Box at 45th Annual William Blair Conference: AI Strategy and Growth Plans

On Tuesday, 03 June 2025, Box Inc (NYSE:BOX) presented at the 45th Annual William Blair Growth Stock Conference. The discussion, led by CFO Dylan Smith, focused on Box’s strategic shift towards AI-driven content management and its financial outlook. While the company is optimistic about revenue growth and operating margin expansion, it remains cautious due to potential macroeconomic uncertainties.

Key Takeaways

• Box is shifting from a system of engagement to an intelligent content management platform.
• AI integration is central to Box’s strategy, enhancing enterprise content management.
• The company targets a 5% annual pricing improvement and 20% growth in its partner ecosystem.
• Revenue growth is expected to reach 10%-15%, with operating margins in the mid-30s.
• Box plans to allocate capital to share repurchases and strategic acquisitions.

Financial Results

• $100,000+ customers increased by 8% year-over-year.
• Suites now account for over 60% of revenue.
• Churn rate remains stable at 3% annually.
• Net retention rate is projected to improve to 103% by year-end and 105%-110% in the coming years.
• The company anticipates 8% business growth this year and a mid-teens CAGR in free cash flow over several years.

Operational Updates

• The recent launch of Enterprise Advanced has generated significant customer interest.
• Box expects its partner ecosystem to grow by 20% annually.
• Platform revenue is projected to increase by 30% per year, reaching over 10% of the business.
• Nearly half of Box’s engineering team is located in Warsaw, Poland, to optimize workforce costs.
• Infrastructure optimizations and higher pricing are expected to improve gross margin by 1-2 points.

Future Outlook

• Box is committed to double-digit revenue growth and significant operating margin expansion.
• The company aims for a revenue growth plus free cash flow margin target of 45 to 50.
• Pricing improvements are expected to rise from 4% to 5% in the coming years.
• Customer acquisition, driven by an expanding partner ecosystem, is seen as crucial for higher growth rates.
• The company plans to increase headcount in low-cost locations, adding 3-4 points to the bottom line.

Q&A Highlights

• Box’s billings and short-term RPO outperformed expectations.
• There is strong customer demand for Box’s AI capabilities.
• Box differentiates itself by offering a single platform to manage the entire content lifecycle.
• Pricing is expected to be a major growth driver, with Enterprise Advanced offering a 20%-40% price uplift per seat.

In conclusion, Box’s presentation at the conference highlights its strategic focus on AI integration and operational efficiency. For a detailed account, readers are encouraged to refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Jason Ader, Analyst, William Blair: All right. Good afternoon, everyone. Thanks for joining us. I’m Jason Ader with William Blair. I’m pleased to introduce Dylan Smith, the CFO of Box.

Before we begin, I’m required to inform you that a complete list of research disclosures or potential conflicts of interest is available on our website at williamblair dot com. Dylan is going to go through some slides and then we’ll have some time for Q and A about fifteen minutes in. So thanks for being here Dylan.

Dylan Smith, CFO, Box: Thanks, Jason. So yep, just texting everyone is maybe a little bit different level of context around Box and what we do. We’ll hit some of the high level, what we do market opportunity, recap some of what we had presented around the strategy at our most recent Investor Day, and then how we’re thinking about the business in the years ahead, and then should have some time to jam on questions with Jason and you all. I think you can see all the required disclosures online should you choose. So really what Box does in our mission is really to power how the world works together by really creating and enabling a level of intelligence around how enterprises manage their content.

So especially in this new AI first era of business, The workforce and the importance of unstructured content is just getting much more clear to CIOs and the workforce itself and what they do, the expectations and even the nature of how employees are now increasingly working side by side with AI agents is changing and Box is really well positioned to power that across the stack. So just kind of going from where we were through with kind of in the client server era to when Box started the company early on as a system of engagement and now a very different level of the way that kind of content is showing up in enterprises and why having a single content platform across front office to back office that can really handle any type of information and provide those insights in real time is now an opportunity that was never kind of present and never able to be addressed by some of the legacy solutions in the content management space. Even before AI, the kind of use cases and types of employees that were interacting with those systems as an order of magnitude smaller than what’s possible today. So unstructured data has proliferated.

That’s about 90% of the content in enterprises, and that’s really at the heart of what AI can add value to and unlock the value that’s been sitting really dormant for decades in many enterprises, but also just the data that’s being created today and going forward is increasing at an exponential rate. And that unstructured data, which is really at the heart of what Box does, is what can benefit most from these new capabilities. So going from a very siloed approach, where there’s all sorts of content sitting either, again, dormant or just unmanaged, out of compliance in insecure different environments. And Box is looking to bring all of that together, again, in a single content platform to secure, manage all of that centrally and extend that value into whatever applications you want to be using as an enterprise. And that is really the idea behind intelligent content management.

So in terms of the ecosystem of partners that we connect with to a lot of the kind of core capabilities of the platform that you can see here is really how Box thinks about the world of content and powering it. So again, going back to the and really building on the underlying architecture that we put in place a couple of decades ago, really focused, you know, first as the most just simplest and then the most secure and compliant way to share access and manage information. Then over time, you know, really over the last decade, we’ve been expanding our capabilities into a bunch of different kind of content management categories, whether that is e signature, you know, kind of deeper insights around security and the threats that impact your content to, you know, much deeper workflow capabilities to e signature capabilities. We’ve really been building out just the depth and the breadth of our content services and then building on that platform is really where AI comes in. And so we’ll talk more about that, but really kind of leveraging that underlying architecture gives the huge advantage and right to win in this space, because a lot of the core challenges of kind of implementing AI around the security permissions, what do you have access to, we’ve already been solving that natively in our platform for two decades.

And then the other thing that you really need to get the best answers, accurate answers and only getting access to the information that you need or should have access to, to drive those insights is what Box also naturally does from our underlying permission and file architecture. And then you can see on top of that, you can access it from any number of different endpoints, different kind of partners, more than 1,500 integrations already, and then just other different ways, whether it’s just basic APIs or eventually more robust agent to agent ecosystem are all different ways that you can get tie back to and get value out of Box ecosystem. And that’s only expanding. Again, back to AI agents, which are really an extension we think about as effectively entities sitting side by side with the knowledge workers in enterprises and your organization to make them even more effective and to really expand the market opportunity as well. And so just thinking about kind of how we evolved over time, I kind of mentioned that journey at a high level, but showing where we are today and how that shows up in terms of the underlying products that enable that.

After introducing suites for the first time about five years ago, We just recently back in January introduced Enterprise Advanced, our highest tier suite, as well as a bunch of other capabilities to go alongside that seat based model to complement it, to really capture a lot of the value that our new product offerings and AI enable, right. So think about that and package in the form of what we call AI units as a way to get even more value into the platform and to think about making sure that we’re in a good position to monetize all of these new opportunities as they’re emerging with enterprise advance and all of these more robust AI capabilities at the center of that. So going after a huge and growing market opportunity through the leading ICM, intelligent content management platform that I mentioned. And really now we’re all about just going deeper in the core areas of intelligent content management that we play in and then extending the reach of our platform through agents, through partners and the SI ecosystem in particular and through an evolving more volume based or consumption based model. Ultimately, to over the next three to five years, committed to delivering double digit revenue growth and significant operating margin expansion into the mid-30s to achieve a rule of revenue growth plus free cash flow margin target of 45 to 50.

So just to recap, some of the slides we shared and kind of the strategy for this year and how that’s evolving, we’ll hit on again a bit on the market opportunity, some of the products we’ve introduced and the economics and how our model is evolving. So continue to grow, and this is of our most as of our most recent quarter. Our 100 ks plus customers, which represents about two thirds of our overall business, grew by 8% year on year. Suites, which is primarily Enterprise Plus or the suite that we introduced before Enterprise Advanced, now represents more than 60% of our revenue. We have been steadily growing our price per seat as we further differentiate and command more value out of these more premium offerings.

And over the past couple of years, our full churn rate, which is a dollar weighted metric has been stable at a best in class 3% annualized. Let’s skip over that. Another key metric that we’re very focused on, improving largely through pricing, but as we return of seat growth to higher levels as well as enterprise advanced and a lot of the things that we’ve been building, also give us the opportunity to expand the use cases within our customers. We expect our net retention rate to improve to 103% by the end of this year after improving by a point last year and then ultimately getting into the 105% to 110% range over the next few years. So again, if you think about some of the core drivers of the evolving model and key growth catalysts that are related to, but not directly coming from some of the enterprise advanced capabilities, we do think that will enable us to even incrementally drive even faster growth from pricing improvements going from about 4% per year to 5% per year in the years ahead.

One emerging growth opportunity for us, as I mentioned briefly, is around our partner ecosystem and the opportunity now given the types of use cases we can support. We’re beginning and we’ve been investing in and beginning to see traction with key systems integrators in particular, but also see a lot of opportunity to work more closely with other leading ISVs as well as marketplaces and expect that about 20% per year over the next several years. And then finally, on the platform revenue sides, that’s really all of those kind of consumption based or volume based ways that we’ve that we can monetize our newer capabilities. Expect that to grow at a rate of about 30% per year and to go from about 5% of our business today to 10% plus a few years from now. I can just fly through some of these in the interest of time.

So that’s and then kind of bridging both top line and then bottom line to get a sense of some of those core drivers of how our model is evolving and what we expect to deliver that growth and leverage in the years ahead. Again, this is over the next three to five years. On the growth side and now expecting this was our guidance as of March 18, when we first gave this presentation, expect the business to grow about 8% this year. And then going forward, I think the biggest improvement is going to be through that net retention rate combination of upsells, primarily from moving more and more customers into Enterprise Advanced, but also seat expansion as that enables new use cases. We see new customer acquisition as another important driver of higher growth rates going forward, especially we expand our reach through that partner ecosystem that I was discussing.

And then platform, as I hit on, also see that adding one to two points of our overall growth rate, getting us into that double digit range, 10% to 15% overall revenue growth. And then on the bottom line, one of the core drivers of the operating margin expansion that we’ve seen over the past few years and we expect to be a continued driver of leverage for us is around our lower cost workforce and location strategy. So today, we now have from a standing start about five years ago, nearly half of our engineering team located in low cost locations, primarily over in Warsaw, Poland, and we’ll expect to continue to drive our headcount growth across the business in low cost locations in the years ahead, adding three to five three to four points to the bottom line. Continuing to optimize kind of how we manage our infrastructure now that we’ve moved fully to the public cloud that unlocks significant amount of expansion, especially last year. And then from here, to expect our gross margin to improve by another one to two points, largely through those infrastructure optimizations, but also as we continue to command higher pricing and stronger unit economics because of what we’re selling.

And then finally, a lot that we’re doing in addition to those two categories just to run the business more efficiently and really at the heart of this is a lot of the ways that we are increasingly kind of changing how we run internally using AI. So already a lot of exciting things underway and not just tools, but fundamentally kind of how we’re structured and see that as a huge opportunity, both to unlock productivity, especially in the near term, to just get more throughput out there and give us more confidence in our ability to grow at a double digit clip. But then over time ultimately expect that to show up more directly in the bottom line. And that’s part of kind of the longer term evolution of the model as well. And then outside of the P and L and shifting to capital allocation, we are we generated more than $300,000,000 of free cash flow last year.

Expect that to grow at a CAGR in the mid teens over the next several years. And to use the majority of that free cash flow generation to return capital to shareholders through our share repurchase program, ultimately incrementally reducing total shares outstanding over time. We also expect to use a portion of that to accelerate product innovation through strategic acquisitions, such as most recently Cruise and then Alpha Moon. Over the past eighteen months or so, we’re able to really quickly and natively integrate that into our platform. And that’s behind many of Enterprise Advanced kind of most compelling features and functionality.

So we’ve talked about from an AI point of view, automatic automated metadata extraction is a use case that’s really jumped out and is resonating with customers. That was powered directly through AlphaMoon and then the way that we are customers able to manage and visualize and track a lot of the workflows, business processes and really stay on top of that information in a really customizable way came directly from the Cruise acquisition that we did at the start of last calendar year. And then following this, the capital allocation strategy, we do expect to steadily, gradually and steadily bring down stock based comp as a percentage of revenue over time as well. Here I won’t get into all these examples, covered these at our most recent Analyst Day, but we are seeing a groundswell of opportunity and activity and excitement across the company. This is just using kind of my organization, G and A as an example of some of the types of use cases that we’ve already rolled out or are working on around across the organization, some of the different ways that we’re using Box internally to kind of to drive more efficiencies and productivity.

So whether it’s just some of the core capabilities around things like Box Hubs to be able to organize and then get information to our internal stakeholders faster to the ways that we can dramatically reduce the time it takes to fill out security or compliance RFPs, and we do the same thing in sales using AI to the way that we are even generating code as some of the folks in security business analytics are also very technical and getting the same benefits that you’d see from engineering teams are just a few different examples of what we’re already seeing in the business that we’ve been really, really pleased about. And then lastly, just looking at kind of that long term target model, have already hit many of these elements. So I won’t go into too much detail, but again, expect to drive steady improvement on both our overall revenue growth rate, getting into that 10% to 15% range and then mid-30s operating margin with leverage really across all parts of the business, especially kind of which really builds directly on a lot of the key growth initiatives and then efficiency initiatives that I outlined. So happy to go into a lot more detail with whatever Jason and you all have in mind.

Thanks.

Jason Ader, Analyst, William Blair: Okay. Thanks, Dylan. Maybe to start out, you guys just reported earnings last week, correct? Yep. So maybe you can just talk about some of the puts and takes when the stock popped nicely.

So people obviously liked what they saw and heard. Let me just talk about kind of the quick recap of the key takeaways the earnings call.

Dylan Smith, CFO, Box: Sure. Certainly really pleased with the early momentum that we’re seeing this year. And I think that shows up and I think it was maybe most appreciated with some of those pretty clear leading indicators on the top line that the strategy is working and that enterprise advance and a lot of things that I’ve been talking about today are really starting to show up. So in everything from outperformance on the billing side to short term RPO were some of the financial highlights. And I think from a strategic point of view, what we really wanted to emphasize was just I think the customer excitement and demand that we’re seeing around all of our AI capabilities.

So that’s showing up in some of the elevated early renewal volumes, just as a lot of our customers are looking to start using those newer capabilities as quickly as possible. And we are starting to see some consistent and pretty exciting use cases emerge around Enterprise Advanced as well. So we’re still very early days, just the quarter ended with Enterprise Advanced generally available for just about three months, but already starting to see some pretty nice traction and pipeline building there.

Jason Ader, Analyst, William Blair: Got you. And what are people wanting more? What do they want to see out of you guys going forward to kind of help them get comfortable with that kind of long term thesis?

Dylan Smith, CFO, Box: Yes, I would say largely just continuation and more of a trend and consistency on some of those leading indicators, especially because not just this quarter, but for the last little while, have been some noise in some of those metrics from FX and timing and things like that. I just think some of it is just a continuation of what we’re seeing. And the reality is also, I think, as I’ve discussed today, a huge part of our excitement about the business and our confidence in the long term growth does come down to enterprise advanced traction and the other implications on our business model as that evolves. And so I think just proof points once that’s been in the market for longer and we’re able to share more about what we’re seeing, I think that would go a long way for people as well.

Jason Ader, Analyst, William Blair: And what would you guys say about macro at this point in terms of its impact?

Dylan Smith, CFO, Box: Yes, so far we’ve seen really a minimal impact on our business both in the quarter as well as conversations that we’ve been having with customers and the way the pipeline is building. That said, we know it’s, know, there’s a lot going on out there and then a lot of uncertainty. And so we did explicitly talk about wanting to take a more prudent conservative approach to our expectations in the back half of the year even though we’re not seeing that show up in the business currently.

Jason Ader, Analyst, William Blair: Okay, great. You talked, you threw out a term automated metadata extraction. How many people in the room know what that means? Come on, somebody must know what it means. Automated extraction.

Guy knows what it means. Maybe you can just talk about what that means and like maybe some customer examples of how your customers are using that feature and just overall Box AI? Yeah. So

Dylan Smith, CFO, Box: if you think about virtually any business process that relates to content, you have a file effectively that is uploaded from somewhere and then it goes through some set of reviews, edits, and then ultimately you do something whether it’s, you know, sending off to somewhere else, you know, archiving it in the right place, whatever that might be. And so what AI enable us to do is make it just a lot easier to take that file whether it’s from a mass upload, upload it to a specific folder from you know anywhere to put it into the right workflow and make sense of the information in an automated way and then respond accordingly. So in the case of a contract lifecycle management process, right? You upload a contract, maybe a red line from an active kind of conversation negotiation that you’re having with a vendor or a prospective client. And it will flag here a summary of the changes, here are any problematic terms or terms that are different from the thousands of sales contracts that you have that are similar and then flag that as appropriate.

Or in a more basic or kind of different side of that, maybe in one of these standard files that are uploaded into a workflow, you sense that, hey, there is personally identifiable information in there. And so we’re going to flag that. We’re not going to put that into the normal process. We’re going to send that over to this person to review and make sure that this person should be accessing information. Or you label it as confidential, internal use only and make sure that you can’t set, share external links if it has that sort of information.

So it’s everything from just allowing you to kind of run across a lot more efficiently to kind of protecting the information in your business and going from there. And then there’s just a lot of other fields that when I talk about metadata extraction, going back to the contract example, it can pull out things like the renewal date and here are the terms and here is it has a nonstandard SLA term that we need to be aware of for the future and all the other information about the customer so that whenever you want to run a search to say, okay, which contracts are up for renewal three months from now or which customer contracts have this sort of term, you can very easily pull that up because we pulled all that information out as part of the initial kind of process.

Jason Ader, Analyst, William Blair: And prior to that technology it was very just manual?

Dylan Smith, CFO, Box: One of the things. So it be either very manual or you just weren’t tracking some of that information. So maybe you would know, okay, here’s the value of all my contracts and renewal dates because you had that in Salesforce or something, but for non standard terms, yeah, you might miss those. And we even saw this internally occasionally was, you know, someone would come up for renewal or a customer to have a certain term that we weren’t aware of and found out after the fact that, oh, we should have, you know, alerted them of this. And those things happen all the time in enterprises.

Or if you’re a large company where contracts are the lifeblood of what you’re doing, you might have a dedicated and much more expensive and probably cumbersome point solution for contract lifecycle management. And then, so there you’d be able to save, solve many of the same use cases, but that would be a tool that you’re buying separately to whatever you’re doing to manage your content. And so in that case, Box would just allow you to do it, but more integrated into the other workflows than types of content you’re managing and can run that a lot more cost effectively.

Jason Ader, Analyst, William Blair: Okay, great. Can you talk about your competition and like ultimately what differentiates Box?

Dylan Smith, CFO, Box: Yeah. So we tend to see more often than anyone else in competitive situations, Microsoft is also arguably our most important and impactful technology partner. And then we’re increasingly seeing, because of just how our product capabilities have evolved over the last several years, a lot of the kind of traditional enterprise content management players. So the OpenText, Documentums, Highlands of the world are who are now more regularly seeing. I would say that the differentiation against both groups is really around Box as the only kind of content management solution in the enterprise that manages that whole life cycle of content in a single platform.

Right? So if you are, like with Microsoft, if you were to compare us kind of feature by feature, they’d be able to check many of the same boxes. But in some cases, that’s through a OneDrive or a SharePoint or Teams or if you were kind of building applications on top of Azure, but it’s not really the same architecture even. And so it just leads to a little bit of a clunkier user experience. And so Box is just a much better way to manage end to end.

And because it’s in one system, that just makes the security, compliance, permissions, managing all of that securely and seamlessly a lot more effective, more secure. And these capabilities are built natively into the platform for security compliance, for example. So you don’t need to buy additional bolt on tools to get some of the same capabilities. So that would be at a high level as well as just the openness, the breadth and the depth of the integrations that we have with third party players is another huge big differentiator there. And then that plus a laundry list of others from the legacy players.

Jason Ader, Analyst, William Blair: Any questions from the audience here? We’re going to go up to the which room? We’re going do a breakout in Jenny A. After this, so save your questions for that. I guess I’ll just, if no one has a question, I’ll wrap up with actually the same question I asked on our earnings call, which is what do you think is going be the biggest growth driver for the business going forward, is

Dylan Smith, CFO, Box: it pricing or seats? Yeah, would say pricing we think will probably have a bigger impact overall in the coming years, but certainly a big focus on the seat side as well, especially given some of the use cases that Enterprise Advanced can open up.

Jason Ader, Analyst, William Blair: Right. And what is the price differential between Enterprise Advanced and Enterprise Plus?

Dylan Smith, CFO, Box: We tend to see a 20% to 40% uplift moving from one to the other on a price per seat basis.

Jason Ader, Analyst, William Blair: Gotcha, Good. All right. We will end it there. Yeah go ahead. One last question.

Dylan Smith, CFO, Box: Yeah, so really, I mean, think that’s mentioned briefly, but one of the benefits of Box and why we’re so well positioned for the shift is effectively, we’re just leveraging the same architecture and permissions that are already in place for the core business. When you think about the types of customers that we serve, it’s, you know, Fortune 10 companies across financial services, healthcare and life sciences, the public sector. And so already all of the content, we take that approach. And so we’re very mindful in these agent to agent interactions, what they have access to, the types of things that we’re sending off are very much using that exact same level of kind of sensitivity to our customer information, even going beyond the person identifiable information back to the core content that we’d be opening up to. And we give customers full visibility, full control over that as well.

So extremely granular, customizable permissions in terms of what type of information. And again, that going back to like how information is categorized, classified, you can set labels where this just cannot be used in any be sent, no other agent can call into this for this type of information if you want to go down that route to anything else, types of users, types of systems that can or cannot access Box. Very, very kind of a big part of our offering and how we manage content overall.

Jason Ader, Analyst, William Blair: Thanks, Dylan. Thanks, everyone.

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