Ladies and gentlemen, good afternoon, and thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Box Incorporated Second Quarter Fiscal 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press the Star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one a second time. Thank you, and I would now like to turn the conference over to Cynthia Hiponia, Vice President of Investor Relations. You may begin. Good afternoon, and welcome to Box's Second Quarter Fiscal 2025 Earnings Conference Call. I'm Cynthia Hiponia, Vice President, Investor Relations. On the call today, we have Aaron Levie, Box Co-founder and CEO, and Dylan Smith, Box Co-founder and CFO. Following our prepared remarks, we will take your questions. Today's call is being webcast and will be available for replay on our investor relations website at boxinvestorrelations.com. 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 the X platform at the handle, @BoxIRInc. On this call, we'll be making forward-looking statements, including our third quarter and full year fiscal 2025 financial guidance and our expectations regarding our financial performance for fiscal 2025 and future periods, including our 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 deferred tax expenses, 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, the proceeds from the sale of our data center equipment, 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 may 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 documents we file with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q, 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, August 27th, 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 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 reconciliation with comparable GAAP results in our earnings press release and in the related supplemental slides, which can be found on the IR 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 delivered a strong second quarter with operating results at the high end or above our guidance. This includes revenue growth of 3% year- over- year, or 6% in constant currency, and record gross margin of 81.6%. Our focus on operational discipline drove operating margin of 28.4%, up 360 basis points from a year ago, while our continued investments in growth are reflected in our Q2 accelerated billings growth of 10% year-over-year and RPO growth of 12% year-over-year. Our results show the continued success of building out the most powerful AI-enabled platform for secure content management, collaboration, workflow automation, and intelligence. In Q2, we saw customer demand for Box AI continue to grow, driving both upgrades and new logo wins in Enterprise Plus in order to gain access to Box AI. Customer examples in Q2 include a large U.S.-based law firm and a new Box customer that purchased Enterprise Plus in a six-figure deal. They plan to leverage Box Hubs and Box AI to create easily searchable repositories for their attorneys and other staff. They will also leverage Box Sign, replacing an existing e-signature vendor, to help Box serve as their attorney-client collaboration layer. A leading consumer convenience store in Japan upgraded to Enterprise Plus and expanded its use of Box company-wide to boost productivity by enabling all employees to use Box AI. They chose Box as their content platform to leverage AI and reinforce their security posture. These wins illustrate what has become clear in my conversations with customers, that almost every enterprise is working to figure out how to use AI to enable more productivity from their employees by automating more work, improve their data security, and deliver improved experiences for their customers. And at the center of all of this is enterprise content. You have heard me talk about how 90% of an enterprise's data is unstructured, with most of that unstructured data being enterprise content. Historically, enterprises have not been able to truly get the value from this enterprise content due to years of investment in disparate technologies, where content is scattered across many repositories in the enterprise, among numerous applications, and not built for a modern way of working with AI. At Box, we are fundamentally transforming how companies leverage their enterprise content with intelligent content management. Instead of enterprises investing in fragmented legacy ECM technologies, workflow products, e-signature tools, and security solutions, and attempting to bolt on AI on top of these systems, Box is delivering a singular platform that can power the end-to-end life cycle of content with intelligence built right in. And building on our leadership in secure content management and collaboration, we are now extending our value into workflow automation and intelligence. With Box AI, we can change the equation and enable enterprises to fully leverage their content to gain insights and dramatically increase productivity. Critically, instead of legacy ECM systems that cost a fortune and can only be used in relatively rigid ways, intelligent content management from Box extends well beyond the use cases of traditional ECM systems by offering modern user experiences, integrating with every app, having security and compliance at the core, building in enterprise-grade AI, and being entirely in the cloud. We are seeing more and more customers turn to Box to replace their legacy ECM solution and choose us as a more flexible, multi-tenant, lower cost, and more powerful intelligent ECM solution. With Box, on a single platform, customers will be able to power everything from their secure collaboration externally with clients, to internal use cases, including how they manage their most important digital assets in marketing or sales, how they automate workflows with their contracts or financial documents, and ultimately, how they govern and protect their sensitive records over the long run. Because we can now support vastly more use cases across the enterprise than traditional ECM, and for customers of all sizes, this represents a dramatic expansion of our market opportunity, similar to when Salesforce disrupted CRM or ServiceNow disrupted ITSM. In a strategic move to significantly expand Box's intelligent content management platform, we recently announced the acquisition of the AI-powered intelligent document processing, or IDP, technology and team from Alphamoon. Alphamoon's technology combines leading large language models from OpenAI and others, with proprietary image and document processing technology to intelligently structure documents at scale. Once natively integrated into Box, Alphamoon's technology will further expand the capabilities of the Box AI platform to revolutionize IDP and address the long-standing challenges of metadata creation at scale, and empower our customers with unprecedented new automation capabilities. Once metadata is applied to content within Box, customers can more easily automate workflows like contract management, digital asset management, invoice processing, client onboarding, and so much more. Combined with the technology from our Crooze acquisition earlier this year, Box will be able to transform critical content-centric business processes for enterprises of all sizes, and critical to our success in intelligent content management is our ability to enable Box customers to be on the leading edge of innovation with enterprise-grade Box AI. In June, we announced that Enterprise Plus customers now have unlimited end-user queries for Box AI in notes, documents, and hubs, making it even easier for customers to roll out Box AI across their enterprise. Customers can now focus on leveraging AI to drive value without having to worry about usage caps. In Q2, we also unveiled a new set of features in Box AI, which include access to GPT-4o for products such as Box Hubs, as well as support for new file types, including images and spreadsheets in Box AI. We expect these features will be available later this year and will be included in Enterprise Plus plans. Box AI for metadata is also available in our API in beta for customers on the Enterprise Plus plans. Developers are able to integrate Box AI with custom applications using new Box AI for metadata API functionality to automatically extract key information from documents at scale. When combined with Box's workflow automation tools, customers will be able to automate processes based on file metadata, extract key fields from unstructured content, and save information to external applications such as Salesforce. We also continue to roll out advancements across security and compliance. Over the last several months, we've launched Zero Trust 2.0 enhancements for admins and GxP validation sandbox management, and we are on track to meet FedRAMP High compliance in the coming quarters to expand our use cases in the federal government. Finally, our flexible and interoperable platform is a major differentiator for Box. We are supporting deeper integrations with Salesforce, Microsoft Teams, Microsoft Copilot, IBM Technologies, ServiceNow, and our customers' custom-built applications. Just last month, we announced an expanded partnership with Slack that brings secure AI to enterprise content. Joint customers of Slack and Box can access unlimited Box AI queries directly in Slack, allowing users to ask critical questions and uncover timely insights from their Box files. Now, turning to go-to-market. As I mentioned earlier, we continue to see strong adoption of Enterprise Plus, our multi-product suite offering, with unlimited access to Box AI. In Q2, Suites comprised 87% of our deals over $100,000, up from 78% a year ago. With Enterprise Plus comprising over 95% of those deals, we saw solid suites attach rates in large deals across verticals and all geographies, including record attach rates in Japan. Now, with 57% of our revenue coming from Suites, compared to 48% a year ago, we still have a large opportunity to drive Enterprise Plus adoption. Our Q2 customer expansions and wins with Enterprise Plus include one of the largest marketing companies in the world, upgraded to Enterprise Plus with a six-figure upsell as the organization looks to leverage Box AI metadata and Box Hubs to create client-centric hubs with workflow to reduce the time for teams to come up to speed on new engagements with clients, partners, vendors, and securely collaborate across their ecosystem. A UK-based event design and production company purchased Enterprise Plus with a three-year enterprise license agreement, with a key focus on replacing legacy ECM tools like SharePoint, in order to enhance and streamline their collaboration efforts as they create engaging experiences for their clients. An organization that regulates and creates policies for the construction industry purchased Box with a six-figure deal to replace an antiquated on-prem ECM system. With Box as their modern intelligent content management solution, they expect to save costs associated with their on-prem solution, including hardware, storage, maintenance, upgrades, and support costs. The organization also has plans to integrate Box to their contract permitting system and utilize Box AI with their contracts team. As we power more advanced workflows, in partnership with key system integrators in Q2, we saw a number of wins with large customers across critical focus industries, with the help of these strong SI partners, including the replacement of many legacy ECM systems. Now, looking forward, our go-to-market engine will continue to drive Enterprise Plus expansion, catalyzed by gaining access to Box AI. And we have planned to expand our efforts with critical go-to-market partners, like system integrators, that can expand our penetration into key prospects and accounts and get Box embedded into more customer workflows and retire legacy ECM systems. We are also incredibly excited to host BoxWorks, our flagship customer conference this year on November twelfth in San Francisco, which will also be live streamed to tens of thousands of customers globally. At BoxWorks this year, we expect to unveil major new product enhancements, as well as highlight major partnerships across the AI landscape and system integrator ecosystems. In conjunction with BoxWorks, we're hosting a virtual IR product briefing for investors to discuss these major updates. Now, in the last few months, we have been pleased to announce the appointment of some fantastic leaders with decades of enterprise software experience to our leadership team. This includes Samantha Wessels, who has joined us as President of Box EMEA. Samantha has led successful teams at high-performing SaaS and software companies, including Elastic and Snyk, and large system integrators in EMEA. Another new leader, Tricia Gellman, has joined as our Chief Marketing Officer. Tricia brings over two decades of experience in driving growth and innovation for leading technology companies, including high-growth startups and industry giants like Salesforce and Adobe. These leaders will help us to drive our evolution as the leading intelligent content management platform, delivering AI-powered collaboration, workflow automation, security, and intelligence. Finally, we're also pleased to welcome Steve Murphy to our board of directors. Steve is the CEO of Epicor Software and has had an extensive career in the software industry, a track record of operational excellence, and expertise in the content management market. Overall, we are incredibly pleased with our strong performance and execution in Q2. Our acceleration in RPO growth will continue to drive momentum in the second half of this year and beyond, and with that, let me hand it off to Dylan. Thanks, Aaron. Good afternoon, everyone, and thank you for joining us today. We are very pleased with our strong Q2, delivering accelerated billings growth, as well as record gross margin, operating margin, and EPS. These record results demonstrate both our proven business model and early signs of success from the investments we're making in our intelligent content management platform. Consistent with our key financial priorities, we're continuing to generate operating leverage and execute on our disciplined capital allocation strategy. In Q2, we delivered revenue of $270 million at the high end of our guidance, up 3% year-over-year and 6% in constant currency. We now have more than 1,800 total customers paying us at least $100,000 annually. Our Q2 suites attach rate in large deals was 87%, a new high watermark, and up from 78% a year ago. Suites customers now account for 58% of our revenue, up significantly from 48% in Q2 of last year. We're seeing increasing demand for Box AI and our more advanced capabilities, which has been a key driver of our strong suites momentum. We ended Q2 with remaining performance obligations, or RPO, of $1.3 billion, a 12% year-over-year increase, or 14% in constant currency. This represents a strong acceleration from last quarter's constant currency RPO growth of 8%, driven by the combination of bookings outperformance and longer average contract durations. Consistent with prior quarters, we expect to recognize roughly 60% of our RPO over the next 12 months. Q2 billings of $256 million were up 10% year-over-year and up 9% year-over-year in constant currency, above our expectations for low to mid-single-digit growth. Roughly half of this outperformance was driven by strong bookings, particularly in Japan and our public sector business. Q2 billings also benefited from roughly $3 million in early renewals, as well as a roughly $4 million tailwind from FX versus our prior expectations. Our net retention rate for Q2 was 102%, up from last quarter's net retention rate of 101%, and driven by improving price per seat trends. Our annualized full churn rate continues to remain stable at 3%, demonstrating best-in-class product stickiness with our customers. We now anticipate exiting FY 2025 with a net retention rate of roughly 102%, an improvement from our prior expectations of at least 101%. Q2 gross margin came in at a record 81.6%, up 470 basis points year-over-year, and exceeding our expectation of roughly 80%. In Q2, we were able to sell data center assets that we're no longer using, generating a gross margin tailwind of approximately 60 basis points. We expect to realize a similar benefit in Q3 as we complete the sale of our remaining data center assets. Q2 gross profit of $220 million was up 10% year-over-year, exceeding our revenue growth rate by more than 600 basis points. In Q2, we delivered operating income of $77 million, up 19% year-over-year, once again demonstrating our commitment to generate leverage across the business. Q2's record operating margin of 28.4% was up three hundred and sixty basis points year-over-year, despite absorbing an FX headwind of roughly a 180 basis points. Our rigorous approach to expense management, coupled with gross margin expansion, continues to generate additional leverage in our operating model. As a result, we also delivered a record EPS result of $0.44 in Q2, up $0.08 year-over-year, and well above the high end of our guidance of $0.41. This result includes a negative impact from FX of approximately $0.05. I'll now turn to our cash flow and balance sheet. In Q2, we generated free cash flow of $33 million, up 59% from Q2 of last year. We generated cash flow from operations of $36 million, up 11% year-over-year. Let's now turn to our capital allocation strategy. We ended the quarter with $483 million in cash, cash equivalents, restricted cash, and short-term investments. In Q2, we repurchased approximately 3.9 million shares for approximately $102 million. As of July 31st, 2024, we had approximately $25 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, and our board recently authorized an additional $100 million stock repurchase plan. With that, let me now turn to our Q3 and full year guidance. As a reminder, approximately 1/3 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 weakened versus the yen, and the following guidance includes the expected impact of FX, assuming current exchange rates. Additionally, we expect the non-cash, deferred tax expenses that we discussed previously to represent an impact of roughly $0.01 to GAAP and non-GAAP EPS in Q3 and $0.05 for the full year. Finally, I would note that the seasonality of our second-half expenses is expected to differ from the past few years for two reasons. First, in Q3, we expect to recognize the benefit from data center equipment sales that I mentioned earlier, resulting in lower Q3 cost of sales. Second, this year, BoxWorks will be held in person in Q4, representing a little more than $2 million in Q4 sales and marketing expenses. For the third quarter of fiscal 2025-... We expect Q3 revenue to be in the range of $274 million-$276 million, representing 5% year-over-year growth. This includes an expected headwind from FX of approximately 130 basis points. We anticipate our Q3 billings growth rate to be in the mid-single-digit range. This includes an expected tailwind from FX of approximately 210 basis points, as well as an expected headwind of roughly $3 million from the early renewals that were billed in Q2. As we complete the sale of our remaining data center assets in Q3, we expect our Q3 gross margin to be roughly flat sequentially, representing a year-over-year improvement of more than 500 basis points. Beginning in Q4, data center asset sales will have been completed and will no longer impact our gross margin going forward. We expect our Q3 non-GAAP operating margin to be approximately 28%, which includes an expected negative impact of approximately 110 basis points due to FX. This represents a 330 basis point improvement year-over-year and a 440 basis point improvement in constant currency. We expect our Q3 non-GAAP EPS to be in the range of $0.41-$0.42, a 16% year-over-year increase at the high end of this range. This includes an expected headwind of approximately $0.02 from FX and $0.01 from non-cash deferred tax expenses. Weighted average diluted shares are expected to be approximately 148 million. For the full fiscal year, ending January 31st, 2025, we anticipate revenue to be in the range of $1.086 billion-$1.09 billion, representing approximately 5% year-over-year growth and 7% growth in constant currency. This represents a $10.5 million increase at the midpoint versus our prior guidance, with roughly 2/3 of this increase attributable to FX and roughly 1/3 attributable to strength in our underlying business. We now expect an FX headwind of roughly 170 basis points versus our previous expectations of 250 basis points. We now expect our FY 2025 billings growth rate to be in the mid-single-digit range, an improvement from our previous expectations of a low single-digit growth rate. We now expect FX to have a negative impact of approximately 30 basis points on this year's billings growth versus our previous expectations of approximately a 150 basis points. We are raising our FY 2025 gross margin expectations to roughly 81%, an increase of a 100 basis points from roughly 80%. This represents a year-over-year improvement of 360 basis points. We are also raising our FY 2025 non-GAAP operating margin expectations to approximately 27.5%, up from approximately 27% and representing a 280 basis point improvement year-over-year. We now expect FX to have a negative impact on operating margin of roughly a 130 basis points versus our previous expectations of a 160 basis points. We are raising our EPS expectations for the full year, driven by outperformance and the leverage we've been able to generate across the business. We now expect FY 2025 non-GAAP EPS to be in the range of $1.64-$1.66, representing a 14% 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 I noted previously, as well as an expected FX headwind of $0.12, which is $0.03 lower than our previous expectations. Weighted average diluted shares are now expected to be approximately 148 million, 2 million lower than our previous expectations. As we enter the era of intelligent content management, Box is powering the full life cycle of content in a single platform with native enterprise-grade security and AI capabilities. As Aaron mentioned, we are already seeing the success of this strategy with increasing adoption of Enterprise Plus and its enhanced Box AI capabilities, catalyzing an acceleration in our RPO growth and an improvement in our net retention rate. Additionally, our disciplined financial strategy allows us to continue making targeted investments to fuel product innovation and our go-to-market initiatives, while also expanding margins and returning capital to our shareholders. With that, Aaron and I will be happy to take your questions. Operator? Thank you, and we will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is S tar one if you would like to join the queue, and your first question comes from the line of Steve Enders. Your line is open. Okay, great. Thanks for taking the questions here. I guess maybe just to start, I mean, good to hear the, you know, outperformance on the booking side. I guess great to get a little bit more, I guess, clarity on kind of what you're seeing out there in the macro and deal environment, and if you feel like, there's an improvement going on there versus maybe a little bit of better execution on the sales side. Yeah. So, definitely, you know, we're very happy with the execution in the quarter. You know, the team delivered strong results, really, across segments. I think we still see, you know, some degree of incremental pressure in areas like-- not incremental, but, relative pressure in areas like SMB, and, you know, a couple of kind of regional segments. But when we look at the Q2 performance, it feels like, you know, relatively stable, compared to, let's say, Q1 and the general trends we've been seeing. And overall, I think it was a quarter driven by demand for Box AI and our Enterprise Plus plan. So the teams are very much focused on continuing to drive both new logos and upsells into the E Plus plan, and that momentum just continues, you know, relatively unabated, which is great to see. And customers really doubling down on this idea of having an intelligent content management platform. But I think we're happy with the performance on a broad basis, even though there are some areas where you know we still see some degree of kind of macro pressure in areas like SMB, et cetera. Okay. No, that's great to hear. And then I guess on the AI side of the equation, I mean, I think you called out some pretty solid wins there. I guess, is there a way to, I guess maybe, you know, just slow down maybe what contribution, you know, the AI side is beginning to have in terms of, you know, monetization and the revenue impact? And I guess secondarily, as we think about that, you know, that law firm, when you called out in the prepared remarks, I guess, what kind of drove them choosing Box for their AI use cases versus maybe leveraging some other kind of platform out there? Yeah, so I think, you know, we made a key decision about a year ago on the pricing strategy for AI, and it was really due to the fact that we saw trends in the AI space, where the cost of AI tokens and the underlying AI models were becoming, you know, cheaper and cheaper and more cost-effective over time, at the same time as the performance and powerfulness of those models were improving, and so anytime you have those kinds of trajectories where the technology is getting better and cheaper at the same time, you have to make a decision on kind of how do you want to price and package it, to make sure that you're letting your customers really get the kind of accruing of all that value. And so we made the call to include Box AI in our Enterprise Plus plan, as you know, and with the goal and expectation that what that would do is drive an upgrade cycle for, you know, any customers that maybe were holding out on moving to Enterprise Plus. You know, we had multiple chances of getting them to upgrade for a variety of other features, but for some reason, they still hadn't kind of moved to the E Plus plan. And AI has provided just yet that additional catalyst that is turning out to be a very big component of the plan to get customers into that upgrade cycle. So really, in any particular deal, in this case of the law firm, you mentioned that I mentioned in the remarks, this is really, again, the full portfolio of capabilities. Box Sign included the potential use cases of Box Hubs in the future. And so AI just becomes another kind of core foundational capability that gets that type of customer over the edge to getting a deal done. We had a number of either renewals or upgrades in E Plus in Q2 that were just further catalyzed by customers wanting access to Box AI for all of their employees. If you kind of step back and you think about, you know, any kind of CIO or IT leader right now, they need to be able to have an AI strategy, you know, for their leadership team, for the company, for the board of directors. And so we're making it extremely easy, to say, "Okay, Box is my intelligent content management platform," based on the fact that Box AI is included as a core component of the platform. And so we've just made it, you know, easier and easier for that to happen. Yeah, and this is Dylan. And just to build on that, in terms of where you can really see the impact, currently, with our current set of offerings, is in that suites attach rate in larger deals and our overall, you know, suites penetration, i.e., the revenue attributable to suites, with both of those metrics at, you know, record highs and up about 10 points year- on- year. And then even going forward, once we have our newer, you know, sets of offerings and AI capabilities, we still expect to see the biggest and most direct impact, from those AI capabilities driving, you know, yet another upgrade cycle, to our highest tier plan, as well as Enterprise Plus. And so we will be monetizing AI, discreetly as well. And so that'll be, you know, very clearly connected and directly attributable to AI queries. But we expect the majority of the impact to be coming from customers electing to, you know, move into higher-tier plans. Okay, perfect. No, great to hear, and I appreciate all the extra detail there. Thank you. Your next question comes from the line of Pinjalim Bora. Your line is open. Oh, great. Thanks for taking the questions. One question, obviously, you're talking about a little bit better, it seems like price per seat. But I'd love to hear what are you seeing around kind of the seat growth trends at this point. Is that stabilizing? Do you see any signals of seat growth improving? Yeah, so to your point, you know, really where we saw that uptick in our overall net retention rate was attributable to stronger pricing, which, you know, was in large part due to what we were just talking about, around more and more customers electing to move to our highest tier, you know, our Enterprise Plus plan, driven by AI. On the seat front, we are seeing a relatively stable dynamic and environment there. You know, we have been seeing continued pressure on overall seat expansion rates. And so, while we do, you know, feel confident that those will improve over time, that was not a factor in the most recent net retention rates and that improvement to 102% that we just reported. Yep, understood. And one for you, Aaron. Maybe talk about the reasoning behind providing unlimited AI queries in the E Plus plan. Is that driven by the lower cost to run those queries? Is it mainly? I think you were saying this in the question before, maybe lowering the friction of adoption, maybe just the reasoning behind it. Yeah. And then could there still be some avenue, it sounds like, to monetize power users on a consumption basis? Just trying to think, how you'd kinda manage the gross margins. Yeah, great. So, two factors for why we gave unlimited, and then I'll share one more factor in terms of future monetization. So, the first factor was we wanted to encourage the kind of most seamless and frictionless adoption of Box AI. And what we were finding was some customers were not deploying Box AI as broadly as their sort of internal demand suggested, because they were worried about running over their query limits. And that was kind of the opposite of why we decided to include Box AI into Enterprise Plus. So we really didn't like that friction that we were seeing from some, you know, limited customer deployments. At the same time, and these are, you know, dependent on each other, I don't think we would be able to do this without the secondary factor. At the same time, we've seen the drop in costs of the underlying AI models by probably more or less an order of magnitude just in the past, kind of 12- 18 months. So, you know, the fact that GPT-4o Mini is priced, you know, at a lower rate than whatever the, you know, leading models were just in the past couple of quarters is. You know, we're seeing breakthroughs on a very regular basis in this space. So for us, the models themselves are improving at a rapid rate. The costs are dropping fairly precipitously. You know, competition is alive and well in the model space. That's keeping all of the model providers on their toes, and that is something that we can then just benefit our customers with. The other component is the monetization of more, let's say, excessive use or large volume use. So what we announced was our end user use cases for Box AI were would became uncapped. So if you're a user and you ask a question of a document or a set of documents, that's now included at an unlimited basis in the platform. If you want to do something with our APIs, so read through, you know, thousands of documents, power an onboarding process, extract metadata from a large amount of data, a large amount of content, that's on a per volume basis. We will continue to monetize any of the kind of high-volume use cases with AI, using our platform, and Box AI API monetization capabilities, and I mentioned the metadata aspect of that. That will only increase over time. When you think about things like the Alphamoon technology being baked into Box, you'll see even more kinda high volume metadata extraction use cases, and we will monetize that separately. We still wanna make sure that we are delivering very, very price competitive performance in that. We wanna make sure that we can, you know, get as much market share as possible, but not to the extent that it dilutes, you know, the fundamental underlying margins of the company. Understood. Thank you very much. Thank you. Your next question comes from the line of Brian Peterson. Your line is open. Hey, guys, congrats on the strong quarter, so I'd be curious to hear how the demand environment evolved through the quarter, or anything that you guys could share on linearity and what you're seeing so far in August. Yeah. So I think we saw a pretty healthy linearity in the quarter. Nothing, you know, kind of, to speak of one way or another, you know, our expectations obviously have been embedded into our Q3 guidance and full year guidance for what we're seeing right now, for the rest of the year thus far. Great. And maybe just following up, I know, Aaron, you called out the strength in public sector. Is there any use case or anything prevalent that's really driving that strength, and is it reasonable to correlate some of the AI products or higher price point plans there, and is that what's resonating? Just curious to unpack that a bit. Thanks, guys. Yeah. I think the overall message, probably all taken together, is producing that momentum. When you think about a, you know, traditional government agency, you know, I think our brains maybe, you know, instantly think of federal government, but the state and local space is very vast, you know, highly decentralized, lots of legacy systems. And these are environments where they're running mission-critical work for their state, in whatever capacity that agency is operating in. And they're often on legacy document management and storage technology. And so our platform is really representing a... the first time, in many cases, where, because of compliance and security reasons, they're able to now move to the cloud and be able to do at-scale enterprise content management with intelligence baked in, to power modern experiences for their constituents and citizens and ecosystems. So that message is now really resonating. We've been building up our public sector efforts, again, in addition to federal, at the state and local level as well. And so we've seen, I think, some really nice balanced success across both federal and SLED, you know, internally. And then equally on the federal side, you know, we continue to see large agencies and departments, look toward Box as a modern way to deliver intelligent content management in their environment. And so AI is a part of it, but I think in the case of the government, there's so much modernization that is possible that the whole platform story is very, very compelling. And then the only additional piece, this is. We're not generating revenue from this yet, so it's more upside in the future, but, we are going through the FedRAMP High process. That will open up yet another set of use cases, for our federal customers, for much more, you know, kind of sensitive data. So right now, we're in the federal FedRAMP marketplace, in process for our High application. So you can see that right on the FedRAMP website, so great momentum on the compliance certification process there. Appreciate the color. Thanks, Aaron. Yeah, thanks. And your next question comes from the line of Jason Ader. Your line is open. Yeah, thank you. Good afternoon, guys. I just wanted to ask, as we think about the next couple of years, what from your perspective is the growth algorithm to get you back to double-digit growth? And as part of that question, just wondering, if what your thoughts are on maybe taking a few points out of operating margin to drive top line growth. Do you think that is a potential way to boost the top line? Yeah. So would say, you know, at a high level, as we think about getting, you know, from our, you know, kinda normalized constant currency, you know, pushing into the high single digit growth, you know, range where we are currently, you know, moving up into the double digit range, we do think the majority of that is gonna be coming through and show up in our net retention rates as that moves up a few points. And would expect, you know, at that stage in the coming years, as the macro environment, you know, kind of returns a bit more to normal, to see a pretty balanced contribution between seat growth and pricing. Over the past several quarters, it's been much more, you know, weighted toward pricing improvements, as we mentioned, but we would expect to see a healthier mix, or sorry, a more ratable mix over time, both driven from the macroeconomic improvement, but also as you think about the impact that a lot of the newer initiatives and use cases that that opens up will enable us to sell to customers, so that's where we expect the majority of the improvement, but at the same time, you know, there's some you know markets internationally. You know, we've talked about EMEA in the past, where I think we're, you know, kind of seeing you know less contribution to the business and growth currently you know versus the opportunity. and some other, emerging markets, that we, will think would contribute, you know, a little bit more to the net new logo, and, net new customer growth, part of the equation as well. So those are kind of the big buckets, and can certainly drill into any of those other areas. And then as it relates to the, you know, kind of growth, versus profitability, you know, balance, certainly exactly where we land, you know, in any given year is gonna be a function of exactly that balance. And as we see, you know, a lot of the investments we're making, like we are today, you know, really paying off, we'll continue to invest. And so I think you'll see, you know, as we have those proven signs of success, that we may, you know, kinda change the mix shift of how we improve that, you know, rule of equation between revenue growth and profitability. But we're very confident that we'll, you know, that we will be able to continue to expand our bottom line, you know, regardless of the growth rate, just because a lot of the initiatives that are well underway, that we have a lot more juice to squeeze out of, that we've talked through in the past. Thank you. And then one quick follow-up, just on the M&A that you've done this year. Is there any impact on either revenue or EPS from these two acquisitions? Yes. So, so would say, no, impact, on the, the revenue sides. You know, so not bringing any of that over, you know, from Alphamoon, for example. And then those are, embedded, in the guidance that we provided. And just to get a sense of, of scale, with, with the, Alphamoon, acquisition, we're bringing in or we brought in about 15 engineers, to join the Box team. But, that's all, you know, kind of well, incorporated into the expectations we set. All right. Thank you. Good luck. Thanks. And your next question comes from the line of Taylor McGinnis. Your line is open. Yeah, hi. Thanks so much for taking my question. So the first one is, just when I look at the revenue guide, it implies a slight acceleration in Q4. And I know in the prepared remarks, there were some comments about an accelerating growth outlook. So with the bookings momentum we saw, more stable demand environment and tailwind from some of the emerging areas like Box AI. So is any color you can provide on how we should think about that exit rate as a leading indicator into next year, and the comfort in the drivers behind that? Yeah. So I'd say actually, you know, while we do expect to see, you know, that top line acceleration over time and are seeing some of those, you know, early signals of success in a lot of the initiatives that are intended to drive that, would say that while the back half of this year, you know, we are expecting to see, you know, stronger growth and in Q4, you know, to your question specifically. But I'd also note that, you know, that we expect to see a little bit less of an FX headwind in Q4 just because of how rates have recently moved and, you know, how they've moved throughout the year. So actually, there's not too much of a difference in terms of the constant currency growth that we expect in the back half versus the first half. And in terms of, you know, kind of underlying, you know, growth through the business you know, you look at, again, kind of the constant currency, you know, growth outlook we've provided for Q4 for the full year, to get a sense of that. But we'll certainly provide a lot more color into what we're seeing and specific expectations for next year, you know, once we're, you know, a bit deeper into the year. Perfect. And then my second one is just, if we look at the net adds for the greater than 100K customers, it looked pretty strong this past quarter. So just when you think about what, like, the main drivers of that, whether that be, have been better execution, Box AI, I guess, what would you attribute that to? And as we think about that metric going forward, any, you know, expectations that you guys have on your end, there? Thanks. Yeah. So, we're not guiding to a particular metric on, you know, increase on that front, but overall, we were really happy on Q2's performance in those deals. I think, you know, the general trend is, again, customers really gaining access to Box AI through Enterprise Plus. It really becomes another component that kinda tips the scale in favor of doing the Enterprise Plus upgrade, in addition to Box Shield for advancing data security or Box Governance for better governing your content or some of our more advanced Box Sign functionality. And you'll just continue to see this be a trend, as we add additional capabilities into higher tier plans in the future, we'll be able to go and drive another upgrade cycle beyond the Enterprise Plus plan. But right now, that's the main contributor to our 100K-plus deals. Thank you. Thank you. And your final question comes from the line of Rishi Jaluria. Your line is open. Oh, wonderful. Thanks so much for taking my question. Maybe I just wanted to start off by thinking about kind of the benefits on margins that you've seen from data center sales. Can you just remind us, what is the specific quantification that we've seen on the full year? And, you know, how much of that is extra that you're guiding to this quarter versus last quarter, or is that already contemplated in the prior full year margin guide you gave? Then I have a quick follow-up. Yeah. So for this year, those sales represent about a 60 basis point tailwind to both gross and operating margin in both Q2 and Q3. So for the full year, you think about it as, you know, roughly 30 basis points or so. And that was kinda incremental, you know, relative to our expectations entering the year. So that was upside because of, you know, our ability to execute against that. So all of that is baked into our guidance that we provided today, but was not incorporated into our prior guidance. Got it. Thanks. That's really helpful. And then I wanted to ask a question on Japan. So you talked. It sounds like you're seeing an improvement or an uptick in bookings in Japan. Maybe can you walk us through what is driving that? Because you did have a little bit of a slowdown in the past. Sounds like things are getting better, which is great to see. Maybe walk us through kind of, was there any changes you made? Is it the macro environment, anything else? Thanks. Yeah. Japan performance, we, it continues to be strong. As we've kind of mentioned that, they've remained a steady part of our business, and we've called out in the past, you know, significant remaining upside across the Japanese market, given the kinds of industries that we're still pretty early in penetrating. So things like financial services, pharmaceuticals, the federal and kind of government spaces in Japan. So lots of upside, we still believe, across Japan. And, you know, they have been major adopters, early adopters of our Box AI functionality. So this is a market that is extremely interested in AI and really bringing more automation to their content use cases. So I think, you know, they've been relatively stable on the macro front. Obviously, we just see, you know, continued upside in the kinds of industries that we still have a lot of room to work in. All right. Wonderful. Thank you. Yeah, thanks. That concludes our question and answer session. I would now like to turn the conference back over to Cynthia Hiponia for closing remarks. Great. Thank you, everyone, for joining us today, and we look forward to updating you again on our next call. Ladies and gentlemen, that concludes today's call, and we thank you for your participation. You may now disconnect.