Box, Inc. Q4 FY2025 earnings call

• Financial results: Q4 revenue exceeded guidance, with 2025 fiscal year seeing 5% revenue growth and 320 basis points expansion in operating margins. Record free cash flow of $305 million was generated in fiscal 2025.
• Product launches: Launched Enterprise Advanced in the last two weeks of the fourth quarter, with several dozen Enterprise Advanced deals closed. Internally, Box is building an AI-first enterprise, using Box.ai in various functions like HR, engineering, and go-to-market.
• Go-to-market: Suites attach rate in large deals was strong at 87% in Q4, with Suites representing 60% of Q4 revenue. Remaining performance obligations (RPO) increased to $1.5 billion, a 12% year-over-year rise.

In the fourth quarter, Box achieved revenue of $280 million, which is a 6% year-over-year increase or 8% in constant currency. Operating margins were 27.3%, and EPS was 42 cents. For fiscal 2025, the company reported revenue of $1.09 billion, up 5% year over year or 7% in constant currency. Operating margins expanded by 320 basis points to 28%. In the fourth quarter, Suites accounted for 60% of revenue, a rise from 55% in the previous year.

• Q1 fiscal 2026: Expected revenue range is $274 million to $275 million. Q1 gross margin expected to be approximately 80%, non-GAAP operating margin around 25%, and non-GAAP EPS range of $0.25 to $0.26.
• FY 2026: Revenue expected to be in the range of $1.155 billion to $1.16 billion. Gross margin expected to be approximately 81%, non-GAAP operating margin around 28%, and non-GAAP EPS range of $1.13 to $1.17.
• Share repurchase: Board authorized an additional $150 million increase to the share repurchase program, with $52 million remaining buyback capacity as of January 31, 2025.

• Macro environment impact: Uncertainty in the macro environment can affect the business, and the company is closely monitoring it.
• Foreign currency exchange rates: Fluctuations in foreign currency exchange rates can impact financial results.
• Tax risks: Incremental non-cash deferred tax expenses in FY 2026 can have an impact on EPS, and there are uncertainties related to tax calculations and expenses.

Q: Brian Peterson asked about the early momentum with Enterprise Advanced.

A: Aaron Levie said they were pleased with Q4 results for Enterprise Advanced, with dozens of deals closed. Momentum is building, and Enterprise Advanced will be a core part of the selling motion but is a ramp process.

Q: Michael Funk asked about the macro environment impact on clients' purchasing.

A: Aaron Levie stated the company is close to clients and believes it is an asset in the dynamic macro environment as it helps clients drive efficiency, automation, and gain intelligence from their business.

Q: Steve Enders asked about the use cases of advanced custom adoption.

A: Aaron Levie mentioned key use cases like forms and doc gen for automation, archive for managing large datasets, metadata extraction from documents, and no-code app functionality.

Q: Lucky Schreiner asked about revenue seasonality and top of funnel interest.

A: Dylan Smith said Q1 is affected by the leap year, but revenue growth will accelerate throughout the year. Aaron Levie noted AI is expanding the potential customer base as it helps customers realize they can gain insights from unstructured data.

Q: Pinjalim Bora asked about AI units and federal sector exposure.

A: Aaron Levie explained AI units are a consumption model for different AI capabilities. Dylan Smith said federal sector exposure is a low single-digit percentage of overall revenue.

Q: Rishi Jaluria asked about RPO duration and internal use of Box AI.

A: Dylan Smith talked about longer contract durations due to customer commitment and early renewals contributing to RPO growth. Aaron Levie mentioned internal use of Box AI for efficiency in various internal functions like HR and engineering.