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01/10 16:00
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects strong financial performance with growth in RPO, gross margin, and free cash flow. The Q&A session reveals positive sentiment from analysts, with management providing clear answers and highlighting growth in AI capabilities, government contracts, and sales efficiency. The company's strategic investments and raised full-year revenue guidance indicate optimism. Despite a slight decline in operating margin, the overall outlook is positive, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
Revenue $301 million, representing 9% year-over-year growth. Sequential acceleration to 8% year-over-year growth in constant currency. Growth driven by strong customer demand for Box AI and Enterprise Advanced momentum.
Operating Margin 28.6%, exceeding guidance. Reflects strong execution and efficiencies across the business.
Net Retention Rate 104%, up from 103% in Q2 and 102% in the year-ago period. Driven by strong Box AI and Enterprise Advanced momentum, accelerating bookings, and lower dollar churn.
Billings $296 million, up 12% year-over-year both as reported and in constant currency. Driven primarily by strong bookings in the quarter.
Remaining Performance Obligations (RPO) $1.5 billion, growing 18% year-over-year and up 19% in constant currency. Growth fueled by strong customer demand for Box AI, resulting in a pronounced upgrade cycle and longer contract durations.
Gross Margin 81.7%, exceeding guidance of 81%. Excluding the tailwind from data center equipment sales in Q3 of last year, this represents an increase of 50 basis points year-over-year.
Free Cash Flow $61 million, up 7% year-over-year. Reflects strong cash generation and operational efficiency.
Cash Flow from Operations $73 million, up 17% year-over-year. Indicates robust operational performance.
Suites Customers 64% of revenue, an increase from 59% a year ago. Reflects growing adoption of bundled solutions.
Box AI platform: Positioned as a secure, neutral AI content platform for enterprise content, integrating with major AI providers like OpenAI, Google, Anthropic, AWS, and IBM. New features include Box Extract for data extraction, Box Automate for workflow automation, and Box Shield Pro for AI-driven security.
Enterprise Advanced: Continues to drive upgrades and new customer wins across industries. Examples include financial services, law firms, and renewable energy companies leveraging AI-driven workflows and secure collaboration.
AI integrations: Announced integrations with new AI models from Mistral, Anthropic, OpenAI, and Google. Strengthened partnership with AWS for AI collaboration.
Geographic expansion: New customer wins in EMEA, including a renewable energy company and a housing administrator. Partnered with Tata Consultancy Services to expand reach across industries globally.
Vertical focus: Targeting key verticals like financial services, life sciences, government, and professional services to drive adoption of AI-powered solutions.
Revenue growth: Q3 revenue grew 9% year-over-year to $301 million, with billings up 12% and RPO up 18%.
Net retention rate: Improved to 104%, driven by price increases and seat expansion.
Operating margin: Achieved 28.6% in Q3, exceeding guidance.
AI-first approach: Box is adopting AI across internal operations, including sales, customer success, HR, and engineering, to enhance productivity and customer service.
Partnerships: Strengthened partnerships with AWS and Tata Consultancy Services to deliver AI-powered solutions and expand market reach.
Market Conditions: The strengthening of the U.S. dollar against the yen has impacted revenue and billings growth, with a noted FX headwind of approximately 220 basis points in Q3 and 100 basis points lower than prior expectations for FY '26.
Competitive Pressures: Box faces challenges in maintaining its market position as it integrates with multiple AI platforms and competes with other providers offering similar AI-driven content management solutions.
Regulatory Hurdles: The company must ensure compliance with various security and governance models, including FedRAMP high compliance for government clients, which could pose operational challenges.
Economic Uncertainties: Macroeconomic factors, including currency fluctuations and potential economic slowdowns, could impact customer spending and the company's financial performance.
Strategic Execution Risks: The company is heavily investing in AI-driven solutions and new product offerings, which require successful adoption and execution to achieve projected growth. Failure to deliver on these initiatives could impact financial and operational goals.
Q4 Revenue: Expected to be approximately $304 million, representing approximately 9% year-over-year growth or 8% in constant currency.
Q4 Billings Growth: Anticipated to be in the low single-digit range, including an expected tailwind from FX of approximately 70 basis points.
Q4 Gross Margin: Expected to be approximately 82%.
Q4 Non-GAAP Operating Margin: Anticipated to be approximately 30%.
Q4 Non-GAAP EPS: Expected to be approximately $0.33.
FY '26 Revenue: Expected to be approximately $1.175 billion, representing approximately 8% year-over-year growth or 7% in constant currency.
FY '26 Billings Growth: Expected to be in the 9% to 10% range, including a tailwind of approximately 130 basis points from FX.
FY '26 Gross Margin: Expected to be approximately 81%, representing a year-over-year improvement of 40 basis points when adjusted for prior year data center equipment sales.
FY '26 Non-GAAP Operating Margin: Expected to be approximately 28%, including a tailwind of approximately 10 basis points from FX.
FY '26 Non-GAAP EPS: Expected to be approximately $1.28, including an expected tailwind of approximately $0.02 from FX.
Share Repurchase Plan: In Q3, Box repurchased 2.4 million shares for approximately $77 million. As of October 31, the company had approximately $35 million of remaining buyback capacity. Additionally, the Board of Directors authorized a $150 million increase to the share repurchase program.
The earnings call reflects strong financial performance with growth in RPO, gross margin, and free cash flow. The Q&A session reveals positive sentiment from analysts, with management providing clear answers and highlighting growth in AI capabilities, government contracts, and sales efficiency. The company's strategic investments and raised full-year revenue guidance indicate optimism. Despite a slight decline in operating margin, the overall outlook is positive, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
The earnings call highlights strong financial performance, driven by AI-driven workflows and partnerships, with a positive outlook for revenue and EPS. Despite some vague management responses, the company's focus on AI, strong billings growth, and government sector opportunities are positive indicators. The market is likely to react positively, with a potential stock price increase of 2% to 8%.
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