Q4 2024 Box Inc Earnings Call
Participants
Cynthia Hiponia; VP of IR; Box Inc
Aaron Levie; Chief Executive Officer, Co-Founder, Director; Box Inc
Dylan Smith; Co-Founder, Chief Financial Officer, Director; Box Inc
Josh Baer; Analyst; Morgan Stanley & Co
Pinjalim Bora; Analyst; JP Morgan Securities LLC
Steve Enders; Analyst; Citigroup Inc
John Messina; Analyst; Raymond James & Associates Inc
Rich Hilliker; Analyst; UBS Group AG
Jason Ader; Analyst; William Blair & Company LLC
George Iwanyc; Analyst; Oppenheimer & Co Inc
Rich Poland; Analyst; RBC Capital Markets Corp
Presentation
Operator
Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time your lines again will be placed on them, use the coal. Thank you for your patience.
Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the box Inc. Fourth Quarter and Fiscal Year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. So the speakers' remarks there will be a question and answer session. If you'd like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question again, press star one Thank you. I would now like to turn the conference over to Cynthia Tonya. Cynthia, you may begin.
Cynthia Hiponia
Good afternoon, and welcome to Box's Fourth Quarter and Full Year Fiscal 2024 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, Fox Co-Founder and CFO. Following our prepared remarks, we will take your questions. Today's call is being webcast and will also be available for replay on our Investor Relations website at Box.com forward slash investors. Our webcast will be audio only. However, supplemental slides are now available for download on our website will also post the highlights of today's call on the X platform at the handle at Box, Inc. IR.
On this call, we will be making forward-looking statements, including our first quarter and full year fiscal 2025 financial guidance and our expectations regarding our financial performance for fiscal 2025 and future periods, including our free cash flow, 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 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 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 in the documents we filed with the SEC, 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 statements are being made as of today, March fifth, 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 will find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and in related supplemental slides, which can be found on our 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.
Aaron Levie
Thanks, Vienna, and thank you all for joining the call today. Our fiscal Q4 results were in line with or above our guidance as we continue to see signs of stabilization in IT budgets in several of our core markets, we achieved revenue of $263 million, up 2% year over year or 4% in constant currency. Operating margins of 26.7% were above our guidance and EPS of $0.42 was $0.03 above the high end of our guidance in fiscal 2024, we surpassed $8 billion in annual revenue with operating margins of 24.7%, up 160 basis points from 23.1% a year ago. And despite the macroeconomic pressures on IT budgets, which persisted throughout FY24, we are pleased with our ability to deliver margin expansion, reflecting our execution of the strategies we've put in place to lower our cost structure while still investing for long-term durable revenue growth.
In FY24, we continued to bring advancements in our category-defining content cloud platform to the market. We launched box AI. and beta, a new suite of capabilities that natively integrate advanced AI models into the box Content Cloud, we unveiled box hubs integrated with Box AI, which transformed how companies securely curate and publish content and knowledge across their enterprise. And we also made significant product enhancements in security and compliance, collaboration and workflow, while also further strengthening our ecosystem of partner integrations.
As I reflect on the year ahead, it's clear we have an incredibly large opportunity in front of us at FOX. Our mission is to power how the world works together and the way work happens is changing more than ever before. We know that companies are looking to digitize and automate their businesses by modernizing and simplifying workflows, streamlining collaboration and connecting their apps together, they are looking to leverage the power of AI to generate new insights automate their processes and supercharge productivity. And it's critical that they protect their most important data by detecting and preventing threats, avoiding ransomware and meeting compliance requirements.
At the heart of these trends is how companies work with their most important content. And while unstructured data like contract marketing assets, financial documents and other content represents 90% of all enterprise data, most enterprises continue to be burdened by massive legacy and siloed environments for managing this content. And with the recent acceleration of advances in AI, nearly impossible to get the full value of content when it's fragmented across ECM systems, legacy storage, infrastructure and point solutions for years, Box's enabled powerful ways to securely, collaborate and manage enterprise content at scale. But today, we enter a new chapter as a company. And we expect FY25 to represent the most significant set of product expansion and evolution we have had as a company with the combination of AI, our workflow automation capabilities and our advanced metadata driven views we can fundamentally transform how companies run their most important processes. Just in January, we announced the acquisition of Cruze, a leading provider of no-code enterprise content management application built on the box platform for years. Cruise has leveraged boxes API.s to enable advanced enterprise content management and workflow use cases like contract lifecycle management, digital asset management and control documents and regulated industries and more, we were thrilled to team up with Cruise, and we will be rapidly integrating and leveraging the Company's no-code app builder and meta data capabilities to help customers build out custom interfaces and workflows for working with their most important content, combined with Box's upcoming workflow automation improvements, including the expected launch of forms and doctrine this year, Fox will be able to power end to end critical business processes natively without customers having to do any custom development. And with the acquisition of cruise bots will extend into new use cases within our current customers as well as enabling us to rip and replace legacy ECM solutions. Importantly, these business processes are radically enriched with the power of Box A. AI in Asia problem and content management is how companies can apply structure to their unstructured data. For instance, extracting key variables from an invoice or a contract or labeling critical data inside of a digital asset like an architecture diagram or a product image with Box AI, we are now able to automatically label and apply metadata on content at scale, doing the work that took humans minutes or hours performing these tasks now in seconds for a fraction of the costs by having a eye intelligently process documents and content, you can automate tasks and workflows that would have been cost-prohibitive or near impossible to do previously. In FY25, we expect to dramatically advance R-box. I efforts by incorporating new AI models in the box, building new capabilities to help enterprises customize a eye for their business. Workflow needs, enabling customers to ask questions of content in Box hubs and leveraging Box AI more extensively throughout our platform. API.s not only will box A., I continue to be highly differentiated due to our overall security, compliance and governance on box. Our platform neutral approach means that we can leverage tens of billions of dollars in R&D happening across tech by integrating with advanced AI models from various AI vendors to provide the best user experience for box customers.
Consistent with this open approach today, we announced a new integration with Microsoft Azure OpenEye. The expanded collaboration brings box and Microsoft enterprise-grade standards for security, privacy and compliance to AI. So customers can realize the benefits of this groundbreaking technology. We also announced that box AI. is generally available to customers on Enterprise Plus plans starting today since rolling out box AI. in beta to Enterprise Plus customers in November, we have seen a number of existing customers upgrade to Enterprise Plus to gain access to box AI. customer examples in Q4 include a leading construction company which expanded in Q4 to access box AI as they are looking to extract the value from their unstructured content box, applying metadata at scale monitoring trends and contracts, managing agreements and also improving their security posture. With many database classification controls, an American multinational technology company upgrade to Enterprise Plus with a six figure upsell to bring enterprise-grade AI to all of their employees with access to box AI powered by the most advanced large language models. This organization can leverage AI for new use cases or keeping their content secure and compliant.
Finally, one of the country's leading medical support organizations upgrade to Enterprise Plus to use Box a eye to securely curate new content, summarize vast amounts of data and quickly analyze it to report out to clinics that they support now going beyond AI this year to help our customers protect their most important data. Our focus remains on building the leading way to protect and govern the full content lifecycle in the enterprise. In the year ahead, we plan to advance our security offerings to deliver improved threat detection and data recovery from ransomware attacks power, more advanced governance workflows, deliver native archiving solutions, achieve FedRAMP high compliance and deliver deeper integrations with security vendors like CrowdStrike.
Next, our flexible and interoperable platform remains a major differentiator for box. And with our open API eyes, we aim to continue to connect with every enterprise app that our customers use from Microsoft Teams and Slack to Salesforce and ServiceNow and IBM and many more and help our customers leverage our APIs to power their own applications and workflows.
Now turning to go-to-market. We continue to enable new and existing customers to recognize the full value of the box platform with increased adoption of our multiproduct offerings. In Q4, suites represented 81% of deals over $100,000, up from 72% a year ago. We saw continued solid suites attach rates in large deals across all geographies. In Q4, customer expansions and wins with Enterprise Plus included a financial consulting firm who purchased Box with a six-figure Enterprise Plus deal. They will leverage box as their core enterprise content management platform across the entire firm to enable their business to go fully digital while also eliminating spend on legacy agency management solutions.
Next, a top international law firm purchase box to power how they work internally and with external parties. This organization was looking for a new document management solution that provided security, ease of use, integration support and regional data storage, which led them to bots as we look ahead to FY25 and beyond. And as we enter this new chapter as a platform to power intelligent workflows around content, we will leverage our go-to-market motion to bring new solutions to customers, add new pricing models and packages to drive further upsell and extend our platform to a deeper set of partners and system integrators to deliver our more advanced solutions to customers and drive further growth. Further, we plan to ignite more demand gen and pipeline development programs to reach even more customers and prospects, doubling down in key verticals such as financial services, life sciences, healthcare and the public sector, honing our focus on key international markets and more we are focused on taking advantage of the market opportunity in front of us, and these focused go-to-market investments and initiatives are being made to accelerate the future revenue growth of BOX. As you can tell, we are incredibly excited about the innovation we will be delivering to our category-defining content cloud platform in FY25. Our robust product roadmap, combined with our investments in strategic go-to-market initiatives, positions us well for the megatrends that are driving IT decisions and for way more normalized IT spending environment returns. We will be providing more detail on our growth strategy during our upcoming financial analyst day on March 19, we could not be prouder of how the Company continues to execute on the initiatives to drive continued leverage in our cost structure and drive efficiencies across our business. While also setting ourselves up to drive accelerated revenue growth. Dylan will be detailing our progress in his comments, but the resiliency of our financial model has been a strategic differentiator for us as we continue to invest in long-term durable revenue growth as the way work gets done is changing more than ever box is well positioned to capitalize on these megatrends and power the full lifecycle of content in the enterprise.
With that, I'll hand it over to Dylan.
Dylan Smith
Thanks, Sarah, and good afternoon, everyone, and thank you for joining us in fiscal 2024 we delivered another year of strong bottom line improvements while laying the foundation for long-term profitable growth. We generated $1.04 billion in revenue, up 5% year over year or 7% in constant currency. FY24 operating margin was 24.7%, up 160 basis points year over year and up 340 basis points in constant currency. We delivered non-GAAP EPS of $1.46, up 22% from $1.20 in the prior year. We also generated $269 million in free cash flow, a 13% year-over-year increase, which enabled us to deploy $180 million toward our share repurchase program. As a result, we reduced fully diluted total shares outstanding sequentially in all four quarters of FY24. As we continue to navigate this challenging macroeconomic environment, we remain focused on delivering higher top line growth, generating consistent operating margin expansion and executing a disciplined capital allocation strategy.
Turning to Q4, we delivered revenue in line with our expectations and operating margin and EPS above our guidance. Q4 revenue was $263 million, up 2% year over year or 4% in constant currency. Operating margin of 26.7% was 120 basis points higher than our guidance of 25.5%. EPS of $0.42 was $0.03 above the high end of our guidance and up 14% year over year. We ended the year with approximately 1,770 total customers paying us more than $100,000 annually. We continue to see strong demand for our higher value product offerings. Our Q4 suite attach rate and large deals landed at 81%, up from 72% a year ago. Suite customers now account for 55% of our revenue, a significant improvement from 46% in Q4 of last year and from 51% in Q3. Even in this environment where IT budgets are tighter, enterprises recognize the value that our suite offerings bring to help them simplify, transform and secure their content. We ended Q4 with remaining performance obligations or RPO of $1.3 billion, a 5% year-over-year increase or 9% in constant currency. These growth rates were 200 basis points and 500 basis points ahead of our Q4 revenue growth, respectively. This demonstrates both the stronger performance that we delivered in the back half of the year as well as customers longer-term commitments to BOX as a core part of their infrastructure. We expect to recognize roughly 60% of our RPO over the next 12 months. Q4 billings of $379 million were up 6% year over year or 10% in constant currency, above our expectations of low to mid single digit growth, driven by strong early renewals. Our net retention rate at the end of Q4 landed at 101%. While we continued to experience pressure on seat expansion within our customer base, our annualized full churn rate remained stable at 3%, demonstrating the stickiness and value that the box platform provides. We've also continued to achieve an increase in price per seat year over year despite the pressures on IT budgets. As a reminder, our net retention rate is a trailing 12-month metric based on the headwinds we experienced in FY24 that we are now lapping. We expect our net retention rate to bottom out at 101% exiting FY25 with a net retention rate in line with or slightly above our Q4 results beyond FY25 as we benefit from the introduction of new product offerings and plan tiers. And as seat growth returns to more normalized levels, we expect to achieve a higher net retention rate over time.
Q4 gross margin came in at 78.4%, roughly in line with the year-ago period. As a reminder, we fully migrated our infrastructure to the public cloud in Q3 as our on-premises data center expenses wind down over the coming quarters, we expect to deliver additional gross margin expansion over the course of FY25. We also continue to drive leverage across the business through our lower cost location strategy and rigorous cost discipline. We now have 300 full-time employees in our Engineering Center of Excellence in Poland, up 21% year over year and in the coming year, the significant majority of our R&D hiring will be in Poland. These initiatives resulted in 26.7% operating margin or 28.0% in constant currency, an improvement from the 26.0% we delivered in Q4 of last year and a testament to our disciplined expense management. As a result, we delivered increased non-GAAP EPS of $0.42 in Q4 were $0.44 on a constant currency basis compared with $0.37 a year ago.
I'll now turn to our cash flow and balance sheet. In Q4, we generated free cash flow of $82 million, a 10% increase from $75 million a year ago. We delivered cash flow from operations of $89 million, a 3% decrease from $92 million in the year ago period. Capital lease payments, which we include in our free cash flow calculation, were $4 million, down from $11 million in Q4 of last year. We expect capital lease payments to wind down over the next few quarters as we exit our managed data centers as part of our public cloud migration strategy.
Let's now turn to our capital allocation strategy. We ended the quarter with $481 million in cash, cash equivalents, restricted cash and short-term investments. In Q4, we repurchased approximately 790,000 shares for approximately $20 million. For the full year of FY24, we repurchased approximately 6.6 million shares for approximately $180 million or two thirds of the free cash flow we generated in the fiscal year. As of January 31, 2024, we had approximately $64 million of remaining buyback capacity under our current share repurchase plan. We remain committed to opportunistically returning capital to our shareholders and our Board of Directors recently authorized an additional $100 million in common stock repurchase.
With that, I would like to turn to our guidance for Q1 and fiscal 2025. As a reminder, approximately one-third of our revenue is generated outside of the U.S. with roughly 60% of our international revenue coming from Japan. The following guidance includes the expected impacts of FX headwinds, assuming current exchange rates. While we are seeing some pockets of stabilization in most of our markets, our guidance reflects a continued constrained IT budget environment in FY25. Additionally, as our international businesses are now consistently generating profit. In Q4, we have released the valuation allowance against our deferred tax assets in the U.K. And beginning in FY25. We will now be recognizing noncash deferred tax expenses on the profits generated in international countries, which will impact our FY25 GAAP and non-GAAP EPS. We expect this to represent a roughly $0.02 impact to Q1 and $0.06 for the full year. For the first quarter of fiscal 2025, we expect Q1 revenue to be in the range of $261 million to $263 million, representing 4% year-over-year growth or 7% growth on a constant currency basis, both above the growth rate we delivered this past quarter, we expect our Q1 billings growth rate to be in the low single digit range. This includes an expected headwind from FX of approximately 300 basis points. We expect our Q1 gross margin to be roughly 79%, representing a year-over-year improvement of roughly 100 basis points. We expect our Q1 non-GAAP operating margin to be approximately 25%, which includes an expected negative impact of approximately 200 basis points due to FX. This represents a 220 basis point improvement year over year and a 420 basis point improvement in constant currency. We expect our Q1 non-GAAP EPS to be in the range of $0.35 to $0.36, a 13% year-over-year increase at the high end of this range, even as we absorb the deferred tax expenses that I mentioned earlier. Weighted average diluted shares are expected to be approximately $147 million for the full fiscal year ending January 31, 2025. We anticipate revenue in the range of $1.08 billion to $1.085 billion, representing approximately 5% year-over-year growth at the high end of this range and 6% in constant currency. This includes an expected headwind from FX of roughly 170 basis points and is consistent with our preliminary guidance on a constant currency basis. We expect our FY25 billings growth rate to be roughly in line with revenue growth. On an as-reported basis, we expect FX to have a negative impact of a little more than 50 basis points to billings. We expect our FY25 gross margin to be roughly 80%, representing a year-over-year improvement of more than 200 basis points. We are stepping up our sales and marketing expenses to drive future growth, and we expect our FY25 non-GAAP operating margin to be approximately 27%, representing a 230 basis point improvement from last year's results of 24.7% we expect FX to have a negative impact on operating margin of a little more than 100 basis points. This guidance is in line with our preliminary guidance despite an expected incremental headwind from FX. We expect FY25 non-GAAP EPS to be in the range of $1.53 to $1.57, representing an 8% increase at the high end of this range versus $1.46 in the prior year and includes the $0.06 impact from deferred tax expenses that I noted previously. Weighted average diluted shares are expected to be approximately $149 million. And finally, we expect our FY25 revenue growth rate, combined with our FY25 free cash flow margin to be in the low 30s on an as-reported basis and in the mid 30s on a constant currency basis, which includes the combined headwind of a little more than 200 basis points from FX to revenue and billings that I discussed previously. We are encouraged by the stabilization trends we've seen in the last couple of quarters, even in light of the macroeconomic pressures on IT budgets that we saw in FY24. As Aaron mentioned, we are entering a new chapter to power AI driven business processes around content and workflows to take advantage of this opportunity.
Our focus in FY25 is laying the foundation for reaccelerating revenue growth by investing in our innovative product roadmap and strategic go-to-market programs. Expanding gross and operating margin and efficiently returning capital to our shareholders. We look forward to providing further details at our virtual Financial Analyst Day on Tuesday, March 19. With that, Aaron and I will be happy to take your questions. Operator?
Question and Answer Session
Operator
Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question again, press star one.
Your first question comes from the line of Josh Baer from Morgan Stanley. Please go ahead.
Josh Baer
Thanks for the question.
I wanted to ask about the acquisition of cruise very interesting getting into the no-code app development space, but how significantly Are you expecting to invest there really compete in that market versus maybe more limited around use cases centered on content and then is a good way to think about that acquisition, sort of thinking about what you did with the eSignature acquisition kind of evolving into boxes?
Aaron Levie
Yes, I think so a really, really great and important point to clarify. So on Cruises is 100% focused on no code application and sort of customer interface development for content centric workflows. So we are going to remain squarely focused on the content market on. But when you think about the kind of workflows and business processes that enterprises have around content. You have digital asset management, invoice processing, Contract Lifecycle Management on button, GxP, compliant control, document management. And so there's hundreds or thousands of use cases that enterprises have around content driven workflows. And traditionally, we've really kind of had our customers have to go build those workflows and interfaces around those workflows off of box. And so you had to do custom app development and some other kind of platform environment. The crews on kind of independent as an independent company as a start-up really kind of proved out the use case of all of these, these types of use cases being built out on the box platform and a no-code environment. So we've got really excited about being able to bring them on board. And what we're doing now is integrating their technology natively into Box on and in the coming kind of quarters within this fiscal year, we anticipate having a new product that we'll be releasing built on the cruise technology. That will be obviously sharing much more about on throughout the year and that that technology and product will let our customers than in a very native fashion, go and create these types of interfaces and custom applications on top of Box. And so what we've seen from their customer base so far as again, anything from there is major players in the commercial real estate market that use crews for commercial real estate lease portals on. There's customers that are using it as their core portal for any kind of contract management. And so these are the kind of use cases that will now be natively built on the box environment from a monetization standpoint, right now we have continued the business model that cruise had on previously, which is really kind of selling these cruise implementations on a per customer basis for the number of users or seats that that customer needs. And we will continue that while we integrate the technology and then we'll be on really kind of driving crude as an upsell vehicle within our customer base. So unlike Box Sign where we included the core of Box Sign in all of our plans, we won't be doing that with the crude technology. We will be using this as a dozen additional monetization lever on both in our sort of bundled pricing model, but as well as stand-alone capabilities as well. So we're really excited about what this could do from a monetization standpoint, and we'll be sharing a little bit more at the Financial Analyst Day in a couple of weeks around the strategy here.
Josh Baer
Really helpful.
And just anything to call out as far as impact to revenue or expenses this year from cruise?
Aaron Levie
Yes.
So everything is sort of built into the model that we just laid out. We will be investing in the team on certainly to go build out the technology. But given our our philosophy around how we make R&D decisions, that's a that will certainly be prioritized on and But within the cost envelope that we've already laid out. So no changes on that front.
And then from a kind of a revenue growth standpoint, this is really the year of building out the technology in the box on and off, and we expect it to provide a tailwind more in that medium and long term from a pure growth rate standpoint. But overall, if you sort of step back and say strategically what's happening wise, crews, very important. It's really that combination of the no-code application development that cruise brings with meta data views plus the combination of AI and what we're doing in workflow. And together, I think you see a real kind of new chapter in our what our product can deliver for customers letting them go expand, use cases into more of these enterprise content management spaces as well as rip and replace legacy ECM solutions. So there's a nice kind of a combined effect there that we're going to have to drive.
Great, thanks.
Operator
Your next question comes from the line of Pinjalim Bora from JPMorgan, please.
Pinjalim Bora
Yes, thanks. Thanks for taking the questions. Congrats on the quarter, Aaron, what have you seen so far with respect to kind of adoption of Box CIM., maybe in terms of volume of queries that you're seeing within those users that are playing around or have adopted box CI. has that been tracking your your assumptions? And have you seen instances where boxes coexisting with kind of other horizontal copilot at this point?
Aaron Levie
Yes.
So a couple of I'll just do the pieces in there. So first of all, obviously, as everybody knows, we just released box AI. in beta on in Q4 and today is literally the day of GA so on. So it really was some of the more, let's say, leaning in early adopter type customers that they were adopting it for the past quarter, we were looking at what the usage patterns in their use cases and the first set of use cases, we're sort of dominated by the core functionality we have today, which is summarizing documents quickly, extracting information from documents as a user is sort of reading that on. So some powerful kind of end user productivity use cases but on quickly, we got feedback that on probably the biggest areas of excitement on and these are these are things that we've been working on is one the ability to ask multiple documents a question on. So that's the multi document on kind of analysis functionality that we're working on that will be embedded in our hubs product on for customers that have box AII. in the plan that they are in their Enterprise Plus plan, they'll be able to ask questions inside of a hub of any number of documents. And so I think about this use case of having a knowledge base where your sales materials are in that knowledge base or your HR materials or in a knowledge base or on a kind of any kind of equity research data and you can then set up these knowledge bases or hubs make them available to employees or customers or anybody outside the enterprise and then you can ask questions of all of your data and so for for those familiar on the call, that's effectively a kind of a rag as a service type approach that we're going to be delivering right out of the box for our customers. So collect any amount of data, put that into a hub.
And then you can ask questions inside that hub. So it's going to be a really powerful kind of end user productivity business, productivity use case.
And then secondarily, and as I mentioned on this call on probably the big breakthrough on kind of to some extent can expanding use cases, really the ability to structure our unstructured data. And so the ability to take a contract or an invoice or a digital asset and use AI to look at that information and pull out the appropriate metadata on off from that from that content that aligns with our cruise use case, obviously very directly. And so we have a number of customers right now that are in our early beta program, leveraging our metadata extraction capabilities through our API. of one such example that's incredibly powerful is on a loan processing company where they have loan submissions coming in. They need AI to be able to very quickly read a bank statement of uploads from from that client and then ensure that they're associating documents with the appropriate components in their salesforce record and on and being able to completely automate that process is saving them a ton of time and letting them go in actually on issue even more more business and loans. And so when you think about that combination of sales force plus box plus box AI., you start to get to really powerful solutions that we can deliver to our customers. And so this is going to get us more into on even things like the intelligent document processing space. And again, we'll talk a bit more at Financial Analyst Day and what we're going to be doing here on, but using AI to automatically structure, unstructured data on is probably the kind of core breakthrough use case that our customers are most excited about as well as the broad productivity capabilities.
And then finally, with the other kind of copilot and chat diabetes on our focus remains make sure that we're integrated with any of the AI products that our customers are using on. So we're continuing to work through on even better ways to integrate with that with the kind of copilot or assistant products. But we really see those as more just pure individual end user productivity, which is fantastic. And a great use case for content on, but we're going to be directly going after more of the business process type use cases.
Pinjalim Bora
I've got just one quick one for Bill and billings growth in constant currency was very strong coming coming above your guide. Our pure seems like has accelerated both of those billings growth and RPU in constant currency. Seems like it's running ahead of your revenue guide for the year. Maybe talk about the early renewal, how much was that of the influences for billings and more broadly, do you see do you see the 6% growth for this year as kind of a trough level going forward?
Dylan Smith
Yes.
I would say on your first two, right, that for both where we what we delivered in Q4 and our expectations for RPO at least for next year, we do expect those to track ahead of revenue. And I think a lot of that, especially that kind of Q4 performance, in addition to the early renewal tailwinds that I'll address in a bit is really due to the fact that we did see, especially in the back part of the year, a stronger performance overall stabilization and I just feel much better execution. And so while some of the while the environment remains challenging, that is what gives us confidence as we've talked about the stability of calling on kind of future improvements and some of those metrics in various top-line areas, including the net retention rate as it relates to early renewals, piece for Q4 that had an impact of a couple of points to the growth rate. So even adjusting for that, it would have still been ahead of our expectations, both on a reported basis and in constant currency. And as we mentioned, FX was a little bit more of a headwind, but a point more than we had expected going into the quarter so overall, just a kind of stronger quarter in Q4 than we had seen earlier in the year, which is great to see.
Pinjalim Bora
Got it, thank you.
Operator
Your next question comes from the line of Steve Enders from Citi. Please go ahead.
Steve Enders
Okay, great.
Thanks for taking the questions here. Maybe just a follow-up on the last comments there about just kind of what you are seeing in the macro and Indian environment. It sounds maybe this is pretty consistent with what you saw last quarter from some of the stabilization trends.
But I guess maybe as we just want to clarify that. And also as we think about the outlook and then I guess what is kind of being assumed in terms of further stabilization or return them to love them some improvement in how that's beginning to impact some of the net retention bundling that you're calling out here?
Dylan Smith
Sure.
So I would generally describe the overall environment in Q4 as you mentioned, as pretty stable with Q. three. And so there are some incremental signs of life and improvement and some customers know leaning in a little bit more spend getting excited about things like AI in particular. But the reality is it remains a pretty challenging environment. Wouldn't say that that has really turned a corner of a. So what we're seeing what I would say is that our execution in Q4 was stronger than in Q three.
So it's just one example.
We called out in Q three that there were some larger deals in Japan that we had been expecting to close that that didn't ultimately closing Q. three. We ended up closing on just a very strong quarter overall, including those deals, it made a very strong Q4 for us. We saw continued strength and great performance from the public sector in the U.S. And so there definitely I'd say within the business areas of improvement, which led to overall just a stronger outcome versus the prior quarters this year. But would describe the overall environment is fairly stable with what we saw in Q three and then if you looked at FY25 and how we're thinking about that, we are kind of assuming a more of the same that this environment remains challenging. And so we are not kind of baking in any sort of macroeconomic recovery into our FX into our expectations for FY25 and really where we see the the expected improvement in many of those top line metrics. And you mentioned that retention rate is that we're now lapping some of the more challenging periods that we had, and especially those that are trailing 12-month metrics like revenue growth like net retention, where as you move through the year ends with that stability, we expect those metrics to kind of bottom out at those Q4 levels and then for net retention, which you asked about and in particular on you expect to end the year, either at those levels or slightly above depending on how that how that shapes up over the course of the year.
Steve Enders
Okay.
Got it.
No, that's helpful context on it.
And then maybe on Sweden in particular, I think maybe you heard a lot this call around the Enterprise Plus plus tier or a higher and the higher tiered solution on this year. So I guess any maybe changes in how you're thinking about and the tiering moving forward or how you're thinking about some of the adoption of those higher price plans?
Aaron Levie
Yes, on I did kind of call out very briefly in my prepared remarks on that. We will be introducing a higher tier plan. So no change in that strategy.
We'll add more color at our Financial Analyst Day around on again, kind of the contours of that plan on. Again, the only reason we're not we're not being super precise yet is that because we don't want to get ahead of our customers too much on that. And we want to make sure that that we're talking about it more generally when it's fully available on, but you can get the sense that we will have additional higher tier functionality on that will include some degree of higher higher tier AI. functionality, some of this more advanced kind of workflow and content management features with crews as well as other capabilities.
So stay tuned, and we'll share more at Financial Analyst that.
Steve Enders
Retrofit here and now inverted and then in a couple of weeks.
Aaron Levie
Yeah, thanks.
Operator
Your next question comes from the line of John Messina from Raymond James. Please go ahead for.
John Messina
The next question is John on for Brian. Just another one on Box A., I realized just went GA today, but I'm curious as it was in beta, how AI. has impacted the pipeline for suite adoption?
Just any additional color we can get there.
Aaron Levie
Yes. So on. So we saw a pretty healthy number of customers that elected to move into Enterprise Plus where box A., I was one of the biggest or bigger biggest contributing factors of that decision. So on So kind of across a wide range of sectors, size of companies where where, again, they wanted to have a eye on their content for, again, being able to app content.
Question summarize information, be able to access multi document AIS. as hubs becomes available as well as our API.s and and because of our pricing model that we chose that you have to upgrade into Enterprise Plus to have access to that technology so on. So we saw that as a healthy contributor to the upsell motion and on and we now with the product being GA. We expect that just to continue throughout this year and as we get a sense for even higher tier functionality that customers are looking for, whether those are higher performance models the ability, the ability to kind of customize on the AI. in your enterprise, whether that's customer promise or being able to create a custom sort of kind of almost a I use agents or or or use cases in your enterprise on that will be additional. They'll create additional ways that we can monetize and a higher tier plan from here as well.
John Messina
Great.
That's great color there.
And then just on suites adoption overall, I think you've spoken about being on track at 55% of revenue by 2026. Is that still the right way of thinking about the cadence of adoption?
Or is that a I kind of accelerated that?
And then how should we think about maybe the long-term what suites can contribute to revenue. Thank you.
Dylan Smith
Yes, I would say that is for a bit of context going back. We described the suites momentum and penetration overall as certainly ahead of our expectations when we launched those suites and even just about a year ago, pulled in the timeframe in which we expected to have the majority of our revenue coming from suites by a full year to the end of this year. And then as you saw, we now have at the end of the year, 55% of our revenue. So once again, kind of ahead of our expectations. And that's really being driven by a combination of just the way that Enterprise Plus is is resonating overall with the customer base as well as in Q4. And the reason for the big sequential step up was a few larger customers who had had one to two products who were really convinced of the value of our full platform. So they upsold into E-Plus. So kind of combination of the way new customers are being sold off the bat as well as existing customers continuing to move over and then the U.S. And so overall, I would say that you'd have certainly the trends have been ahead of our expectations. We'll provide more commentary in terms of the forward longer-term expectations in just a couple of weeks at the Analyst Day. But is it safe to assume that overall kind of the rate and pace of how we expect that to move in the market is faster, either we expected a year ago or two years ago.
John Messina
Thank you very much.
Operator
Our next question comes from the line of Rich Hill liquor from UBS.
Please go ahead.
Rich Hilliker
Hi.
Thanks for taking my question.
And you're prepared and I think you highlighted construction and health care deal. I was wondering if maybe for my first question, if you could if you could talk about your vertical strategy going forward or anything changed that sort of appetite?
Aaron Levie
Yes, on there's a couple of little cutoffs, but I'll do my best to try and cover the essence of the question, if I don't let me know, but done essentially what we're seeing is and we do extremely well, really wherever there is a large amount of unstructured data in an enterprise where that data needs to be secure. And so it's often a compliance or security kind of driven workflow. There's a lot of collaboration on that data. So needs to flow between systems are between kind of internal or external parties. And so that aligns very well to many of the most regulated industries out there so public sector, financial services, healthcare and life sciences some often and in kind of global manufacturing. So we want to put even more emphasis on some of these key verticals on in the year and years ahead, not obviously to run in any kind of reduction in other verticals, but how do we really double down in some of these key spaces on a I, as an example, has a lot of great additional use cases when you go in mind through all of the unstructured data that those industries work with. So take for instance, in healthcare, life sciences just being able to again automate or drive workflows in a pharma process or in banking for client onboarding and Wealth Management and Services. So so really wherever there's a large amount of unstructured data or content, and you want to build a process that secure it, manage IT governance. That's really what our platform is well aligned for and are well aligned to, and that's where we're going to be kind of further doubling down in that vertical strategy.
Rich Hilliker
Great.
Thanks. I'll leave it there.
Appreciate it.
Aaron Levie
Thanks.
Operator
Your next question comes from the line of Jason Ader from William Blair. Please go ahead.
Jason Ader
Hi, this is Sebastian IG on for Jason. Thanks for taking the question. Just one from me, really around competition. And I'm curious to hear how you think AI impacts the competitive landscape for ECM? And could we see increased pressure from vendors like Google or Microsoft who are maybe paying more attention to their historically limited SaaS offerings. Now that there's a whole new universe of things you can do with that data. Once you apply AI to it, there just seems to be a bunch of new ways that those guys can monetize this FSS. data, especially given their leadership with AI and that could push them to be more competitive with box over the long run. How do you respond to that?
Aaron Levie
Yes.
So I think on there's a there's definitely elements where on the value of unstructured data and content has gone up as a result of AI. And that's clearly a key point in that. That means anybody well prepared to drive innovation on unstructured data. We should see this as a positive. At the same time, it means that a lot of the legacy solutions, the fragmented architectures equally are now under greater threat because companies are going to want to get more value out of their content in this new AI-driven world. And so I think that becomes a positive for us on within the customer base.
And when you take a look at what we've done in the near term as well as what we've laid out from a roadmap standpoint, again, the combination of cruise interfaces for no-code applications, workflow automation and platform neutral AI that can come from any of the vendors that are in the market. That's a pretty potent combination that doesn't exist elsewhere in terms of the names that you just mentioned, so on. So we feel very, very strong about our competitive position, and that's being reinforced every day within customer conversations.
And then maybe only the only kind of note I'd throw out there, one more on the platform neutral approach. One of the big benefits that we have by not being in the model training game is that we actually want there to be a massive race between all of the tech companies on training and delivering advanced AI models because we can then enable all of that innovation for our customers. And so when you're a client of box, you don't have to choose between whether you want the best of Google or the best of Microsoft and OpenEye or the best of Amazon or Entropic our IBN, you don't have to make a decision about where you move your data to get the value of those those capabilities on by having your content in Box, it will work with all of the AI. coming from those different vendors. And so this puts us, I think, in a very unique position. There's not really many cloud-based content platforms that are able to be as neutral as we are, and that's really at the scale that we're at. So we think that's going to be a huge advantage for us in AI Great.
Jason Ader
Very helpful.
Thank you.
Operator
Your next question comes from the line of George Iwanyc from Oppenheimer. Please go ahead.
George Iwanyc
Thank you for taking my questions. With the incremental sales and go-to-market investment you're highlighted for this year. Can you give us a sense of where you're prioritizing the additions and how much is buying into the direct sales force?
Now let's turn to the channel and go-to-market efforts?
Dylan Smith
Yes.
So you can think about the majority of that increase in sales and marketing spend going towards scaling our programs to generate demand, which have been performing very well for us, especially on the heels of a lot of the optimizations we've made in field marketing in our digital channels. We've called out historically and efforts like that, including some investments below kind of laying the foundation to scale the end of the partner and channel ecosystem. And then we will also be investing, you know, kind of given the demand trends that we're already seeing in the sales force and kind of growing that at a moderate clip. But you can make about the majority of the dollars being toward just overall demand generation and versus meal kind of disproportionately scaling the sales force. I mean, you'll hear a lot more about the overall go-to-market strategy as well as details of where we're going to be making some of those investments at our Financial Analyst Day and just a couple of weeks.
George Iwanyc
And Dylan, maybe can you give us a bit more color on what you're seeing in internationally.
It sounds like you did catch up and Japan, but with the incremental FX headwinds that you're seeing there, how is the demand pipeline looking.
Dylan Smith
It still remains very strong and we talk about those areas that we will be growing based on where we are seeing strong outcomes as well as leading indicators.
Japan, particularly the enterprise segment and Japan is absolutely one of those areas. And I would note that even with the FX headwinds that we saw and really over the past two years, our Japan business grew the revenue generated by or by our Japan business grew in the mid 10s over this past year. So continuing to show very strong growth. And that again is even including those FX headwinds. And then you talk about international more broadly broadly would say no real change from what we're seeing in Amea. Do you think there's an opportunity, especially given some of those investments that we talked about earlier and in particular, around the channel ecosystem that could really help kind of fuel and our reach and ultimately kind of the business that we can generate over there. But we're describing the overall, as you are certainly stable but stable at levels that we think are not quite commensurate with the opportunity that we have.
George Iwanyc
Great thank you very much.
Operator
Your next question comes from the line of Rishi Jaluria from RBC. Please go ahead.
Rich Poland
Wonderful or by specialty.
My question just one from me on just turning back to AI. and kind of starting to put some numbers around it. Number one, have you embedded any upside from AI., whether direct or indirect this year that fly 25 guidance and then not to front run the Virtual Analyst Day in a couple of weeks. But as you think about building out your longer-term targets or what are you starting to steal and triple in terms of actual real revenue as you build out those targets?
Aaron Levie
Yes, so on, we'll probably on maybe answer the second one around the financial analyst as you as you have a sense of kind of relaying out the our continued view on the model on, but maybe on the answering the first question will also kind of tied to that on. So we have we've seen the upsell trends that we have from customers moving into on Enterprise Plus with Foxy as an additional catalyst. And we have only about a quarter of data to look at, but we certainly are able to continue to extrapolate that out into this year and done and somewhat beyond.
We also want to be somewhat conservative on around kind of baking that in because there's still variability is still an early product. So I would say it's conservative in the sense of we're not expecting any kind of outsized kind of dynamic because of AI. But and but we are seeing it become a catalyst to drive enterprise plus upsells. And I think the done that maybe the X factor in all of this would be more platform consumption from AI that isn't particularly embedded. And so that's obviously what we're going to be driving this year. And we'll be talking more about some of the platform consumption dynamics that we want to drive. But we see that as sort of upside in the medium term.
Rich Poland
It really helpful.
Thank you for.
Aaron Levie
Thank you.
Operator
Thank you. That concludes our question and answer session. I will now turn the call back over to Cynthia for closing remarks.
Cynthia Hiponia
Thank you, everyone, for joining us today, and we look forward to hopefully seeing a number of you at our Virtual Investor Relations. Jay registration is now live on our IR website, and that is going to be on Tuesday, March 19. Thank you.
Operator
This concludes today's conference call. Thank you for your participation, and you may now disconnect my patience. They are live on our IR website and that is going.
