow up, you called out a few of your partnerships and you look at your partner ecosystem that have maybe been deepened or enhanced by kind of this renewed focus on AI. Maybe you can just talk about how that's kind of shifted your thinking on the partner ecosystem and where you've seen kind of the biggest needle move.

Yes, I’ll mention two main categories. First, the AI models themselves present excellent partnership opportunities. Currently, many leading AI model providers are delivering foundational models, and due to our open architecture and model-agnostic approach, we expect to partner with all of them. This allows our customers to choose the AI model that suits them best. Working on an open platform also motivates these providers to collaborate with us and grow in client accounts. This opens doors for us to work with major companies like Google, Amazon, and IBM as they need to showcase their models for critical tasks. The second category involves AI products, such as assistant and Copilot applications, which depend on having accessible data. We manage a significant portion of corporate data, which is essential for AI. Our platform can integrate with these AI products much more smoothly than traditional systems. For example, ServiceNow featured Box in their demo as a content platform that links to their assist product. We have also strengthened our partnership with Microsoft to serve as a content platform for Copilot. Essentially, any software that interacts with data can connect securely and scale with Box. Lastly, this opens up numerous use cases with system integrators or other partners who can incorporate us into AI-ready document management or unstructured data platforms. We can embed our AI capabilities within their products. For example, we're discussing opportunities with a leading vertical SaaS provider where Box and AI-driven metadata extraction are crucial to their platform. These categories reflect new use cases that we are actively pursuing for customer growth. We are currently focused on these opportunities, and I expect significant progress on this front in the coming quarters and years.

Awesome color, thanks for taking the questions.

Yes, thanks.

Your next question comes from the line of Josh Baer. Your line is open.

Great. Thanks for the question. One for Aaron and a quick one for Dylan. Aaron, I followed your insights around the cost of AI, the cost of units of work and the potential for AI agents. What are we going to see from Box in that respect? How does Box fit into this AI agent future of work?

I'm incredibly excited about this prospect. I'll keep it high level as there will be more announcements in this area. When you consider the use of AI within the Box AI platform, we've developed an abstraction layer that effectively communicates with an AI model, connects it to content in Box, and provides it with a set of prompts and instructions to follow. This model can interact with various tools within our platform. One tool is performing vector embeddings, and another is the enterprise RAG surface we've designed. The AI model is equipped with tools, prompts, and instructions, all abstracted in a way that users don't have to deal with the underlying complexity. Users engage with an AI agent that performs specific tasks, such as summarizing documents, answering questions, or extracting metadata. As AI models and our platform capabilities evolve, these AI agent experiences can be deployed across various use cases relating to your content where a human would typically be involved. Currently, people have workflows where they read contracts to extract metadata or label digital assets for management processes. With the Box AI platform, AI agents can handle these tasks, and we are developing tools to manage and organize this AI effort within the Box environment, linking it to business processes and workflows. Our vision at Box is to automate any work involving content using AI. We are establishing the necessary framework, abstraction layers, and platform services to enable this. This is particularly exciting considering that 90% of corporate data is unstructured content, much of which isn't associated with automated business processes, isn't easily queriable, and may not be optimally secured. In the future, AI will enable us to address these issues, opening up numerous use cases that currently lack automation. Traditional robotic process automation or intelligent document processing has often been too labor-intensive or complex to implement across departments. We see great potential for AI in this regard. So, when customers think about content and AI, our intelligent content cloud will provide them with an end-to-end set of capabilities to deploy AI securely against their content. Does that answer your question?

Yes, perfect. Really interesting. Thanks, and then, Dylan, just one clarification. Really appreciate the details on the FY '25 revenue guidance change and like breaking out that on a constant currency basis, the guidance increased by $3 million, just with all the moving parts. What about for the billings guidance as far as the change in constant currency or any change for FY '25?

Yes. So really, our expectations are consistent with our initial guidance on a constant currency basis. So there, as we had kind of talked about roughly in line with what our reported revenue growth expectations were at the time of about 4%. From a constant currency standpoint, that's still what we expect. But on an as-reported basis, now expecting that to land in the low single-digit range because of that kind of incremental and new 150 basis point headwind that's coming from FX.

Okay, got it. Thank you.

Your next question comes from the line of George Iwanyc. Your line is open.

Thank you for taking my question. Aaron, I'll start with you and maybe in the context of Box AI and Box Hubs, but you're seeing this Suite's momentum. Can you give us some perspective on how that's driving other products like Box Relay and Box Sign and the adoption, really broadly across the Box platform?

Yes. So in general, every time, obviously, our Enterprise Plus plan gets purchased, that opens up a number of new use cases and value propositions for customers. Our advanced e-sign capabilities, our most advanced version of relay. And so we are certainly seeing that open up more value and more stickiness for customers. Q1, we had some notable wins. For instance, in the sign's space, a major pharmaceutical company that will be adopting Box Sign for their validation processes, a major automotive company that will be using Box Sign for kind of critical customer transactions. So again, our whole vision is really when you implement Boxes and intelligent Content Cloud, you get that entire lifecycle of content from the moment you create and ingest data to that final kind of transaction to then governing the content, all of that is in one streamlined experience. And so whether you come in because of workflow or collaboration or e-signature or AI, our job is to make sure that you're seeing the full value of the platform overall. And AI, again, just represents a major catalyst for customers to really think about the role of content in their organization, in their enterprise, are they getting as much value from it as is now possible.

And Dylan, one question for you. Maybe expanding on your comments related to investing in demand generation. Can you give us kind of a how you're investing, where you're investing, what kind of focus you're putting on the sales organization and marketing organization?

Sure. So really, it kind of comes back to a lot of the programs and kind of growth initiatives that Aaron highlighted in his prepared remarks, so I would call it kind of a combination of really doubling down on and scaling some of the demand gen, both kind of programs that are kind of online spend to a lot of those CIO-focused field events that have been working really well for us over the past couple of quarters. So now and especially with all the exciting kind of newer products that we have coming out, seeing really strong interest and demand from customers there. So that's one category. It's kind of straight demand gen. Also investing and building out that partner ecosystem that we talked about. So especially with SIs and just kind of strengthening our overall reach through some of those channels. And then at the same time, we will be kind of growing our sales force as well, commensurate with the demand that we're seeing and to set us up for that kind of growth and kind of laying the foundation. So we're ready as we do have the new products to be able to take advantage of that opportunity. So that's kind of the high-level categories that we really focused on this year.

Thank you.

Your next question comes from the line of Rishi Jaluria. Your line is open.

Oh wonderful thanks guys so much for taking my question. I have two specifically on the workforce. Number one, I know you've talked for years about wanting to do more hiring outside of the U.S., especially in Poland. Maybe can you give us an update on that kind of global workforce strategy and what percentage of your workforce is actually outside the U.S. at this point? And then maybe alongside that, SPC is now taking near 20% of revenue. It's growing faster than revenue. I know there's puts and takes to how that is measured. But maybe walk us through, why that's the case? I understand you're buying back shares, and it's more than offsetting dilution. But I guess, I'm not sure that issuing a lot of stock instead of cash and then buying back stock with cash is necessarily the right strategy instead of shifting more of the compensation away from stock into cash. Maybe just help us understand both of those as it relates to your workforce.

Sure. I'm really pleased with the results of our workforce location strategy, especially in Poland, where we ended last year with over 300 employees. This represents more than 10% of our workforce and is approaching 15%, with over 30% of our engineering team located there. This is our main focus, as the majority of our R&D hires occur in Poland, along with many of our general and administrative roles. We expect this percentage to continue increasing over time. Regarding stock-based compensation, I want to highlight a few points. Despite our strong share repurchase program that has been reducing total shares outstanding over time, we have also decreased our overall equity burn rate for the past couple of years, meaning we are issuing fewer net shares year on year. The reason stock-based compensation has not yet followed this trend is primarily due to very strong retention rates and a higher share price, which makes it a lagging indicator of our equity practices. However, similar to our burn rate and total shares outstanding, we anticipate that stock-based compensation as a percentage of revenue will also decrease over time.

All right, wonderful. Thank you so much.

This concludes the question-and-answer session. I will turn the call to Cynthia for closing remarks.

Great. Thank you, everyone, for joining us today, and we look forward to updating you again on our next earnings call.

This concludes today's conference. Thank you for joining. You may now disconnect your lines.