Box Inc (BOX) 2022 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Box, Inc. First Quarter Fiscal 2022 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would like to hand the conference over to your speaker today, Chris Foley, VP of Finance and Investor Relations. Thank you. Please go ahead.

Good afternoon, and welcome to Box' First quarter Fiscal Year 2022 Earnings Conference Call. On the call today, we have Aaron Levie, our CEO; and Dylan Smith, our CFO. Following our prepared remarks, we will take questions.

Today's call is being webcast and will also be available for replay on our Investor Relations website at www.box.com/investors. Our webcast will be audio only. However, supplemental slides are now available for download from our website. We will also post the highlights of today's call on Twitter at the handle @boxincir.

On this call, we'll be making forward-looking statements, including our Q2 and FY '22 financial guidance and our expectations regarding our financial performance for fiscal 2022 and future periods; timing of and market adoption of our products; our markets and the size of our market opportunity; and our expectations regarding our free cash flow, gross margins, operating margins, operating leverage, future profitability, unrecognized revenue, remaining performance obligations and billings; our planned investments and growth strategies; our ability to achieve our long-term revenue and other operating model targets; the timing of and benefits from our new products, pricing and partnerships; the impact of our acquisitions on future Box product offerings; the impact of the COVID-19 pandemic on our business and operating results; the impact of the KKR-led investment in Box and any 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 the press release and the risk factors and documents we will file with the Securities and Exchange Commission, including our most recent annual report on Form 10-K, for information on risks and uncertainties that may cause actual results to differ materially from statements made on this earnings call.

These forward-looking statements are being made as of today, May 27, 2021, and we disclaim any obligation to update or revise them should they change or cease to be up to date.

In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from our GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release and in the related PowerPoint presentation, which can be found on the Investor Relations page of our website. Unless otherwise indicated, all references to financial measures are on a non-GAAP basis.

With that, let me hand it over to Aaron.

Thanks, Chris, and thanks, everyone, for joining the call today.

I'm incredibly proud of our team in Box and our strong start to FY '22, delivering a 200 basis point improvement in our revenue growth rate versus the previous quarter, 24% billings growth and 20% growth in RPO year-over-year. With the strong momentum we're driving, we are confident in our ability to achieve accelerated growth and higher operating margin now and in the years ahead. As a result, we are raising our revenue guidance for the full year.

Dylan will go over the financial results and guidance in more detail. But before I hand it over to him, I'd like to talk about our strategy, the value that our Content Cloud brings to our customers and the positive impact we are seeing in the market as a result of our strong execution.

Our strategy is well aligned to 3 major trends that are driving the future of work. First, work is being defined by hybrid work environments. In a recent Gartner study, more than 80% of company leaders surveyed said they plan to allow employees to continue working remotely at least some of the time. Even as offices open back up, traditional physical boundaries will continue to blur, and enterprises will need to empower collaboration, both internally, amongst virtual and distributed teams, and externally with partners, customers and suppliers to get work done from anywhere.

Second, we know that the future of business will be cloud and digital first. Customer and partner interaction will increasingly be executed digitally from the onboarding of employees to automating workflows with partners. These workflows must function using multiple cloud-based applications. Access to content in a single unified platform across a multicloud environment is critical to ensure productivity and business success.

And finally, data security, compliance and privacy remain more important than ever. Governments across the world are enacting new data privacy requirements. And as recent cyber attacks, such as the SolarWinds and Colonial Pipeline events have shown, cybersecurity threats are affecting all enterprises and creating significant business disruption.

Content integrity is an absolute requirement. Content is the lifeblood of a company, and any breach that threatens the security of content can cause irreversible damage to the enterprise. At the heart of these challenges is how companies work with their most valuable content. Great content is how the best movies get made, how the best sales pitches are done, how marketing campaigns drive customer engagement and how the next new product breakthrough is ideated and ultimately delivered to market.

Today, enterprises spend tens of billions of dollars every year just to store and manage content in fragmented legacy systems like network storage and document management systems. There is simply no way enterprises can get the value of the content that they have with these approaches. That's where Box comes in. Our platform offers more critical functionality designed for the multicloud, hybrid work environment and a seamless secure user experience than any other solution in the market today. We are building the leading content cloud for enterprises. Our strategy is to power, automate and integrate the complete content life cycle from the moment content is created through the entire content workflow in a single platform that enables our customers to thrive in a work-from-anywhere, digital-first, highly and secure world.

Our content cloud moves beyond legacy content management systems by automating workflows between cloud-based applications through integrations with the apps our customers are using to get their work done, like Salesforce and Microsoft Teams. We're building deep functionality in the key areas of the content life cycle, such as our advanced workflow solution with Box Relay and e-signatures with Box Sign. We have natively built advanced security into the platform so that our customers' content stays safe and compliant. And now we are making it easier than ever for our customers to move content into Box with Box Shuttle. Combined with our cloud-first approach, Box is the only platform that enables customers to work in and across cloud-based applications without fragmented content architectures. Box provides us seamless, simple and intuitive experience that drives productivity for users every time wherever they are.

Our vision for the content cloud is resonating with customers. More and more, our customers are recognizing the strategic importance of consistent content availability and integrity, whether they are collaborating on a project in Zoom, closing a quarter using Salesforce or building a new product with Autodesk. This is illustrated in Q1 by the 48% year-over-year growth in enterprise deals over $100,000.

Additionally, our multiproduct suite sales are gaining strength with our customers adopting and leveraging more of our content cloud functionality. As proof of this, we have experienced a record 49% attach rate of our suite this quarter in $100,000-plus deals, and we anticipate the growth of our multiproduct plans continuing in the future.

In Q1, we continued to build on our leadership position in cloud content management and transform how enterprises work. First, we expanded our product portfolio with the acquisition of SignRequest, a leading cloud-based electronic signature company to develop Box Sign. Box Sign is expected to be available this summer. It will be natively embedded in the Box and included in all Box business subscription plans, with additional levels of functionality being available in our enterprise plans and suites. This will enable all of our customers to have access to the value of Box Sign while also enabling us to monetize the higher end e-signature use cases that leverage advanced functionality and APIs.

Another exciting announcement we made in Q1 was the availability of the all-new Box Shuttle. For many organizations, moving to the cloud has been a priority, but the cost and complexity of content migration has been a major impediment to cloud adoption. The new Box Shuttle can migrate some of the most complex and large-scale content management environment at a lower cost and faster than ever.

We also announced significant updates to our security products this spring. Box Shield, which helps customers reduce risk and proactively identify potential insider threats or compromised accounts, remains the fastest-growing product in Box' history. We continue to rapidly innovate on Box Shield's advanced machine learning technology to help protect our customers' most important IP.

Finally, we announced updated partnerships with both Microsoft and Cisco. We continue to enhance our integrations with Microsoft Teams, Office and Microsoft's information protection suite. As customers adopt a multicloud strategy, they need to access and work with content across a range of applications, and Box helps bridge content management between Microsoft and other platforms. Similarly, we've updated our partnership with Cisco Webex to make it even easier for users to create workflows that span our 2 platforms.

Turning to our customers. We have seen some outstanding examples of how organizations are utilizing Box to run their businesses and drive productivity, such as a global leader in the financial sector who embedded Box deeper into its business with a 7-figure expansion in Q1. For this leading enterprise, Box manages its business-critical content empowers encrypted document sharing between clients and financial advisers at scale while adhering to the highest standards of data privacy, protection and security. And a government agency who selected Box in Q1 to power secure collaboration for their hybrid work environment as well as drive critical processes for the delivery and sharing of public health research.

Over 100,000 customers rely on Box to power secure collaboration and critical business processes across their organizations in Q1, and we closed wins and expansions with leading organizations such as D.A. Davidson companies, IQVIA, Isuzu Motors and Penguin Random House.

Our strategy is working, as demonstrated by our strong results, including the improvement in our revenue growth this quarter in addition to the very strong billings and RPO growth. We are committed to our FY '24 targets of delivering a growth rate of 12% to 16% and operating margin in the range of 23% to 27%. We are going after one of the largest markets in software, attacking the total addressable market of over $55 billion in spend on content management, collaboration, storage and data security annually. And with the addition of e-signature capabilities, our market is only getting larger.

We're also confident that we have the right team and Board of Directors to take full advantage of this opportunity and drive significant shareholder value going forward. With the addition of John Park, who brings significant software growth-investing experience and the expertise and resources of KKR, we have 8 independent directors who are former or current operators of high growth and highly profitable SaaS and enterprise software companies, including 3 former or current public software CEOs and 2 former public CFOs.

Throughout this year, we will continue to build out our industry-leading content cloud. We will expand data migration and workflow automation, go deeper with our data security and compliance offerings, enable new ways to collaborate and publish content on Box and enhance insights and analytics so customers can get the most out of their content. With over 100,000 customers on our platform, an exciting road map and a strategy that is already yielding results, we are building on our leadership in cloud content management and driving the next phase of growth.

With that, I'll hand it over to Dylan.

Thanks, Aaron. Good afternoon, everyone, and thank you for joining us.

In Q1, we are pleased to have exceeded our guidance across all key metrics. Our acceleration in revenue growth, billings growth, RPO growth and operating profit clearly demonstrates the strong trajectory of our business. As a result, we are raising our full year revenue guidance.

We delivered revenue of $202 million, up 10% year-over-year, a 200 basis point improvement from the 8% growth we delivered in the previous quarter. Our content cloud offerings are increasingly resonating with our customers as demonstrated by the strong add-on product traction and large deal growth we achieved in Q1.

As Aaron mentioned, we're excited by the early customer response and demand for native e-signature capabilities in Box, and we're on track to make Box Sign generally available this summer.

As our customers are increasingly adopting products with more advanced capabilities, 60% of our revenue is now attributable to customers who have purchased at least 1 additional product, up from 54% a year ago. In Q1, we closed 59 deals worth more than $100,000, up 48% year-over-year. Importantly, 49% of these 6-figure deals included one of our multiproduct suite offerings, a new record for us and up significantly from 28% a year ago.

We ended Q1 with remaining performance obligations, or RPO, of $865 million, up 20% year-over-year, exceeding our revenue growth by 1,000 basis points and an acceleration from the prior quarter's RPO growth rate. Q1's RPO growth is comprised of 15% deferred revenue growth and 23% backlog growth, demonstrating Box' stickiness as we continue to sign longer-term agreements to support our customers' content strategies. We expect to recognize more than 60% of our RPO over the next 12 months.

Q1 billings of $159 million were up 24% year-over-year and a significant improvement from Q4's growth rate. This result reflects the impact of a few early renewals from customers who had been set to renew in Q2, shifting roughly $5 million in billings from Q2 to Q1.

Our net retention rate at the end of Q1 was 103%, up from 102% in Q4. This result was driven by strength in customer expansion and a stable annualized full churn rate of 5%. Based on the strong momentum we're seeing in customer expansion and retention, we expect to deliver additional improvements in our net retention rate over the course of this year.

Turning to margins. Our non-GAAP gross margin came in at 73.0%, in line with the same period a year ago. Q1 gross profit of $148 million was up 10% year-over-year, consistent with our revenue growth. We expect gross margin to increase over the course of this year and for it to come in at roughly 74% for the full year as we continue to deliver infrastructure efficiencies.

Our ongoing efforts to improve profitability are paying off. In Q1, we delivered significant bottom line improvements through our continued focus on profitable growth and disciplined expense management. Additionally, our investments in building out our engineering center of excellence in Poland will help us drive additional operating leverage and efficiencies over time.

Q1 operating income doubled year-over-year to $34 million, which, in turn, drove a 760 basis point improvement in Q1 operating margin to 17.0%. As a result, in Q1, we delivered $0.18 of non-GAAP EPS, above the high end of our guidance and a strong 80% improvement from $0.10 a year ago.

I'll now turn to our cash flow and balance sheet. In Q1, we delivered record cash flow from operations of $95 million, up 53% from the year ago period. We also generated record free cash flow of $76 million, a year-over-year improvement of 91%. Capital lease payments, which we include in our free cash flow calculation, were $13 million versus $17 million in Q1 of last year. As a reminder, we expect our capital lease liabilities and payments to continue decreasing steadily in the coming years as we continue to drive infrastructure efficiencies and leverage our public cloud partnerships.

For the full year of FY '22, we continue to expect CapEx and capital lease payments combined to be roughly 7% of revenue. Cash from investing in Q1 reflects $57 million in M&A-related payments, primarily driven by the acquisition of SignRequest. As a result, we ended the quarter with $612 million in cash, cash equivalents and short-term investments.

Before I turn to guidance, I'd like to discuss the accounting impact resulting from the preferred stock issuance that we closed earlier this month, combined with our anticipated repurchase of common stock via a self-tender offer, which we expect to launch next week.

Due to the required accounting treatment for these transactions, based on our current expectations, this will result in the following EPS impacts: first, on a quarterly basis until conversion of the preferred stock into common stock, a roughly 2.5 cent reduction due to the noncash accounting impact related to the preferred stock dividend, which we anticipate settling in shares of common stock; second, for Q2 and FY '22, a $0.02 reduction due to a temporarily elevated share count during the period between our recent preferred stock issuance and the completion of our anticipated share repurchase.

Combined, these items will result in a $0.04 reduction to EPS in Q2 and a $0.09 reduction to EPS for the full year. This preferred stock dividend will appear below the net income line in our P&L and in the earnings per share note accompanying Box' financial statements. Note that this will have no impact on net income.

With that, I would like to turn to our guidance for Q2 and fiscal FY '22. Based on our strong Q1 results and forecast, we are raising our full year revenue guidance. Our underlying profitability expectations for FY '22 are also now higher than our initial expectations.

For the second quarter of fiscal 2022, we anticipate revenue of $211 million to $212 million, representing 10% year-over-year growth. We expect non-GAAP operating margin to be in the range of 18% to 18.5%, representing 150 basis point sequential improvement at the high end of this range. Including the $0.04 impact I just discussed, we expect our non-GAAP EPS to be in the range of $0.17 to $0.18 and GAAP EPS to be in the range of negative $0.13 to negative $0.12 on approximately 167 million and 160 million shares, respectively. We expect our billings growth rate to be in the mid single-digit range, which includes the $5 million impact from early renewals that I mentioned earlier. Combined with our strong Q1 billings results, this would result in year-over-year billings growth of roughly 13% for the first half of FY '22, ahead of revenue growth and an acceleration from our billings growth in the first half of last year.

For the full year ending January 31, 2022, we are raising our full year revenue guidance, and we now expect our FY '22 revenue to be in the range of $845 million to $853 million, representing approximately 11% year-over-year growth at the high end of this range. We expect non-GAAP operating margin to be in the range of 18% to 18.5% above our initial FY '22 expectations.

The high end of this range represents a 320 basis point improvement from last year's results of 15.3%. Our stronger business performance drives a $0.04 improvement in our EPS expectations for FY '22 versus our initial guidance. At the same time, our full year EPS guidance incorporates the $0.09 reduction for the preferred stock accounting charges that I mentioned previously.

As a result of these various factors, we now expect our FY '22 non-GAAP EPS to be in the range of $0.71 to $0.76 on approximately 161 million diluted shares. Our GAAP EPS is expected to be in the range of negative $0.50 to negative $0.45 on approximately 154 million shares. We continue to expect billings growth to be slightly above revenue growth for the full year of FY '22. And for the back half of FY '22, our billings growth should be roughly in line with revenue growth. We expect RPO growth to outpace both revenue and billings growth for the full year of FY '22.

Q1 was an excellent start to our fiscal year fueled by strong momentum in large deals and suite attach rates. Our results, most notably accelerated revenue, billings and RPO growth, combined with significant operating margin improvements, clearly indicate that our strategy is working as customers are placing more emphasis on the value of their content.

As the leading content cloud, Box is uniquely positioned to solve a wide variety of high-value use cases for our customers. As we build on this leadership position, we're very confident in achieving our FY '24 targets, 2 years from now, of a 12% to 16% growth rate and operating margin in the range of 23% to 27%.

With that, I would like to open it up for questions. Operator?

(Operator Instructions) Your first question comes from George Iwanyc from Oppenheimer.

So Aaron, with the success you're showing with selling Suite, can you give us a sense of how you feel about your sales investment and whether you think you are at a point where you can maybe be a little bit more aggressive with hiring and kind of focusing on particular verticals and maybe regional expansion?

Yes. Thanks for the call out. We are definitely seeing really healthy acceleration on things like our multiproduct selling. And as we call out with the $100,000-plus deal stat, nearly 50% growth year-over-year, which is, I think, the highest metric that I can at least recall in the past 2 years. So really great start of the year on that front.

As it relates to our sales investment, and Dylan called this out last quarter, we're going to be definitely investing incrementally in sales capacity, in particular, in key regions and segments where we're seeing high productivity rates. We obviously want to drive efficient and profitable growth, but we do see an opportunity to invest more. And obviously, that's in the guidance from a top and bottom line standpoint.

As you look at verticals, this is another area of increasing focus for us. So we see really tremendous momentum in areas like financial services, life sciences, public sector, both at the federal level and even state level, and then kind of any business doing kind of large global collaboration. So global manufacturing, professional services. The technology sector has been very attractive for us.

So I think you'll see us continue to incrementally invest in these high-growth verticals where data security matters, where protecting and enabling the collaboration and workflows around content is incredibly critical. So we will be making further investment in those areas.

And this is Dylan. And just to build on that a bit, we do expect to continue improving sales force productivity for the trends that Aaron mentioned. As you said before, that was up overall 13% last year. And while we have more modest expectations for the rate of sales productivity improvements going forward, we do expect to continue making those improvements even as we grow our sales force. And in Q1, for both enterprise and SMB, we saw a strong increase in the percentage of AEs who achieved their quota as well as year-over-year improvement in average sales force attainment.

And just one quick follow-up to that. As you see that productivity kind of tick up and your retention rate kind of also tick up, with the growth that you're anticipating in the later part of the year, do you feel that, that's something that can maybe get back to the 105%, 106% type of level that you saw early last year?

So we'd say that we -- based on the trends that we've been seeing from a customer expansion and churn rate, we do expect to deliver continued improvement or net retention rate this year. So we set the expectation that we'd end this year, making a year-on-year -- year-over-year improvement of a couple of points, so to 104%. And certainly, if we do continue to see these trends playing out, then there could be some upside to that certainly over time. But that's how we're thinking about net -- our net retention rate currently.

Our next question comes from Josh Baer from Morgan Stanley.

I was hoping to double-click on the hiring, actually. I think the growth in sales force that you're looking to do this year from what Dylan mentioned last quarter was low teens. So I'm just wondering if there's an update there, if that's still the right number, how that's been tracking. We've definitely been hearing about challenging hiring environment and some companies seeing longer time to ramp there. So just looking for an update on your hiring efforts.

Yes. This is Aaron. We still intend for that metric to be the goal that we're executing on, and that will be throughout the year. So overall, definitely, it's an environment where there's really great opportunities for sales talent. And we think we have a very attractive opportunity, and we've been ramping up on the hiring side pretty aggressively in that front. So we do intend to hit that metric.

Got it. And with the commentary around RPO growth to outpace revenue and billings growth this year, sort of setting up for -- to see an acceleration in those revenue and billings growth metrics in the following year?

Yes. I would think about that overall as being a leading indicator of top line growth. And the piece of the part and as we mentioned on the call, deferred revenues, up 15% year-on-year, backlog up 23% year-on-year. So would say that backlog, because most of that's driven from the long-term backlog and the long-term RPO, doesn't necessarily get an impact over revenue over the next 12 months. But the overall trends that we're seeing in RPO, including healthy growth in our short-term RPO of 14% year-on-year, does definitely indicate a lot of the momentum that we're seeing and part of what leads to the confidence that we have in improving our growth rates over time.

Our next question comes from Alex Sklar from Raymond James.

Aaron, you touched on return to work at the outset of your prepared remarks as being a cental driver for the business. I'm curious what you've seen so far in terms of either late-stage or early-stage pipeline with some of your existing customers in terms of propensity to buy newer or incremental solutions from Box?

Yes. So I think the way I would capture the 2 periods that we've been in would be at the kind of first half, to some extent, bleeding into Q3 of last year, it was really this remote work triage mode that customers were dealing with, with the backdrop of, obviously, a lot of economic disruption for most of businesses globally. And that's where we saw things like an SMB slowdown. We saw lower professional services slowdown as an example. And the use cases, customers were coming to us for really just basic remote work, kind of file sharing and access use cases.

As we went into Q4 of last year and certainly Q1 of this year, our conversations with customers are much more around longer-term digital transformation and IT trends that we think align to our strategy. So remote work moving more into hybrid work. The benefit of that for Box is that companies are really going to need to look again at how they're managing their content as employees are working from multiple locations, as they need to be able to work from the office and from anywhere, be able to collaborate with their partners and employees and clients from all around the world. And so we're starting to see much longer-term IT transformation initiatives emerge within our pipeline as opposed to just the kind of rapid fire triage that we saw last year.

So when you look at that metric in Q1 of nearly 50% growth in $100,000-plus deals, that's about as good as evidence as I think we could ever put up that shows customers are now being much more strategic about their long-term IT strategy, moving more content to the cloud, shutting down legacy fragmented architecture and moving more of that to Box. And we think we're really set up for being right at the center of these mega trends of remote and hybrid work, digital-first experiences and data security and compliance really driving a new way to manage content.

Okay. Great. And then maybe just one on the partner channel. I know typically, it's been a source of strength internationally. But as you've kind of expanded the product portfolio here, some of the things we've already talked about and with DocSign coming here a little bit later, does the partnership channel look at incremental -- I'm just curious if it looking incrementally more or less strategic than it did previously.

Yes. It definitely looks a lot more strategic for us. So international has been very strong, in particular in Japan, where it's an environment where we have very strong kind of global partners there. As we look throughout this year -- because in particular, as Sign comes to market and has some new functionality around platform and workflow continues to come to market, I think you'll see us have incremental focus and investments on things like system integrators, both on a global and kind of industry basis.

And whether that's in Europe where we have a new president that's onboarding, that we'll have a focus in that area as well as well as we go deeper in industries like financial services, public sector, life sciences and other spaces, I think you'll see our system integrator partnerships be even more important to that strategy.

Your next question comes from Jason Ader from William Blair.

You guys did very well with the $100,000-plus deals. Can you talk about what's happening with 7-figure deals? And also if you've seen any recovery in the commercial segment, kind of the sub-$100,000 segment.

Yes. So on the 7-figure deals, basically, steady on a year-over-year basis. I think what we're -- and what we pointed to in Q4, we wanted to move more to focusing the attention on customers with a total account value of certain threshold just because we think that's more indicative of our land-and-expand motion. So as an example, that 50% growth in $100,000-plus deals is a much more meaningful metric because it moves customers into different size buckets of total spend. So we're very excited about that.

Do you mind repeating the second part of the question?

Yes. Just the kind of sub-$100,000 deals in the commercial segment.

Yes, yes. Very strong momentum in the commercial segment in SMB. I think as we noted last year, there were some headwinds mostly around the economic environment. So you had SMBs that were really kind of dealing with just the impact of COVID, not spending a lot on kind of long-term IT infrastructure. In some cases, we saw higher churn rates in the low end of the market. But as we noted in Q4, really meaningful recovery starting in Q4. And in Q1, I mean, I don't think we could be happier about the momentum that we saw in that kind of SMB mid-market segment of the business.

So really, really strong momentum. Obviously, we only cut out the $100,000-plus deal band, but very meaningful suite sales in the SMB and mid-market segment, below the $100,000 threshold. And again, really, I think that's a part of the market that's on fire for us right now.

Yes. And this is Dylan. The only thing I'd add is that even in that $100,000-plus deal count, up 48% year-on-year, there was a pretty material contribution even from those SMB and mid-market segments, up very dramatically from where we were a year ago. So because of Suites' largely for especially the customers that are at the higher end -- or the larger end of that segment where those -- where that sales force serves, that was a big driver of the strength that we saw.

Great. And then one quick follow-up. Aaron, you guys are growing around 10% revenue this year. How do you articulate to an investor the bridge from the current kind of 10%-ish growth rate to the 12% to 16% that you hope to get to?

Yes. Sure. Well, firstly, we did just raise guidance coming in around 11% growth for the year. So that's the first bridge. Second, we did have a headwind that we noted on last quarter's call around professional services. That was really a flow-through from bookings last year where customers didn't need as much professional services, which obviously turns into revenue growth headwinds this year in professional services. And so that's something that obviously we're carrying this year on the growth rate.

But when we look at our Q1 performance, as it relates to whether it's billings growth, Suites growth, customers moving into $100,000-plus deal segment, it's very evident that 12% to 16% growth rate can be achieved with our current strategy. And obviously, we want to continue to expand the markets that we're going after and the opportunity, but we feel very, very confident in achieving those long-term growth rates.

Your next question comes from Steve Enders from KeyBanc Capital Markets.

I guess I just want to get a better understanding of the billings pull forward that you mentioned in the quarter. Was there any -- I guess what would you consider kind of drove that? Was it any new product capabilities that were being outsold or any incentives that drove the contracts you landed this quarter instead of in 2Q?

Sure. So no specific incentives. And really, the demand and I think just a desire to get onto some of these and adopt some of these more advanced capabilities faster and Suites, I would really call out as the main catalyst of those early renewals. We have a customer who would have ordinarily renewed in the second quarter. But given just kind of combination of kind of being sold on the value of some of the products and capabilities, they didn't yet have. And in a couple of cases, just a really strong seat growth within those companies that they were in overage is what drove those customers to ultimately renew and upsize those contracts earlier in Q1, which is what drove that $5 million of movement from expected Q2 billings into Q1.

Okay. Got you. That's helpful. And then just on -- just want to touch a little bit on the guide, at least on the op margin side. It looks like it's coming in kind of a point or more above about what you're expecting. Just -- or what the consensus was at. But just kind of wondering what you're seeing -- or what's leading to that uptick on the margin front that's providing that upside there?

Yes. So really, a combination of the stronger revenue outlook for the year based on the momentum that we're seeing as well as I've been really pleased with a lot of the kind of expense kind of management initiatives and especially around our infrastructure and workforce expenses as we've driven a lot of those savings. And so that's what translates into that roughly 1% improvement in our operating margin expectations.

Your next question comes from Brett Knoblauch from Berenberg.

I guess on capital allocation, how are you guys thinking about that? I know the funds from KKR is going to use to repurchase shares. But I guess as we look beyond that, you do have a sizable cash position on the balance sheet. Do we think that should be more M&A-driven or maybe more repurchase-driven? Can you just maybe help outline your strategy there?

Sure. So we certainly look at capital allocation through the lens of what's going to deliver the most value to our shareholders. We expect to use our capital primarily to fuel growth and capture more of the market opportunity ahead of us, including M&A when it makes sense for the business, and our strategy while still preserving a strong balance sheet and flexibility.

But because of now our strong cash flow generation that we're seeing, we do also regularly have the conversations around things like share repurchases with the Board. And then as mentioned, because we did raise $500 million recently on top of an already strong balance sheet is why we expect to launch our self tender offer next week, and we'll announce all of those details at that time.

Perfect. Maybe just one follow-up on Box Sign and SignRequest. I guess in your annual revenue guide, how much revenue is coming from SignRequest?

On the SignRequest front, virtually nothing, so very immaterial to revenue. And certainly from Box Sign, once that's introduced and becomes generally available in the summer, we're very optimistic about the type of impact that can have, especially in terms of the contribution and adoption of Suites. But the stand-alone business, you can think about that as very immaterial.

Is Box Sign currently in your updated guide? Or would that kind of just be an upside to your current guidance?

That is incorporated into our current guidance.

Your next question comes from Chad Bennett from Craig-Hallum.

So just on the billings front, your normalized billings growth indicated was 13% in the first half. So why -- considering the tax rates and success you've had with Suites and ancillary products, why would billings growth decelerate second half?

I understand comps are a bit easier in the first half. But is there something that you're, I guess, seeing? Because everything -- it sounds like from a secondary metric standpoint, it seems like it would be accelerating. And so any kind of indication on seasonality or comps or anything that would kind of cause that?

Sure. So nothing in terms of the underlying business and continue to be very optimistic about the trajectory that the business is on. I would say that to your point, there is not just seasonality, but did see more challenging comps in the back half of last year. And then also, we just, given the timing, have a lot more confidence and predictability in terms of the sales cycles and everything that influences billings near in.

So we certainly do see upside to that growth, and we do expect billings growth to exceed revenue growth for the full year. But there's nothing in terms of the underlying trends that we're seeing in the business that drives that.

Okay. And then maybe one follow-up real quick. I think last quarter, you spoke of, Dylan, I think you gave kind of a net new bookings growth metric. I think it was up something like 24%. Is there any update to how that performed this quarter?

Not sure what you're referring to. Can you clarify which metric? We don't typically talk about our bookings for the business overall.

Yes. I guess trying to get an indication of kind of net new logo bookings and how that trended in the quarter.

Okay. Got it. Yes. That's been pretty consistent, it's been the past few quarters. I think we did call out that in Q4, it was particularly strong because of some large net new wins and -- both in SMB as well as in Japan, and it's back at pretty normal levels where we tend to see about 70% or so of our bookings coming from our existing customers and about 30% coming from net new customers.

Your next question comes from Erik Suppiger from JMP Securities.

First off, you noted the billings growth will be faster than the revenue growth. Can you give us some flavor or context around the difference that you would anticipate? And will that -- obviously, that was meaningful in the first quarter here. But how is that going to be as we progress forward? And how is that difference going to evolve?

Yes. So I'd say that for now, we think about the billings growth in the back half of this year to be fairly consistent with our revenue growth in the back half. And so the slightly higher expectation that we're setting are based on the first half 13% year-on-year growth that we've seen. And then certainly, as we move and head into next quarter, we'll give more color into how our billings expectations are shaping up for the back half of the year.

And that was our last question at this time. I will turn the call back over to the presenters.

Great. Well, thank you. We -- again, very excited about the momentum in Q1 and looking forward to following up with all of you soon.

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