Box, Inc. (BOX) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Box, Inc. investor webcast to discuss remote work in the enterprise. [Operator Instructions] And please be advised that today's conference is being recorded. I would now like to hand the conference over to Alice Lopatto, Head of Investor Relations. Please go ahead.

Hello, everyone, and welcome to our call. We appreciate you [ joining us today ] for our special investor webcast. In light of recent events related to coronavirus, our Co-Founder and CEO, Aaron Levie; and Co-Founder and CFO, Dylan Smith, will be discussing Box's strategy to facilitate remote work and business continuity for customers, employees and the broader community, followed by a Q&A session. Our discussion is hosted and moderated by Phil Winslow of Wells Fargo Securities. During the course of today's webcast, we will be making forward-looking statements regarding our expected financial performance and future products and services. These statements reflect our best judgment based on factors currently known to us, and actual events and results may differ materially. Please refer to risk factors of documents we share with the SEC, including our most recent quarterly report on Form 10-Q, for information on the risks and uncertainties that may cause actual results to differ materially from those set forth in the forward-looking statements we may make today. These forward-looking statements are being made as of today, March 19, 2020, and we disclaim any obligation to update or revise them. In addition, during today's presentation, we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for or in isolation from, our GAAP results. With that, let me hand it over to Phil.

Great. Thank you, Alice. And first off, I just want to say that my thoughts and prayers go out to everyone on this call and their families during this really unprecedented time in our lives. Stay safe, be well, take care of each other. Now before we get going, I also need to let everyone know to please see our latest research note on Box or go to www.wellsfargoresearch.com for pertinent disclosures. Now with all that said, and Alice, I didn't do my disclosure as well as you did, but -- and yes, Aaron and Dylan, thank you for taking the time to talk with us today during what I'm sure is a very busy time for the 2 of you as executives.

Thank you, Phil, for hosting this.

Thanks, Phil.

Now Aaron, let's start with you. Since some of the people on today's call might be new to the Box story, can you give us a quick overview of Box and a little bit of your history? What you've been working on? And where are you today?

Yes. So Box was founded about 15 years ago with a really simple and kind of powerful idea, which is we wanted to let people be able to securely share files and collaborate from anywhere at any time with anyone. And we very quickly, after launching the business, pivoted to focus exclusively on enterprises. So today, fast forward, we have nearly 100,000 businesses globally that leverage Box as a secure cloud content management platform and really to solve a range of use cases, around being able to collaborate with their partners and across their supply chain, being able to enable employees to access data from anywhere, being able to streamline and automate workflows around their business. But fundamentally, anything that deals with content or documents or media files, we are the leading cloud-based provider of content management in the enterprise for enterprises that want to be able to enable that modern digital workplace experience. And so now, obviously, more than ever, this is a massive factor in how businesses are going to be able to operate in the future. And so we're certainly -- we're having this conversation certainly in a very significant way with our customers right now.

Now obviously, right now, it's a challenging time for everyone, which is obviously the reason why we decided to do this call. And before I go into the questions about how Box is enabling remote work for its enterprise customers, can the two of you talk a little bit about: One, how your company is doing; two, how is morale; and then three, how is business continuity being maintained?

Yes. So we were kind of a little bit, I guess, ahead of this issue. But also in watching it, we saw some early signs of some of the challenges just due to the global nature of our business and where we had some early visibility into this. And so we put together a pretty quick rapid response team internally. We have a very robust and mature crisis management function, given the nature of customers that we deal with and the kind of compliance that we focus on. So our crisis management team, many weeks ago, got together and figured out what our response needed to be for our employees and for the whole organization that constitute everything, from our people and HR functions, infrastructure and operations teams. And we launched into a multi-pronged effort to, first and foremost, make sure that our employees were going to be able to continue to work in a very safe and healthy way. That launched into a remote work and work-from-home strategy. We benefit from the fact that our -- all of our IT effectively is already in the cloud. So we're big users of Zoom. We're big users of Slack. We're big users of Okta. We're obviously big users of Box for all of our content. So the whole business on a dime can quickly pivot to being able to drive work from home for our employee base without any disruption in our actual work styles, which was incredibly helpful. And then the next big focus was really on our customers. So how do we make sure that our infrastructure is continuing to maintain its resilience and uptime and security and reliability? And how do we make sure that we're supporting [indiscernible], first and foremost, in terms of our partnering with them, making sure that they have all of the help and training and support that they need to be able to get through this challenging time? So first is make sure your employees are protected and safe, and that the business can continue on its operations. And secondarily, how do we make sure that we're helping all of our customers out through this incredibly difficult period? And that, again, is going back many weeks ago. And so we've been in kind of full-on mode in this way of working now for a few weeks.

Great. Now let's build on that last statement you made there in trying to focus on how your customers are doing. You're in a unique position right now with a remote work technology that [ enterprises ] can adopt during this time. But at the same time, almost all the economic -- macroeconomic forecasts are calling for a recession. What does this all mean to Box when you put it together?

Yes. So I think we're in a fortunate position, which is we are helping customers with their business continuity challenges, their remote work challenges, their collaboration challenges. We've gotten a number of -- we launched into a series of efforts internally to make sure that we could help our customers right now. One was, as an example, we announced to all of our enterprise customers that any usage overages that they want to be able to do in terms of adding more users, more activity for a 30-day period would be completely not charged for. So for anybody that had unplanned work that they had to do or, [ first ], in remote work, we wanted to make sure that there was no friction in the typical IT procurement process to be able to limit them from using Box. So we instituted a bunch of measures to make sure we have the flexibility to help our customers in this super difficult time. We heard a resounding amount of feedback from customers during that of how appreciative and helpful that was. In many cases, we heard from many organizations, many Fortune 500 companies, that Box was a healthy business continuity strategy and how helpful we've been able to be during this time of crisis. And then there's a lot of customers that maybe were midway through a deployment or haven't fully standardized on Box, where we have to really go in and lean in with them right now and make sure that they're getting all the support and all of the training and enablement and use cases and best practices in a very, very urgent -- in a very, very urgent time frame because they're having to compress, in some cases, 12 or 18 months of an IT strategy in just a matter of days. And so we've been very, very focused on helping customers with that. So I think it's a little bit early for us to have visibility into the long-term economic impacts from an IT spending and IT procurement standpoint. So we're not in a position to have a good sense of what the sort of medium- and long-term ramifications are in terms of IT spending. But from where we sit right now, our focus is on helping our customers. And we're seeing a lot of really, really great use cases in response from customers because of that. Focus #1 is on our nearly 100,000 customers leaning into that customer base and making sure that they're supported, and we're getting really good feedback on that front.

Yes. Great. Thanks, Aaron. Dylan, a question over to you. I mean obviously, I understand it's early in the quarter and, obviously, super early in the fiscal year to tell. But what are you hearing from customers? What are you hearing from your salespeople and partners?

Yes. So I'd say that, as Aaron mentioned, I think from customers' overwhelmingly support and appreciation and I think in the way that we responded quickly to this is one of the first things. More broadly, in terms of the environment, while our pipeline remains very healthy, although just like any other enterprise sales company, we're not immune to the risk due to the uncertainty and disruption that many of our customers are experiencing. So as Aaron mentioned, it is still a bit early to assess the full impact that COVID-19 will have broadly and in our business. But we are very well positioned to support this remote working environment both in terms of how we run our business and due to the nature of what and how we sell. So as Aaron mentioned, as our customers are transitioning to this new way of working remotely, we are seeing a lot of them reach out to us and engage very closely to help them manage through these challenging times. And then as a reminder, roughly 70% of our new bookings even come from existing customers. So that's where our primary focus and conversations have been. We'll continue to monitor the situation very closely, and we'll provide additional comments. But as of now, we have not seen significant changes or disruption. But we're very closely and, as Aaron mentioned, primarily focused on assessing the needs of our customers and the situation broadly to see how we can best support them.

Got it. Now let's focus in on that go-to-market. Obviously, enterprise software sales [ relations ] have always been pretty hands-on. I guess a few questions here. How different is the sales process when it is all virtual? Can it be effective in your opinion and why? And how will you attract new customers in this environment?

Yes. So great question, and this certainly ties to a lot of the changes that we had already been instituting over the past 6-plus months. So if you recall back at our Analyst Day, we talked a lot about our land-and-expand motion, really focusing on the run rate business of $100,000, $200,000 deals, continuing to upsell our customers in a pretty methodical fashion. That's a strategy that Mark Wayland implemented, our Chief Revenue Officer, almost day 1 that he showed up. You saw that in the results in Q4, where we did 112 deals over $100,000 versus 90 for the year prior. So our run rate business of $150,000 deals are exactly kind of core to this inside-led, very, very efficient sales motion where a lot of times you're doing most of the selling in a few conversations because it's really about seat expansion. It's about being able to cross-sell products. You still have to get to the same number of constituents on the customer side. So you've got to go to security. You have to go to a line of business. In some cases, you have to go to VP of IT. But it's a sales motion that is very consistent with being able to do that in a virtual way or in person, not a lot of impact or disruption, we believe, between those 2 types of sales motions. And then as an organization, our -- we've been on Zoom for years. Our sales organization has already been able to do virtual selling really since the founding of the company. We have a large inside sales force in our SMB and midmarket businesses. So obviously, no change in how that sales motion works. And then maybe the other thing I would point to is, we haven't talked about this as much on earnings calls or prior presentations. But our digital engine and our self-serve engine has become a bigger focus of our company over the past few quarters. And so we are seeing that as a channel that will be hopefully very robust during this time period, where maybe you'll have fewer sales conversations or in-person meetings. And so if any customer can buy online at any time, we see a healthy degree of volume coming in through self-serve in low- and no-touch kind of ways. We are continuing to optimize that self-serve engine. So we're constantly doing A/B tests and pricing tests and ways of making sure that we reduce friction in the sign-up process and the sign-up flows. So we have a bunch of programs right now to make sure that as much across the business that can be made self-service is done in a very, very clean way. And that would be, again, another area of mitigation for us. But overall, in between self-serve, the land-and-expand sales motion and the fact that 70%-plus of the revenue will come from existing customers, I believe that from a business model standpoint, we have a lot of the components for a high degree of resiliency through this climate.

Got it. Now Dylan, let's flip over to you for a moment. At a high level, how should we think of these initiatives?

Oh, and actually, Phil, do you mind if I just say one more thing, sorry?

Oh, sure, yes, go ahead.

The only other thing I would just add and point to is the adoption of Box is also fairly efficient as well. While we take a lot of pride in our professional services organization and being able to have amazing adoption patterns and consulting within Box, it is a very small percentage of our revenue, which is, as a corollary, means that Box is deployed very, very efficiently, so with that as an example, through virtual and via video. But overall, the ability to adopt Box happens in a very, very seamless and efficient way. So these are not sort of 3-, 6-, 12-month long, deep system integrator consulting engagements that have to be enacted. So we're also very fortunate in that the ability to adapt and light up and scale Box, we probably are in the upper 10 percentile of products in terms of the ease of adoption once you do drive a deployment.

Yes. And then just to build on that briefly, I would note that even on the professional services side, with our Box consulting team, we already began delivering many of those packages over the phone and through kind of video conferences as well. So for that run rate body of work, this was already the way that we've been operating.

Got it. And I guess, Dylan, just to follow up with you on that. At a high level, how do you think about these initiatives flowing through the P&L, particularly the bottom line? Does this change at all how you think about your guidance?

So again, I think as it relates to the top line impact, it's a bit early to assess based on how the situation continues to evolve, and we're monitoring that situation very closely. And we'll provide additional commentary on our Q1 earnings call. I would say that on the bottom line targets, the overall approach and our expectations for the year are still broadly in line with what we had laid out previously. We still expect the majority of the leverage that we drive this year to come from sales and marketing. And we're also having -- are in the midst of executing several initiatives to improve our gross margin as well. So as we navigate this dynamic situation, we're taking a very prudent approach to our spending, and we remain committed to delivering the FY '21 operating margin targets that we'd laid out on our last earnings call.

Got it. Thanks. Now I know the focus of this call was going to be on Box's strategy to facilitate remote work and business continuity. But also I wanted to ask you some higher-level questions that I often get from investors since we do have the both of you here. I guess firstly, could you talk about the overall trends that you're seeing in both, call it, the enterprise file sync and share but also the ECM, enterprise content management, markets? And how are the competitive dynamics evolving here?

Yes. So this is -- I mean we certainly were -- as we've already talked about, there's this convergence of markets that we've seen for a long time, which is you have the legacy ECM products, which are document management, workflow automation, content management systems. They were not built for a modern way of working. These are legacy on-premises systems that, in many cases, were implemented 10, [ 15 ] years ago, running in data centers on legacy infrastructure. So very much a technology market that is not enabling secure, simple, remote, collaborative work. And then obviously, you have the cloud-based, more end user-oriented products, classically seen as enterprise file sync and share. And in that part of the market, we've seen that these products are fantastic for end users and personal storage and sharing, and it's obviously a market that we've historically been a leader in. But the features don't tend to scale as well or be able to support broad enterprise use cases of workflow automation and advanced data security, threat detection, et cetera. So we really see this sort of almost convergence of 2 big ideas, which is, "I need to have the security, the workflow, the content management capabilities of maybe the legacy approach but done in a modern way. But I need a simple, end user-driven user experience tool that employees are going to just be able to adapt seamlessly." And that's really our vision for cloud content management. And that's what our road map has been very, very focused on. So I think that to the extent that remote work and business continuity through the cloud is a sustained focus of businesses and of boards and of CIOs, I think this will be maybe the final catalyst that says your legacy ECM system is just not going to work for this modern approach to business. And you don't have the level of continuity, you don't have the level of seamlessness that you need to be able to fully run in the cloud. And so that's, I think, going to be a macro tailwind over the next few years, as CIOs recognize that they have to be prepared for a new work style and they have to have modern technology to help with that. One other thing I would just throw in there is we've talked a lot about our add-on products and our differentiated capabilities. Shield, which is our advanced security product for threat detection, data classification, we think, is going to be a good [ differentiator ] for the product line because as you move to remote work or distributed work, all of a sudden, data security becomes an all-new challenge, which is you might have devices that are not corporate-owned or don't have the same kind of security policies on them as the devices or networks that people are working from within an office. And so that ability to protect and have insight into what is happening with your data as it's flowing inside and outside your organization becomes very important. So we see this as, again, an area where Box's product differentiation as a multi-tenant, cloud-based architecture with data security built in, workflow automation built in, data governance built in, we think is going to be a very powerful value proposition for customers right now. So that's obviously where we think the categories shake out as it relates to this modern IT stack that we expect will continue to evolve pretty rapidly.

Yes, Aaron, that was super helpful. And just to continue to dive into that. Obviously, you talked about the sort of dynamics from sort of the 2 markets. But do you think we should expect enterprises to standardize on one vendor for both sort of the sync and share capability and the ECM functionality? And specifically, what is the benefit of having both functions from one vendor on one platform?

Yes. So I think some of this is philosophical to the individual IT organizations. But if you want to have a very simple user experience for people to be able to share and access files from anywhere and be able to have the right security and governance and collaboration on that data, then you really have to have one platform. And there's really no -- there's no dividing line between ECM and EFSS, and that's obviously what the cloud content management value proposition is from Box. Some organizations maybe haven't sort of -- don't share that philosophy or it's not a big priority. And so they still maintain legacy ECM systems as well as deploy EFSS tools. Maybe there's legacy business processes that just haven't been migrated to the cloud yet. And so we know there's a variety of reasons why some customers won't have these 2 markets or technologies converge. But when you look at a modern enterprise that wants to be able to run with a full digital stack and you want to have employees be able to work from anywhere on any device and collaborate with anyone, in particular, people outside of the enterprise, then all of a sudden, you need to have a content platform that can support the needs of the end user as well as make sure it's tied into your business processes. And that's where we think cloud content management ultimately is able to shine as a new category that really goes and reshapes some of these other approaches. But obviously, that's our vision that we've been really kind of pushing on. 100,000 -- nearly 100,000 customers agree with that vision, but we know there's certainly more work to do in getting that out there. And that [ has ], for Box, certainly, during this time, is how do we help CIOs and IT organizations see the impact and the benefit of a single, simple solution for being able to do secure cloud [ content work ] on one platform for their content.

Got it. Now speaking of the ECM market, how is customer reception to Box Relay 2.0? And I know it's still relatively new, but how should we think about the evolution of Relay 2.0 as a product just going forward?

Yes. So Relay 2.0, which is our natively built workflow automation solution built directly into Box on our code base with our user experience, is a step-function change in terms of Box's ability to do workflow automation directly in the platform. And so we suspect as -- certainly, we saw this pre-coronavirus. We expect to see it post, which is as companies want to be able to automate more of their business processes, make that review process a contracting review process, a client onboarding process, you want to be able to have a series of workflow steps, maybe it's tasks being kicked off or being able to have automatic ingestion or movement of data to the right people, all of those things need to be automated. They need to have an audit trail. It needs to be compliant. And so Relay is our built-in solution to be able to power those experiences. And we want to make sure that Relay is deployed to as many customers as possible. This is why it's now in both of our product suites. We fundamentally believe this drives further stickiness when customers tie us more to business workflows. And so ultimately, it's a major focus area of ours in terms of helping customers streamline and digitize and automate more of their business processes with Box.

Got it. Perfect. And then I'm going to ask one last question before turning the call back to Alice to poll for questions from the audience. But the suites, the bundles that you rolled out over this summer, obviously, Relay was a -- is a key portion of those. But can you walk us through just initial customer reception of these suites? What do you think is the impact is going to be in terms of the go-to-market motion but also just your thoughts on sales efficiency?

Yes. So overall, suites are absolutely reducing the friction of being able to sell our add-on products. Instead of having to have point-to-point sales conversations for selling Box Governance to the legal team and Box Shield to the security team and Box Relay to various lines of business, we can now do that in one accelerated way by pulling all the products together. It has obviously a material increase in terms of average contract value and price per seat when customers do elect to buy the suite. And so this is going to become a much more common and core part of our go-to-market motion going forward, is to make sure that we're always positioning the suite upfront in the sales conversation and get more and more of our customer base deploying suites. And even right now, this is obviously going to be very important because you need to be able to have the right data security architecture. You need to be able to drive workflow automation. You need to be able to have data governance in -- with all of the collaboration use cases that are starting to emerge with the remote work. So suites will be just as fundamental to our go-forward strategy as it was last year.

Great. All right. With that, thank you, again, Aaron and Dylan. And Alice, I'll turn the call over to you for the audience for Q&A. [Operator Instructions] So Alice, over to you.

Yes, sure. So first question on the webcast, can you comment on usage trends on the platform in the last 2 weeks? Is there a noticeable increase?

Yes. So we're watching usage trends very, very closely. We're seeing great usage from our existing customer base, which is great to see. In multiple days over the past couple of weeks, we had record levels of uploads of data, which shows that people are definitely migrating more data to the cloud right now. We think that's a sign of companies probably launching pretty rapid remote work efforts and saying, "You got to get your data to the Box to be able to work from anywhere." We're obviously not seeing kind of geometric kind of events like on the Zoom front just because video conferencing is so fundamental to being able to instantly launch into this new way of operating with universities and schools shutting down and all that. But we are seeing healthy usage patterns right now, which is, for us, obviously, a sign that we're fundamental and mission-critical for the -- our current customer base. And now we obviously want to do whatever we can to make sure that there's no friction or limit in driving up usage even further.

Okay. All right. So...

And maybe just to add to that. Sorry, Alice. Maybe just to chime in. As it relates to the usage and what we've done to get ahead of that as well is, again, today, we do support tens of millions of users and have done a lot to build out kind of not just the capacity that we've talked about related to the data center migration projects over the last several quarters, but because the partnerships that we have with various public cloud providers as well, we feel very confident in our capacity and ability to handle increased volume as a result of the trends that we're seeing around the remote work.

Actually, Alice, I've got a write-in here on my e-mail that I'll read off to the team. I guess, I think this would be to both of you. One of the areas that you highlighted on the Q4 call was controlling head count and reallocating investments from low RRI regions into higher RRI regions. Can you walk us through the room for improvement for new renewal and upsell economics in the context of these 2 pillars? Does the macroeconomic outlook change any of your allocation plans?

Yes. So I would say that the overall plans in terms of that reallocation to really invest in some of these higher-performing, more predictable, more productive regions and taking those resources out of those lower-performing regions is still very much the plan. Certainly, based on the environment in any given geographies, the ability to go out and recruit folks in these uncertain times could create a little bit of an impact in terms of the timing and being able to fill some of these roles. But the overall strategy has not changed there. And as it relates to the dynamic between landing net new customers versus expansion and renewals, again, as a reminder, the economics associated with those 3 types of sale are very different. So it's much more efficient to expand an existing customer versus signing up a new customer to Box for the first time and then even more efficient to renew an existing customer, and would say that as it relates to the territories and the strategy of where we're placing our bets from a go-to-market engine point of view, we tend to see much more mature markets and customer bases in the more productive regions. So that is one of the big drivers. As we had mentioned earlier, we expect an even higher-than-normal percentage of our new bookings that come from existing customers versus net new this year, upward of 70%. And that is in large part connected to the fact where we are going to be placing these bets and growing is in the areas where we do have healthier and larger customer bases.

Great. Thanks, Dylan. We've got one other -- and we've got another question on the call. Box has a good presence in Japan, which was relatively early in corona. What did you see in that market as things begin to normalize? How have the conversations changed?

Yes. So we've obviously seen fantastic performance over Japan over the -- in Japan over the past couple of years. We were very early to sort of recognize the coronavirus, maybe, challenges that came or coming in through Asia, and we were all hands on deck in Japan. I think many of the conversations that we've been having with customers have already been about new work styles, is a term that they refer to it as, which is really around distributed work, collaboration, being able to work from anywhere. So our sales motion was already really tied to being able to tie it to -- really tied to this new remote work and distributed work style. Overall, I think Japan, as a country, has seemingly dealt with the pandemic in a very swift way. I think the national health system that they have was super effective at dealing with a bunch of the challenges. So I think that they appear to be on the other end of the process right now, kind of emerging back into more normal operations, still with more work from home and distributed work but certainly not the level of disruption and maybe dislocation that we've seen in the past week in the U.S. So we think that Japan will continue to be a very sturdy part of our business. And I feel pretty confident in what they're doing to respond to this, making sure that they're supporting customers. Certainly, a lot of new conversations coming up because of this very immediate and acute issue of distributed work.

Actually, Alice, I've got another write-in here. It's about AIML. Aaron, can you talk about the value of your technology and go-to-market partnerships, IBM, Microsoft, et cetera? And how Box is positioned to enable AIML for -- in a content management environment?

Yes. So we have an open platform that allows customers to bring their own data models and AI, whether that's hosted in -- with IBM Watson, who's a big strategic partner of ours, in Google or other cloud platforms, and be able to process data, be able to classify content, be able to understand what's inside of images and video and then have productivity or security features that are really based on those AI models. So that's an important part of our technical architecture and our platform. At the same time, we also recognize that AI is really a long-term trend that companies are betting on in terms of transforming their business processes. I think there's been, certainly, especially in this climate right now, so maybe more immediate things that organizations are prioritizing. However, AI, I think, will remain a core part of how they deliver those efforts. So with IBM, in particular, we've got a very strong partnership across their platform. And we're going to work with customers to figure out how do we continue to automate more business processes, streamline more and how do you get humans out of the work stream. AI will obviously be a big macro trend of when you need to be able to have business continuity. And maybe you don't have the same efficacy or effort from the people side, how do you make sure you have automation that can drive that? So I expect AI to still be a big tailwind over the long run for Box and for the rest of software, and we have very strong partners that we're focused on delivering that with.

Great. Alice, that's the last of the write-in questions I've received. So I'll turn it back to you.

Great. There's one more question on the call. How much would you expect the churn rate to increase in a recession?

Yes. Good question, and I'll let Dylan chime in as well. But -- because we're running different kind of model scenarios of various business levels of impact. But I think what we're seeing [indiscernible] are using us for secure, collaborative content management and these modern ways of working. We tend to see a lot of stickiness in customers, especially for those that have had one or more add-on products, which is now the majority of our revenue base as a percentage of the -- majority of our total customer revenue. And so we -- from where we are right now, we see a high degree of stickiness in the product. Obviously, in a recession, you have economic pressure that would drive pricing pressure, as an example, and that would be something that we would have to factor in. And obviously, if customers are going out of business, that's something that is hard to model for at this stage in terms of what that would look like. But in terms of driving stickiness, making sure that we can drive expansion within accounts, offering more value, in some cases, for [ a cost really ], make sure that we're more competitive in this market, these are all the areas that we're incredibly focused on. But we are modeling different scenarios just as we planned the business so we can commit to bottom line target and make sure that we're driving the right level of business performance overall. But I'll let Dylan maybe build on that.

I don't have too much to add. I would note a couple of the big drivers of retention that we're focused on are, first of all, the overall usage and adoption of what a customer has purchased in terms of the seat or user activity levels. And as Aaron mentioned, we are seeing an increase there because customers are increasingly transitioning to this remote work environment and with Box as a central component of that. And then the second big driver is generally the nature of the use cases. And as we've talked about in the past and shared at our most recent Investor Day, we tend to see very different dynamics and retention implications once customers adopt our more sophisticated solutions. As Aaron mentioned, we have a little more than 1/2 of our revenue is coming from customers who have adopted at least one of those add-on products. And in that population, the retention rates tend to be about 2/3 -- the churn rates are about 2/3 lower than customers who are using Box in more basic ways. And that's because the nature of the use cases tend to be very sticky, embedded in core business processes and the like. And so that is kind of what drives a lot of the strategy and our focus on adopting suites in some of our newer products. And so far, we have not seen any kind of additional impact or churn risks emerging. But as mentioned, I think, given how dynamic the situation is, it's a bit too early to tell in terms of how this will ultimately flow through given the different types of use cases and customers that we serve.

Thanks, Dylan. And then one other question. Since you removed the limits of users for existing customers, how much of an increase did you see in users of bigger and smaller companies?

Yes. Great question. We're not yet in a position to kind of break that out. But what we've seen is a lot of customers come forward and say, "Hey, I have this urgent crisis where I need to rapidly move 500 people to remote work, and I don't have the IT procurement ability right now to be able to go through the standard sales cycle for that." And so we wanted to make sure that we had the right flexibility within our policies that gave us that [indiscernible] for any situation like that to be able to help customers with. And so I'm sure there's going to be situations where customers will add 2 or 3 seats because it's maybe a small team that just needs a little bit more support right now. There'll also be situations where people say, "Okay, I really need to be able to burst with remote work in this other environment." And I think when we look at the broad usage trends across the platform, I think you're seeing interesting -- different puts and takes. I mean some industries are disrupted enough that you're seeing far less productivity. And other industries, you're seeing a massive increase and, again, just the amount of data coming into the platform and what people are doing. So I think right now, we're in a very unusual point in the process because the work style is so new, and it's coming at the exact same time as economic kind of changes in business. And so I think, in the next few weeks to months, we'll see what that normalizes out at. And obviously, as we'll have a lot more data to share in terms of what we saw in the [indiscernible]. So we definitely look forward to being able to update everybody on that.

Okay. Since there are no other questions at this time, we want to thank everyone for joining us today. I want to thank Phil for joining us on this call and echo him when I say I hope everyone stays safe and healthy during this time, and have a great rest of your day.

Yes. And let me just chime in on that, Alice. Thank you. Just want to say thanks to certainly everybody for taking the time to chat with us. And again, very, very dynamic situation and stressful situation for many. So I hope everybody is doing okay with that. And know that we are 100% committed on both, of course, the safety and health of our employees but also [Audio Gap] customers during this time that they're getting everything they need from Box. So our commitment remains to building a very strong and resilient business through this time period, and that will remain our focus no matter kind of what kind of challenges we see through this. But I do want to thank everybody for their support and time today on this.

And thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.