Box delivers solid Q1 2024 results as CEO Aaron Levie points to AI opportunity for content

(© Box, Inc)

Box saw its share price rise by 5% in after hours trading as it beat Wall Street’s expectations this week for its Q1 2024 earnings. Growth may be slow, but the cloud content company is delivering on profitability and CEO Aaron Levie pointed to an increased number of high value, multi-product deals. 

Levie also noted that the company’s recent Box AI announcement, which includes integration with the likes of OpenAI’s ChatGPT and Google’s large language models (LLMs), will be central how companies interact with the platform and content in the future. 

The key numbers for Q1 2024 include: 

• Revenue for the first quarter of fiscal year 2024 was $251.9 million, a 6% increase from revenue for the first quarter of fiscal year 2023 of $238.4 million

• Remaining performance obligations (“RPO”) as of April 30, 2023, were $1.179 billion, a 17% increase from remaining performance obligations as of April 30, 2022 of $1.005 billion

• GAAP operating income in the first quarter of fiscal year 2024 was $8.3 million, or 3.3% of revenue. This compares to a GAAP operating income of $0.6 million, or 0.3% of revenue, in the first quarter of fiscal year 2023.

Commenting on the numbers, Levie said: 

Achieving these results in a challenging macro environment is a testament to the value of our Content Cloud platform, and the operational discipline of our Boxers as we deliver substantial year-over-year bottom line improvements.

While the dynamic macro economy continues to pressure IT spend and headcount growth expectations from our customers…we are seeing strong traction and stickiness of our platform in customers, and our message is well-aligned to the challenges they are facing today.

Over the last quarter I’ve had the opportunity to speak with 100s of business and technology leaders, and it’s clear that the dynamics enterprises face today are fully aligned with the pillars that underpin our strategy. Enterprises are focused on simplifying their IT environments, driving productivity across their businesses, and protecting their most sensitive data. 

And across nearly all my conversations in the last quarter, business leaders everywhere are looking to leverage the power of AI to help transform how they work, and get even more value out of their data.

However, despite the decent quarter, Box also warned that the US dollar has continued to strengthen versus international currencies and this is resulting in a larger than expected FX headwind for Q2 and FY 2024. For Q2 2024 Box is expecting revenue in the range of $260 million to $262 million, up 7% year-over-year at the high-end, and FY 2024 revenue in the range of $1.045 billion to $1.055 billion, up 6% year-over-year at the high-end. 

Despite the muted guidance, Levie did point to Box’s ability to secure multi-product, large deals that support a customer’s ‘stickiness’ to the platform. He said: 

Our strategy is to continue launching new multi-product offerings over time, increasing the value to our customers by bringing them the full power of the Content Cloud. Our latest multi-product offering, Enterprise Plus, continues to be well over 90% of our Suites sales in large deals, with Suites comprising 69% of deals over $100,000 in Q1. We saw consistent Suites attach rates in large deals across all of our geographies.

Box AI

As diginomica highlighted earlier this month, Box is rapidly pursuing a generative AI strategy - with the announcement of Box AI. The use of LLMs like ChatGPT to enterprise documents and other textual information will allow users to summarize a document, find key information, or create new content in Box Notes. 

Commenting on the significance for Box, Levie said: 

As we look forward into FY ‘24 and beyond, our pace of innovation continues to accelerate. We are at the beginning stages of a new era of software. Similar to how cloud and mobile changed the technology landscape forever, AI has the opportunity to completely change how work gets done. 

As highlighted by the meteoric rise of ChatGPT, we've recently begun to see a huge breakthrough in the potential of Large Language Models or LLMs, which are now capable of bringing human-level reasoning to a large number of tasks. However, the real power of these new AI models is when you use their intelligence to help you work securely with your own proprietary data set.

Given the very nature of LLMs and Box’s core focus being content, there does seem to be a particular close alignment in opportunity here for the vendor. Levie said: 

For years we've been able to ask questions about our structured data, like the information that's in a database, ERP system, or CRM system. You can ask those systems for financial forecasts, sales pipeline results, inventory levels, supply chain details, and more. But we’ve had limited ability to ask questions of our unstructured data, like content, which is 80% of corporate data. And now we can. By safely bringing leading AI models to enterprise data, enterprises can truly unlock the value that lies in their content.

Imagine being able to instantly ask things like how many days of parental leave can I take? on an HR document or please summarize this report and provide five key takeaways on a quarterly earnings document or how would you pitch this product to a customer in the automotive industry when looking at a product overview document.

But this is just the beginning. Ultimately, as a core platform capability, Box AI will be used throughout the product to continue to transform how we work with our content in a variety of ways. We can imagine in the future being able to use AI to automatically classify content in even more specific ways, automatically extract data using a Relay workflow, use platform APIs to interact with AI models from a variety of providers, and being able to ask a question of a larger set of documents on a specific topic.

Levie said that Box will remain a “platform-neutral vendor” and that this means also being AI-neutral. As such, whilst current collaborations include the likes of OpenAI and Google, Levie said that when new AI breakthroughs emerge, Box will be ready to adopt them. 

My take

The opportunity for Box and the use of LLMs is a compelling one, given that generative AI is focused on making use of existing content to create something ‘new’. It will be a while before we see the use cases emerge for Box AI, which will tell the true story of how customers make use of the technology, but there’s potential for it to help Box accelerate its growth.