Box Inc (BOX) 2019 Q4 法說會逐字稿

Good afternoon.

My name is Chris, and I'll be your conference operator today.

At this time, I would like to welcome everyone to the fourth quarter and fiscal year 2019 financial results conference call.

(Operator Instructions) Alice Lopatto, Head of Investor Relations, you may begin the conference.

Good afternoon, and welcome to Box's Fourth Quarter Fiscal 2019 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'll also post the highlights of today's call on Twitter at the handle @boxincir.

On this call, we will be making forward-looking statements, including our Q1 and FY '20 financial guidance and our expectations regarding our financial performance for FY '2020 and future periods, timing of and market adoption of our products, our markets and market size, our operating leverage, our expectations regarding maintaining positive free cash flow and future profitability, our planned investments and growth strategies, our ability to achieve our long-term revenue and other operating model targets and expected timing and benefits of our new products and partnerships.

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 risk factors in documents we 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.

These forward-looking statements are being made as of today, February 27, 2019, 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.

Also, please note, we updated our financial disclosures to reflect our adoption of the new ASC 606 revenue recognition standard under the modified retrospective transition method.

Having adopted ASC 606 for this fiscal year under the modified retrospective transition method, all Q4 year-over-year comparisons are made against Q4 results a year ago, which were under ASC 605, unless otherwise stated.

Please refer to our press release and the supplemental financial deck on our Investor Relations website for a reconciliation of our financial results under ASC 606 compared to ASC 605.

With that, let me hand it over to Aaron.

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

In fiscal 2019, we continue to position ourselves to help our customers transform their businesses with cloud content management.

We achieved $608 million in revenue for the full year and now have more than 92,000 customers, an ecosystem of strategic partners that include leaders like IBM, Google and Microsoft, and are consistently recognized as a market leader by industry experts, including Gartner and Forrester.

Turning to our quarterly results.

In Q4, we delivered wins and expansions with major customers, including State Street, Live Nation, Allina Health System, Intuit, MGM Studios and Red Robin.

Revenue was $163.7 million, up 20% year-over-year.

Billings was $237.7 million, up 16% year-over-year.

And finally, non-GAAP EPS was positive $0.06, our first quarter of non-GAAP profitability.

In the quarter, we closed 94 deals greater than $100,000 versus 79 a year ago; 12 deals over $500,000, in line with last year; and 2 deals more than $1 million versus 9 a year ago.

While we saw strong continued momentum in the $100,000-plus deal segment and we were encouraged by the strength of the 7-figure deals in our pipeline ahead of Q4, we ultimately underperformed against our 7-figure deal expectations in the quarter.

These more complex enterprise deals are taking longer to close.

And as a result, a few moved out of the quarter and in the pipeline throughout this year.

Additionally, as we've previously shared, we saw weakness in EMEA throughout FY '19 and in Q4 experienced a greater impact from this weakness than we anticipated.

While these results didn't meet our expectations, we've achieved strong momentum in our solution-selling strategy as evidenced by our $100,000-plus deal growth and with 80% of our new $100,000 deals including at least one add-on product compared to 67% a year ago.

We're confident our solution-selling strategy is working, and now we need to aggressively drive more standardization across the business.

To drive more unified global execution across all of our sales segments, we've been improving our sales training and processes.

And over the past 6 months, we've hired or promoted new sales leaders in key growth regions across North America and EMEA.

With these investments and building on the progress we saw in FY '19, we remain more confident than ever in the cloud content management opportunity.

As we kick off fiscal '20, we are focused on 2 key objectives to drive our next phase of growth on our path to $1 billion in revenue and beyond: number one, building the category-defining cloud content management platform that powers our customers' digital business processes; and number two, accelerating our customers' digital transformation with cloud content management through our go-to-market efforts.

Let's start first with building the category-defining cloud content management platform.

When we look around the world, digital transformation is more urgent for enterprises than ever.

Companies today are working across a diverse network of global partners that demand seamless collaboration anytime and anyplace.

Markets are hypercompetitive.

And to compete, companies need to move faster in everything that they do.

Further, every enterprise across every industry is dealing with massive cybersecurity and compliance challenges.

Content is at the center of these challenges, yet most enterprises are held back by their legacy content management vendors.

Legacy on-prem systems like Documentum, OpenText and SharePoint make it far too difficult to share content and manage business processes across the extended enterprise in addition to being too costly and complex for the digital age.

The enterprise content management and storage infrastructure markets represent $40 billion in opportunity, and Box is the only cloud-native platform built to power the next generation of workloads as they rapidly move from on-prem to the cloud.

Entering FY '20, we have the most exciting product road map in our company's history, focused entirely on enabling our customers to power their digital business processes and to retire legacy content management systems.

Throughout the year, we will be launching and enhancing critical Box products to enable, number one, workflow automation to power business processes with an all-new Box Relay; two, smarter content management with new metadata solutions and Box Platform updates; and three, advanced security classification and threat detection with Box Shield.

From our conversations with our largest customers, it's apparent that they have a wealth of manual business processes primed for automation.

We've heard overwhelming feedback from our customers that they want simpler ways to consume workflow automation natively within Box.

And this year, we'll be launching an all-new Box Relay built from the ground up by leveraging Box's automation capabilities announced at BoxWorks.

The all-new Box Relay is built natively on Box and will help customers automate business processes across sales, client services, marketing, contract management, manufacturing and more.

This product will be launched in the middle of this year and will be sold as a stand-alone SKU in addition to being a part of the new product suites we'll be offering later this year.

In FY '20, we will also focus on enabling intelligent content management by advancing our metadata, skills and platform capabilities.

Combined, these capabilities enable customers to retire legacy ECM technology and integrate Box into ERP systems, line of business apps, business processes and more.

For instance, one customer we closed in Q4, Lineage Logistics, an international warehousing and logistics company, will leverage Box Skills through Box Platform to power new warehouse automation initiatives.

Finally, with content being accessed from more locations, apps, devices and shared across a growing network of external partners and customers, we need a brand-new approach to security in the cloud.

To solve this, we will be launching Box Shield as an add-on product later this year.

Box Shield will bring intelligent threat detection and content classification natively into Box.

We're already hearing from prospective customers that Shield will be transformational to their security and risk posture and protecting critical intellectual property.

FY '20 is setting up to be the most exciting year for product innovation in Box's history.

And due to the increasing success of our add-on products, we'll be making it much easier for our customers to adopt the full power of our cloud content management platform by launching new product suites in the first half of FY '20.

Turning to our second area of focus for the year.

The full power of our cloud content management platform is realized when an organization leverages Box for broad digital transformation, enabling a digital workplace and powering digital business processes across the extended enterprise.

To do this, our focus for the past year has been to evolve from selling Box as a tool for file sharing and storage to consultatively selling Box as a cloud content management platform for the entire enterprise with a full set of Box capabilities.

Our solution-selling strategy is focused on ensuring that new and existing customers see the full use cases and possibilities with cloud content management, tied to significant business outcomes in the form of IT cost savings, business process acceleration and lower security and compliance risk.

When we sell this way, we're able to drive much larger and strategic deals with customers.

Cross-selling add-on products is key to driving larger and more transformational deals.

A few examples of where our add-on product and solution-selling strategies were successful in Q4, driving 94 deals above $100,000 or more, include a 7-figure deal in Q4 with a major technology company in the Fortune 500 that purchased Box Governance, KeySafe and platform, accounting for over 40% of their deal and transforming how they're streamlining processes around content across the organization.

We also achieved a new ELA with Heidrick & Struggles, a long-standing Box customer where they purchased Box Skills, Box Multizones and Box Platform to better coordinate between distributed global offices in their effort to find and close top executive candidates faster.

And finally, a win with MGM Studios who will leverage Box's core offering and Box Governance as its central content repository to retire network file shares.

MGM is focused on building an end-to-end digital supply chain where applications like Box will be used across lines of business, from marketing to production and financial operations.

We began implementing our solution-selling strategy in FY '19.

And while we're encouraged by our early progress, we're working to further improve our execution through: number one, improved sales training, rigorous sales processes and updates to our sales compensation plans tied to solution selling; two, hiring and promoting experienced world-class sales leadership talent throughout all segments of the field globally; and three, selling suites of our add-on products like Box Governance, Platform, Skills, Shield and Relay to make it even easier for customers to purchase and adopt our full cloud content management platform.

While the majority of our customers leverage Box today for secure collaboration and productivity, we know the big opportunity is to power our customers' digital business processes in the cloud.

Within our existing customer base alone, there are billions of dollars in potential revenue upside as our customers begin to leverage Box's full set of capabilities across their organizations.

Our number one job is to move our customers along the journey to leverage Box to power their full digital transformation.

To wrap up, Box is the only cloud content management platform that accelerate business processes, powers workplace collaboration and protects an enterprise's most valuable information while also working across the best-of-breed modern enterprise IT stack.

Heading into FY '20, we are focused on extending the core capabilities that differentiate Box as a cloud content management platform and refining our solution-selling motion to drive more consistent execution across the business.

At the same time, we're targeting our first year of non-GAAP profitability, showing further leverage in the business as we continue on our path to $1 billion in revenue and beyond.

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

Thanks, Aaron.

Good afternoon, everyone, and thank you for joining us today.

Q4 capped off a solid year and marked a couple of important milestones for us.

In Q4, we achieved our first quarter of non-GAAP profitability and our second consecutive year of positive free cash flow as we continue to drive strong leverage in our business model.

We delivered revenue of $163.7 million in Q4, up 20% year-over-year with 23% of Q4's revenue coming from regions outside the United States, driven by strong performance in Japan throughout the year.

We closed 94 deals over $100,000 versus 79 a year ago; 12 deals over $500,000, which was flat with a year ago; and 2 deals over $1 million versus 9 a year ago.

Fourth quarter billings came in at $237.7 million, representing 16% calculated and 17% adjusted billings growth year-over-year, falling short of our original expectation of growth in the mid-20s.

As Aaron mentioned, this outcome was the result of some 7-figure deals that are taking longer to close than we had expected and our disappointing execution in EMEA.

Total deferred revenue was $375.0 million, up 17% year-over-year.

Backlog was $311 million, an increase of 12% year-over-year.

While billings and our 7-figure deal results did not meet our expectations, we are highly confident in our overall CCM strategy and market opportunity.

We now have more than 900 customers paying at least $100,000 annually, making up 60% of our recurring revenue.

Our strategy to up-sell and cross-sell in these large accounts is a critical initiative, which will drive long-term product stickiness and growth.

We're in a strong position to capitalize on this opportunity as we build on the early momentum we've delivered on our solution-selling efforts.

The value of our add-on product portfolio is up more than 60% year-over-year, now at roughly 14% of our revenue run rate in Q4 versus roughly 10% a year ago.

Turning to margins.

Non-GAAP gross margin came in at 73.5% versus 76.2% a year ago and 73.6% last quarter.

As a reminder, this past year, we made some upfront investments to expand our data center footprint based on the demand we've been seeing, and the impact to our gross margins in FY '19 were in line with our original expectations.

We were pleased to see a slight improvement in price per seat on a year-over-year basis, mainly as a result of higher add-on product attach rates.

We now have 12 million paid users.

As part of our hybrid cloud infrastructure strategy, in FY '20, we will be migrating our data center footprint to significantly lower-cost regions, which will accomplish 3 primary goals: supporting our growth to multi-X bytes scale, addressing complex customer compliance requirements and saving tens of millions of dollars over the subsequent 3-year period.

As part of this move, we'll be temporarily occupying redundant colocation facilities throughout the course in FY '20, leading to elevated data center expenses over the next year.

As such, we are expecting gross margin throughout FY '20 to range from 70% to 71%.

Once we complete this migration and as we continue to drive these efficiencies, we expect gross margin to trend back up toward the mid-70s.

Q4 was another successful quarter of driving operational efficiency.

Sales and marketing expenses in the quarter were $64.6 million, representing 39% of revenue, a significant improvement from 51% in the prior year, which includes a roughly 3% benefit related to the adoption of ASC 606.

Looking ahead, we expect to drive more leverage in sales and marketing as we gain greater efficiencies from our solution-selling strategy.

We're entering FY '20 with 300 quota-carrying sales reps, up 12% year-over-year.

In FY '20, we plan to grow our sales force in the range of 10% to 15%, focusing on field hires in the U.S. and Japan.

Next, research and development expenses were $29.8 million or 18% of revenue, flat with a year ago as we continue to invest in the enhancement of our product offerings.

This included the continued development of Box Relay, Box Shield and Box Platform.

Our general and administrative costs were $17.4 million or 11% of revenue compared to 12% in Q4 of last year.

We expect to drive continued leverage in G&A as we benefit from greater operational excellence and scale.

Our focus on operational efficiency drove our Q4 non-GAAP operating margin to a solid 10 percentage point improvement year-over-year, coming in at positive 5% versus negative 5% a year ago.

As a result, non-GAAP EPS came in at positive $0.06, an improvement from negative $0.06 a year ago and well above the high end of our guidance.

One of the key elements that makes our business model so powerful is our strong customer retention.

Our full churn rate in Q4 was 4.3% on an annualized basis.

Importantly, we've seen that as customers increasingly adopt our add-on products, they become stickier.

In Q4, the full churn rate for customers who had purchased at least one add-on product was roughly 2% on an annualized basis.

Our net expansion rate on an annualized basis was 12%, driven primarily by strong seat growth in existing customers and cross-sells of our add-on products.

As such, we ended the quarter with a net retention rate of 108%, stable versus the prior 2 quarters.

Let me now move on to our balance sheet and cash flow.

We ended the quarter with $217.8 million in cash, cash equivalents and restricted cash.

We delivered cash flow from operations of $31.3 million compared to $22.5 million a year ago.

In Q4, total CapEx was $2.2 million versus $7 million a year ago.

Capital lease payments, which we factor into our free cash flow calculation, were $6.7 million versus $3.4 million a year ago.

We expect CapEx and capital lease payments combined to be 5% to 6% of revenue for the full year of FY '20 and roughly 6% of revenue in Q1.

Finally, we generated $21.0 million of free cash flow in the fourth quarter or 13% of revenue compared to $12.1 million a year ago.

We're pleased to have achieved positive free cash flow in Q4 and for the full year of fiscal 2019.

With that, let's now turn to our guidance.

For the full year of fiscal 2020, we expect revenue to be in the range of $700 million to $704 million.

This guidance incorporates the impact of both underperformance in EMEA and 7-figure deal execution in Q4, with each of these factors representing a roughly $10 million headwind to FY '20 revenue versus our prior expectations.

Additionally, one of our customers significantly reduced its spend with us upon its renewal earlier this month as they did not realize the full value of their initial use cases.

This was a unique customer situation, which will represent a revenue headwind of approximately $8 million in FY '20.

We expect our FY '20 non-GAAP EPS to be in the range of negative $0.03 to positive $0.01 on approximately 156 million diluted shares.

Our GAAP EPS is expected to be in the range of negative $1.06 to negative $1.02 on approximately 148 million shares.

You may recall that a quarter ago, we shared our expectations of achieving roughly breakeven non-GAAP EPS in FY '20.

As you can see from our guidance, we are continuing to drive leverage across the business.

And in FY '20, we are targeting our first year of delivering non-GAAP profitability.

For the first quarter of fiscal 2020, we are setting revenue guidance in the range of $161 million to $162 million.

Note that Q1 has 3 fewer days than Q4, which creates a revenue headwind of a little more than $5 million versus Q4 but does not impact year-over-year comparisons.

While we don't typically guide to billings, we want to provide some color around how we expect billings to trend throughout the year.

While we generally expect our revenue and billings growth rates to track roughly in line, year-over-year comparisons of this metric can be variable from quarter-to-quarter and thus is not always a meaningful indicator of the underlying momentum of our business.

In Q1, we expect to see our revenue and billings growth rates deviate due to a few different factors.

First, we saw an elevated volume of multiyear prepays in the year-ago period.

Second, the impact of the previously mentioned churn event creates a significant headwind to Q1 billings.

Finally, as we stated throughout FY '19, the final payments associated with our enhanced developer fee were billed from Q1 to Q3, representing an additional $2 million headwind to Q1 billings.

As such, Q1 will have a particularly tough year-over-year comparison, and we expect Q1 billings growth to be in the low single-digit range before returning to more normalized growth rates for the remainder of FY '20.

We expect our non-GAAP EPS to be in the range of negative $0.06 to negative $0.05 and for GAAP EPS to be in the range of negative $0.29 to negative $0.28 on approximately 145 million shares.

We remain confident that our market opportunity in cloud content management, combined with our increasingly differentiated product portfolio, will allow us to achieve faster growth rates over time than what we're anticipating in FY '20.

While our Q4 FY '19 sales results led us to lower our revenue expectations for FY '20, we're encouraged by the early traction we are seeing in our solution-selling strategy.

We are focused on driving a reacceleration in top line growth in order to achieve our target of $1 billion in revenue for the full year of fiscal '22.

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

Operator?

(Operator Instructions) Your first question comes from Philip Winslow with Wells Fargo.

Just want to dig in on your comments about billings growth but also just go-to-market headcount increases.

You all talked about, I believe, a 10% to 15% headcount in just the go-to-market.

I believe you ended the year at about 300 quota-carrying.

If I kind of correlate that back then to the billings guidance, sort of implied also being kind of in the low teens there, what are -- just if you can kind of walk through the math there kind of how you're thinking about sales productivity.

Because obviously, this fiscal, you made a lot of changes.

How are you thinking about sales productivity this coming year versus last year and kind of the puts and takes versus just, call it, like the headcount side?

And then one quick follow-up to that.

Sure.

So I'll start with that.

Phil, this is Dylan.

First of all, I would note that while we generally expect revenue and billings growth rates to track roughly in line, year-over-year comparisons of this metric can be pretty variable from quarter-to-quarter for a variety of factors, such as payment durations and customer-driven changes to the timing of large renewals.

So I wouldn't necessarily think about the comments that we gave around billings as a meaningful indicator of the underlying momentum that we're seeing in our business.

On the productivity front, as mentioned -- as we've talked about, we've seen some inconsistency on a region-by-region basis in terms of the productivity of this past year.

So within that 10% to 15%, we are going to be really focused on growing in the regions where we are seeing better performance, such as most of the U.S. in the field as well as in Japan.

And then as we start to see some of these things we're doing across the business roll out, we may add headcount to other regions as well if that productivity improves.

So we are going to be very, very focused on driving productivity improvements across the globe, particularly in the field in the coming year.

And there's a few different areas that we're really focused on here.

So first, there's an operational component.

As Aaron mentioned, really revamping a lot of the sales enablement and training to drive more consistent execution as well as tweaking some of the comp plan incentives that we have in place just to further align that with our solution-selling strategy.

I think we've been pretty pleased with the way that showed up this past year in add-on products and generally in large deals.

So the second component is around the product capabilities.

We are going to be making Box Relay generally available in the first half of this year, the new Box Relay, as well as Box Shield in the second half and introducing product suites this year for the first time, which we think will again further help us sell bigger deals and improve productivity.

And then the third component is on the leadership front.

So we now have the key positions that we have been searching for filled in North America and EMEA.

And so those 3 factors, the operational, product and leadership side should really help drive these productivity improvements and should start to see that even as soon as the first half of the year, particularly in the big deal growth outcomes.

Got it.

And then just as a follow-up to that, I missed the metric in terms of the attach rate of add-ons to the 100k deal.

I think it was 80% last quarter.

Just wondering what it was this quarter.

And then in terms of just bundling in terms of sort of driving, I guess, cumulative add-on, how are you thinking about rolling these out?

You mentioned in the first half -- I mean, is this something that we should expect to see this quarter?

And I remember on the last call, you mentioned sort of experimenting with some of those bundles in Q4, making it a little more formalized.

What did you see where you did roll out the bundles?

And how is that impacting how you're thinking about the bundling this year and the timing of when those actually do roll out?

Sure.

So I'll turn it over to Aaron for the question on bundling and the strategy there.

And then to confirm that metric for add-on product attach rates in our 6-figure deals was 80% again this quarter, which is up from the high 60s a year ago.

Cool, yes.

So this is Aaron.

Phil, the evolution of Box has obviously been having a core product for file sharing, collaboration and content storage in the cloud; and then over the past really 3 or 4 years, we've been adding additional value-added products like data governance, our platform capabilities, advanced security capabilities, add-on solutions around the core.

What we're finding is as we're moving more toward solution selling and selling larger transactions, we want to get out of the moat of selling each individual product on a one-off basis to customers and really being able to bring the full suite of Box's cloud content management platform to our customers.

So we insinuated that a little bit in some of our customer conversations in Q3 and Q4 to quite a bit of early success.

And so with the general availability in the new Box Relay, which is really going to be our ability to bring the best workflow automation capabilities to our customers for content management, that will then allow us to say with workflow, data governance, Platform and eventually our advanced security with Shield, you can then buy that as a suite of capabilities from Box to really help with digital transformation.

So that's already been tested more or less in the market through customer conversations, but we want to make that a packaged offering that we can bring to our entire customer base.

And that's what we are looking to do within the first half of this year.

So something we're very excited about, which we noted that our sales reps in the field are quite excited about as well and that we've already seen strong early signal from our customers that, that is a better way to purchase and use the full breadth of Box's capabilities.

Your next question is from Melissa Franchi with Morgan Stanley.

This is Josh on for Melissa.

My question was on some of the CapEx and data center investments that you've made.

So ahead of increased demand and connecting that with some of the -- like the weaker billings that we've seen, maybe to answer, you can talk a little bit more about what you're seeing in the pipeline.

Yes.

So this is Aaron.

I mean, overall, we're still seeing very strong pipeline.

We're again not happy, I'm not satisfied with the Q4 results in the big deal segments, especially the 7-figure deals.

However, those customers are still in the pipeline for this year.

Tend to be very large, regulated customers, often in banking or government agencies or life sciences where the deals tend to be more complex in nature from a security, legal, compliance standpoint.

But overall, we have not changed our view of the momentum and the pipeline that we're seeing in the business.

As it relates to then the capital expenditures on data centers, just due to the sheer growth of our customer base and the amount of usage of the platform, we're actually preparing for our -- the continued growth of our customers.

And that requires us to move into much more scalable data center facilities, in addition to our hybrid cloud usage of public cloud partners.

And so as a result of that, that means we have to operate out of 2 extra data centers from a redundancy standpoint temporarily while we're making that migration happen, which obviously has an impact on gross margin, as Dylan mentioned.

So this is something that is completely driven by the growth of the customer base we're already seeing and then to ensure that we have the room for capacity growth going forward in lower-cost locations outside of California, which is one of the other kind of key points of this is we want more scalability with our data center footprint in lower-cost locations.

And that's a core factor that will then ultimately lead to better gross margin performance over time.

That makes a lot of sense.

And one clarification for Dylan.

So the deals that -- the large deals that got pushed out from longer sales cycles are still in the pipeline, but you did mention, just want to make sure, a $10 million impact to FY '20 revenue guidance from the large deals.

Or was that just on the EMEA side?

Yes.

So that was the expected impact on FY '20 revenue as a result of some of these larger deals not coming in, which is in addition to the impact from EMEA, which is another roughly $10 million expected impact for FY '20.

Your next question is from Ted Lin with Goldman Sachs.

I wanted to dig in a little bit more on kind of the slipped deals and trends there.

I guess, what were the types of kind of legal and government complexities that caused the 7-figure deals to slip and the sales cycle to lengthen there?

And do you anticipate that to be a kind of -- just a trend going forward?

And I guess, can you talk about the close rates on those slipped deals for the first month of the first new year?

Yes.

So given -- first of all, we don't expect that to continue.

We are improving a lot of the operational and sales rigor around these larger deals, and that was already happening throughout the year.

But again, unfortunately, due to the complexity of some of these transactions, there's -- some of that is not fully within our control.

I'd say due to the kinds of customers we're talking about where the intellectual property that's within their files and their data is very sensitive, could be client records, could be government data and information, it just puts a very high threshold on the security review, the compliance review, the data privacy reviews of our customers, which often involves a pretty broad set of individuals and parts of the organization that we have to go and work through.

And then, of course, obviously, as always, budgeting and kind of finance decisions as well in that process.

So the complexity of these deals, obviously, has increased over the past couple of years, really driven by the strategic nature of these transactions.

And we're working to make sure that they can happen as smoothly as possible and that we're constantly improving our own internal processes to drive these as well as the sales rigor and the operational rigor to make sure that we can get these across the finish line.

I think the 100k deal segment and the 500k deal segments did show very healthy growth on a year-over-year basis.

And as a note, the miss in the 7-figure deals translates through both the 500k and the 100k deal segments because it's a cumulative number.

So we did see strong growth in the 500k to $1 million sales segment on a year-over-year basis, if you just look at that segment specifically.

So overall, strong momentum on these larger deals.

But that 7-figure category, we are not happy about those results.

We're seeing those 7-figure deals in both our Q1 and Q2 pipeline, so we have a high degree of confidence that we'll get the majority of those things closed throughout the next couple of quarters into Q3.

And that's where we'll see these deals show up.

Great.

And is there anything you can tell us, I guess, about the overall demand environment?

Are you seeing maybe a slower adoption curve for content management in the cloud or perhaps more competitive environment?

I think, again, given the nature of our evolution from being a tool for file sharing and collaboration, which was a relatively straightforward sale that drove the kind of first set of adoption within customers to now much more of a strategic platform where customers are automating their business processes or, in many cases, they're dealing with much more regulated information, where compliance and security is even more important, where content might even go out and reach through their manufacturing processes or supply chains or customer base and the fact that they're able to shut down legacy systems, this is just the nature of these transactions that again it's -- more parties tend to be involved within the customer and it tends to be a more in-depth sales cycle.

However, as a result of these types of sales cycles, we do see way greater customer retention, obviously much larger deal sizes.

And then, ultimately, much more of our differentiation is able to benefit from these deals as well.

So we do expect that this becomes the bulk of our business as we reach $1 billion in revenue and beyond.

But it is an evolution to get there.

And it's something that -- again, we're not satisfied with the speed at which we're driving that execution through the whole company, but we are seeing some incredible pockets of success that we now want to go replicate and drive more uniform execution around.

Yes.

And this is Dylan.

Just to add a little bit there.

I think Aaron covered most of it.

But just as a note, while these particular deals that we had expected to didn't close in the fourth quarter, are taking longer to close, we're not seeing this as a more general trend across our larger deals beyond what we had already been seeing in the business and expecting.

And as Aaron mentioned, ultimately, this is kind of solvable through our -- just better execution on our end.

A lot of it came down to just deal management and not sort of getting ahead of some of these complexities.

Although external factors did influence a couple of these deals, such as one of the 7-figure deals was delayed because of a large merger, another because of the government shutdown.

But most of these -- almost all these deals are still in play in the pipeline and set to close throughout FY '20.

Your next question is from Rob Owens with KeyBanc Capital Markets.

This is Mike Casado on for Rob Owens.

Dylan, relative to the 7-figure deals, can you help us understand the assumptions around the $10 million headwind you referenced -- pardon me, I'm sorry, around the $10 million headwind you referenced?

How do you expect those deals to play out over the course of the year?

And any other color you can provide us and helping us get a sense of how you arrived at that $10 million headwind?

Sure.

So maybe to give a little bit of color, it was effectively the delta between what we had forecasted in terms of the impact on kind of the annualized contract value and cumulative impact that we'd expected in Q4.

And that's how it would roll through the year on the revenue front.

It does take -- we basically have a few different categories of deals, depending on our confidence in closing those deals, from committed to different probabilities associated with that.

And so it's really looking at that weighted expected impact of those deals that are in those kind of firmer categories versus what ultimately happened in the fourth quarter.

And then we are expecting some of those deals, as mentioned, to close throughout the course of FY '20, so adjusted for that.

But really, looking at it effectively as the delta between -- in that side of deals we had expected to close in the fourth quarter originally as we sort of enter the quarter versus what ultimately happens and then making adjustments for the deals that are nearer term that we have visibility into in the earlier part of the year.

That's helpful.

And then with the new EMEA leadership in place for only 2 quarters now, how satisfied is the team with the structure there?

And is being able to better solution sell in EMEA largely just a function of educating the sales force?

Yes.

So we're seeing strong early signs from the new leadership.

We've actually made a set of changes even beyond bringing the new leader that we mentioned in the start of Q3 of last year.

We have a new leadership in some of our kind of subregional segments that are running kind of key countries within EMEA.

So overall, we have made some investments in very strong sales leadership and talent to help with EMEA broadly solution selling and really this move from enabling customers to use Box for file sharing and collaboration to really using the full suite of Box's capabilities.

This is an evolution that we've been going through across all of our segments.

However, we have more work to do specifically in EMEA.

And it is something where sales training, our sales processes and rigor as well as the introduction of our product suites, we believe, is going to be very helpful in increasing momentum there.

So happy with the early signs that we're seeing.

And we do expect to see some recovery on this within the first half of this year.

But again, not satisfied with the Q4 results, which is driving a big part of that revenue guidance.

Your next question is from Mark Murphy with JPMorgan.

This is Matt Coss on behalf of Mark Murphy.

The one customer you mentioned that renewed at a much lower rate than originally expected and will be a headwind to revenue this year, what were some of the original use cases that they thought they were going to realize?

And why weren't they able to meet those targets or realize those use cases?

What were some of the unforeseen circumstances they ran into?

Yes.

So just some brief context on the deal, the deal was initially structured with prior leadership within the organization, of which we had much stronger kind of connection or relationship to.

So that was the kind of start -- the whole context of the overall strategy from an IT standpoint looked very different given the prior relationship structure.

We had a number of use cases, some higher value than others.

Unfortunately, in some of the high value ones, with this new leadership in place, there ended up being a cost versus value gap that we couldn't bridge with the new leadership.

And so that resulted in that down sell.

They remain a customer, and it's a customer that we're working with right now to drive more expansion of use cases.

So I think we see actually a lot of go-forward opportunity in this account in particular but unfortunately a mismatch to the prior set of use cases and the unique structure that was created there, again driven by the prior leadership.

So definitely a one-off from our perspective, not something that we see any kind of consistent trend on, but something that we're really focused on recovering even with this specific customer and driving future growth with.

You also called out strength in Japan.

Can you comment or update us on the Fujitsu partnership and how they're able to drive that strength or how much they contributed to it?

Yes.

So we're seeing fantastic results from Japan, absolutely driving certainly a disproportionate amount of our international growth.

But just even on an absolute basis, we're very happy about Japan right now.

This is an ecosystem where it's a kind of co-sell model, both direct and with partners.

Fujitsu is one of them, including IBM and many other kind of major resellers in Japan.

So the growth -- we're seeing kind of healthy relationship with Fujitsu, both as a customer as well as a partner in that ecosystem.

But I'd say, the broader partner ecosystem in Japan is performing very strong, and we're seeing really strong results from that region.

Your next question is from George Iwanyc with Oppenheimer.

Dylan, when you look at the competitive environment, I think you covered this earlier, can you give us a sense of whether your win rates are steady or going up or ticking down relative to the competition?

Yes.

So our win rates have been stable and pretty strong.

So that hasn't changed whether you're looking at kind of even on a competitor-by-competitor basis.

I would say that we tend to see higher win rates in those use cases that are more kind of cloud content management in nature, so particularly as there are a greater set of products associated with those deals.

As much as we always mention, they tend to be more complex and, in many cases, longer deal cycles, the win rates on those types of conversations that we have are higher than the more basic use cases who are less differentiated.

But across the board, there hasn't been any significant changes to either the sort of competitive environment or the types of win rates that we've been seeing over the past several quarters.

Yes.

And the only thing I would build on that is more and more, we're helping customers go and retire costs from their IT environment.

So oftentimes, we're not necessarily competing with a net new competitor as much as helping customers replace and retire legacy systems, which tend to obviously improve the funding and the budgeting for Box as well.

So a lot of the legacy document management and storage infrastructure technologies that can't work in the cloud, Box is able to help customers go and retire.

And so we're seeing an increasing trend in our win rates and in our win notifications around being able to help retire and shut down legacy document management and storage infrastructure.

All right.

And kind of just building on that, from a pricing perspective, if you're comparing like-for-like products, is that stable as well?

It seems like the lift you're getting is primarily mix related.

Yes.

So we are seeing stability in terms of the uplift that we see on the products.

And again, just kind of the high-level puts and takes, the 2 most significant puts and takes that we see on an overall price per seat basis are the tailwind that we get from the incremental value from these add-on products and the higher-value use cases, offset by these larger deals with more seats as we tend to give volume discounting.

So overall, we've been pretty pleased with the way that price per seat has been trending.

We did see continued improvements, slight improvement over the past year in terms of the price per seat overall and is up roughly 30% versus where we were 2, 2.5 years ago.

And my last question on that 30%, when you have the new Relay product upgrade that comes later this year and the security on it, do you feel like you have some extra pricing leverage with those type of products relative to the 30% that you've seen for the past products?

Yes.

So I think that those products are absolutely more premium in nature than even sort of the data governance module.

However, again, given the Box suites that we're looking to introduce, I think you'll see a collection of these add-on products that are sold to customers, which will obviously be more than any individual add-on products sale but obviously include volume discounts, et cetera, based on the size of the customer.

But overall, I think our pricing power due to our workflow automation capabilities, advanced security capabilities, data governance capabilities and open platform will only continue to get stronger over time as we move customers from using Box as, again, a productivity and collaboration tool to really a cloud content management platform.

Your next question is from Brian Peterson with Raymond James.

Aaron, just a question for you.

So normally in the prepared remarks, we hear a lot about the channel momentum and I think Dylan gives some stats on how many of the larger deals are driven by channel partners.

We didn't hear that this quarter.

Is there anything to read into that?

Has anything changed with the health of the business with channel partners?

Yes, it's a great question.

No significant change on the focus on channels or resellers.

There is an evolution where this year, in particular, you're going to see us put even more emphasis on system integrators and our work with the larger technology integrators, the likes of Accenture, Deloitte, et cetera.

But we really wanted to make sure that we covered the broader evolution that's happening with our go-to-market efforts, which is much more about how do we take the full power of Box to our customers and drive up-sells with add-on products.

And so we wanted to make sure we put a lot of emphasis on that particular dimension of our business model.

I think more and more, over time, channel, we will see as a distribution vehicle for us.

But whether the customer's director channel is, again, not the big focus versus making sure customers really use us as a cloud content management platform, and so we'll certainly reflect that in our comments as we go forward this year.

And -- but you will see the partnership mix continue to evolve, again, to bring in more of the system integrators as we're driving much bigger and more strategic solutions to our customers.

Yes.

And so channel does remain about 30% of our overall business.

And in the fourth quarter, close to 50% of our 6-figure deals were co-sold with a channel partner, although that is driven in large part, a little bit higher than in most quarters, by the really strong growth that we saw in Japan that we mentioned as virtually all of those deals are through the channel.

Got it.

And Dylan, maybe one clarification for you.

I know we get the revenue breakout of domestic versus international, but is there any sense that you can give us in terms of the size of EMEA in that international revenue?

So we would say it's tended to be in the kind of 10%, low teens type of range to give a sense of kind of order of magnitude.

And as it relates to the overall revenue growth rate, the contribution from the international business has improved by a bit year-on-year.

That is, as Aaron mentioned, really driven by Japan, offset by what we've been seeing in EMEA.

But to get a sense of that scale, that's kind of roughly the contribution from EMEA today.

Out of our overall revenue and given just the market opportunity, we think that kind of by improving some of the execution and inconsistency we've seen, that over time, we should be able to grow that as a percentage of our overall revenue as well.

Your next question is from Michael Turrin with Deutsche Bank.

I was hoping we could touch more on your thoughts around seasonality heading into fiscal '20.

I think we're all expecting to see more of a back end-loaded year this year as a result of the move to solution selling.

But growth rate has actually held pretty consistent throughout the year.

You added some color around billings trajectory in Q1.

But I'm just wondering if you're still expecting solution selling in the move to larger deals to provide more of a back-ended seasonal pattern going forward.

Sure.

So we do expect that to be the case.

As you mentioned, the billings kind of breakdown and seasonality has been fairly consistent over the past few years now.

I would say that in FY '20, again, we'd expect roughly the same, particularly as we grow a larger portion of what we ultimately bill that comes from renewals.

So you probably will see us move the needle significantly given the current scale.

So I would expect to see similar trends but for there to be a little bit of a shift from Q1 into Q4, both because of some of those expected Q1 billings headwinds that we mentioned as well as that continued push in the solution selling in some of these larger customers, in addition to coming off of a Q4 that's not particularly strong for us.

[So we would expect to see the contribution to FY20 billings to break down as: mid-teens in Q1, low to mid-twenties in both Q2 and Q3, and then mid to high 30s in Q4.] (corrected by company after the call)

Okay, that's helpful.

And then maybe one on margin.

Now that you -- Dylan, now that you've reached profitability on an adjusted basis, any plans at all to potentially dial back the degree of margin expansion from here?

How are you thinking about that trade-off and the potential to maybe push for more growth going forward here?

Yes.

So as we've talked about in the past, we really do focus on what we're seeing in terms of sales productivity on a region-by-region, segment-by-segment basis to really determine what we think the right growth rate is to grow our sales force, which is the biggest driver of the overall spend and I think variability in terms of the type of leverage that we'll see in the coming years, as sales and marketing is probably the line item that's going to be most impacted and where we expect to drive most of the leverage.

We're -- if we are seeing pipeline and actual sales and performance in certain regions, then we will likely invest more in those regions.

And if not, then you'll see -- likely see more profitability.

But I would say that we think we have a pretty healthy mix of kind of the growth and profitability in terms of what we've discussed for this year.

And would note that we think there's a lot of potential to grow at a healthy clip and invest in the capacity and the pipeline to put up continued growth based on what we're expecting to do this year.

So I feel pretty good about the sort of -- just all of the inputs that would go into putting up those healthy growth rates over time.

And I would say that when we get through FY '20, which we did give formal guidance around, we expect to see fairly consistent improvements in our operating margins between this year that we're just entering now and FY '22.

So call it roughly 500 basis points or so of margin expansion in each of FY '21 and FY '22.

Your next question is from Chad Bennett with Craig-Hallum.

Maybe first, a clarification one for Dylan.

The $10 million headwind between Europe -- or EMEA, I should say, and the large deals this year as a result of the billings weakness in the fourth quarter, are those -- the 7-figure deal weakness and EMEA weakness, are those mutually exclusive?

Or is there some overlap there?

Meaning obviously, was some of the 7-figure deal weakness out of EMEA?

Yes.

So those are 2 separate categories.

So while there is overlap in terms of the 7-figure deals in EMEA that we'd expect to close and didn't, we had categorized those as part of the EMEA headwind.

So those are 2 separate categories that are mutually exclusive, each about $10 million.

Okay.

And then kind of generally speaking, maybe for Aaron or Dylan, I guess, I'm trying to understand your kind of enthusiasm or confidence behind the solution selling working.

I think over the last couple of years, you've grown quota-carrying headcount well in excess of revenue growth and certainly in excess of billings growth.

You would think if the solution selling is working, it would certainly be evident in your fiscal fourth quarter where the solution-based large deals really accumulate and seasonally are strong.

And if you look at your trailing 4-quarter billings per paying user, I think since you've given this metric, it went negative year-over-year for the first time.

Looks like based on the Q1 billings guidance, it will be negative again year-over-year on a trailing 4-quarter basis.

Obviously, your paying users are down and your billings are down because billings missed.

That's obviously apparent.

But I guess, what evidence are you seeing that what you're doing is really working?

Yes.

So I can cover the evidence side, and then I think Dylan wants to maybe clarify a couple of numbers because we are seeing a higher kind of revenue growth rate than the sales headcount add, so we do want to clarify a couple of numbers there.

I think, overall, when we look at the broader base of large deals, especially the $100,000-plus segment, which are -- while they don't represent the full impact of our CCM platform being sold to customers, they are often representative of the kinds of customers that are using Box in more strategic ways.

And we have seen that base of customers grow at about 20% basis year-over-year and now starting to really reach a volume where more and more of our sales reps are driving those transactions and customers.

So it's reaching a broader set of customers from a broader set of sellers.

So we're seeing that more of our sales reps are driving add-on product sales, really driving much more strategic relationships with customers.

But I would say that we're disappointed with the speed at which this is rolling out throughout the business.

We just did our sales kickoff about 2 weeks ago and a really kind of great opportunity obviously to reenergize the entire team and really bring to life some incredible examples from -- throughout FY '19 of very large strategic transactions we're able to drive.

So I think we're seeing very strong momentum, energy and impact of these changes happening throughout the sales force.

But then, again, given the deal cycle length, especially for 7-figure deals, the fact that we're obviously onboarding new reps and then the need to continue to improve our sales rigor and processes, that is taking longer than we'd like to have the full dent on our revenue growth that we would expect.

So again, we're not satisfied with the results.

However, we have an incredible amount of confidence based on the early trends that we're seeing within the customer base, a lot of customers that we're talking to about cloud content management and how that's going to impact how they transform their businesses, and thus, we see the size of the opportunity going forward.

Yes.

And then maybe just to clarify a bit on the numbers.

So this past year, we grew revenue by 20% and our sales force by 12%.

And then even our guidance for this coming year expects revenue to be faster than the growth of our sales force as well.

And that's sort of been the trend over time also.

And just in terms of how it relates to the productivity and some of the trends we've seen, and any time you think about a productivity metric and not seeing all the work that you're doing with the numbers, but I'd say the user growth is probably not as meaningful as large deal growth or billings revenue to get a sense of kind of the traction and success in the sales force.

But over the last few years, we've see an improvement in sales force productivity overall.

This past year, it was flat year-on-year with a bunch of different trends kind of on a regional basis that we've seen.

So just high level, U.S., as it's our largest region, was pretty solid overall in terms of year-on-year performance where we saw kind of the Coasts, West Coast and East Coast regions leading the charge and the Central and South regions have been ramping with a lower productivity currently.

And then as we talked about or as you'd expect from like some of the commentary we've given, EMEA was significantly down year-on-year in terms of productivity while Japan saw a significant improvement in sales force productivity year-on-year.

And then in our inside sales commercial segment, globally, that was a bit better as well with a much more consistent performance on a regional basis.

So all in, you have a lot of different kind of subregions and different stories there.

But overall, over the last few years, again, productivity has been improving.

And over the past year, it was pretty flat.

Your next question comes from Rishi Jaluria with D.A. Davidson.

Two quick ones.

Aaron, let me start with you.

Is the $1 billion model in FY '22 still on the table?

Because if I look at your current guidance, it implies that revenue is going to have to accelerate to a 20% CAGR over the following 2 years.

And if it is still on the table, what is it that's giving you confidence in that?

And I've got a follow-up for Dylan.

Yes.

So we're still very focused on that reacceleration.

This is the entirety of our strategy right now.

When we look at the big deal growth and, again, being able to sell multiple add-on products and then eventually suites to our customers, we see a tremendous amount of opportunity just within our existing customer base, multiple billions of dollars of revenue just within our existing customer base, especially the top customers.

So the focus right now is entirely on that reacceleration to achieve that target of $1 billion in revenue in FY '22.

And so that's where we're putting all of our energy.

Obviously, the lower guidance than we would have liked in FY '20 does put even more of a need for that reacceleration on us.

But again, when we look at opportunity, when we look at our customer base, when we look at our leadership position and our add-on products that we have, this is something that we're very confident in continuing to drive.

All right.

And then, Dylan, if I just combine the moving parts in next year's guidance together, $10 million headwind from EMEA, $10 million from the slipped 7-figure deal and then about $8 million related to a large customer that's reducing its spend, that on top of your -- the midpoint of your guidance would be about $730 million, which would be a 20% growth rate next year, in line with what you've done in FY '19 or realistically a deceleration from the 22% growth adjusted for ASC 606 this year.

You had discussed in the past quarter and definitely at the Analyst Day seeing an acceleration in revenue growth next year.

So just help me square these 2 observations together and why even adding in the moving parts that still wouldn't amount to an acceleration.

Sure.

So I would say, first of all, when we had phrased that and had always said that, that was on a reported revenue growth basis, so 606 to 605 was what we've tried to clarify there in terms of our earlier commentary.

And our prior expectations were based around those numbers.

I would also just say that, certainly, there are going to be other factors and a lot of puts and takes in the business that relate to -- have an impact on FY '20 growth.

And we went in to just size to give commentary around kind of order of magnitude, what -- how this impacts next year's revenue with the biggest buckets, bunch of other things that do impact our revenue guidance as well, other parts of performance in FY '19 as well as expectations for FY '20.

Your next question is from Erik Suppiger with JMP Securities.

You've made a number of changes on the sales front.

Have you had any increased turnover either voluntary or involuntarily?

And do you think that this needs to -- do you think that you need to revisit the salespeople that you're hiring?

Are you looking for maybe a more seasoned enterprise sales candidates going forward that might be higher cost?

Yes, this is Aaron.

I think we've seen retention rates relatively in line with our expectations.

Obviously, it can move intra-quarter for a variety of factors.

We have been very focused on bringing on more sales reps that have been in the environment selling kind of end-to-end solutions for customers.

Oftentimes, that can lead to us pulling candidates out of different kinds of companies than maybe we traditionally recruited from.

But overall, this is all sort of priced into our expectations from a cost and sales and marketing standpoint.

So we don't see any changes from a competition standpoint in terms of what we're going after -- in terms of the kinds of reps we're going after.

But absolutely, it is about evolving the sales force, continuing to make sure we can go and drive solution sales into our customers and much bigger transactions into our accounts.

Do you feel like your training is where it needs to be?

Or is this still very much a work in progress that still is kind of figuring out the optimal go-to-market?

Yes.

This is an area we've actually been investing in a bit more over the past especially a couple of quarters.

We, in fact, just brought in a new leader to run our sales training and enablement.

And the focus here is making sure that we can really get very rigorous with all of our sales team on exactly what it takes to go and sell these much larger deals, making sure everybody is equipped with the right content messages training to do this.

It's something that we've -- we're building off a very strong foundation, fortunately.

But we want to invest in this even further and get even more rigorous with our training, enablement and sales processes and, as Dylan mentioned, continuing to kind of tweak the compensation plans in a way that's in line with solution selling and these much bigger transactions.

So really, the -- building off of the momentum that we again kicked off last year.

So last year, we kind of -- was the start of this evolution.

And again, it's -- we're not satisfied with the complete speed in which we're doing this.

But we're seeing very strong early success, and now we're just building on that momentum coming into this year.

And again, really optimistic about the results.

Your last question comes from Philip Winslow with Wells Fargo.

Just a couple of housekeeping items here.

First, Dylan, you mentioned that backlog was up 12% year-over-year.

Do you have a split of that -- of current versus noncurrent, if you have the split of total RPO current and noncurrent?

That's one.

Two, do you have just the total user count?

I think we got the paid user count.

And then the third question, you also have the partner net metrics for Q3.

You just gave us Q4 from a prior question, but I don't think those are in the transcript for Q3.

Sure.

So I'll start on some of the metric clarifications.

So total registered users ending the quarter and year was 64.5 million.

Maybe what -- so what was the channel metric that you were asking about?

For the contract size of 100k through partners in Q3.

I think you said it was about half in Q4.

In Q3, I don't have the number off the top of my head.

We'll follow up on that.

I think it was a little bit lower, more in the 40% range, but we'll confirm that.

And then on the kind of remaining performance obligation, the deferred revenue breakdown: overall up 17%, short-term deferred was up 21% and long-term deferred was down 26%.

And that's again because of end-to-end -- the noise and headwinds from the long-term deferreds was because the impact of that enhanced developer fee, which was a much bigger amount on our balance sheet a year ago.

But in terms of the backlog -- and maybe just to put the full piece in context, our total remaining performance obligation ending the year came in at $686 million, which is up 15% year-on-year.

That's made primarily of deferred revenue, which it went through -- that was $375 million, a combination of short term, long term, up 17%; and then backlog, which ended the year at $311 million, up about 12% year-on-year.

Cool.

And do you have the breakdown of RPO current versus noncurrent for the next 12 months?

No.

The deferred revenue piece, but I don't have the backlog current versus noncurrent piece.

Okay, got it.

And then also just last metric question.

One of the things you're giving was sort what billings growth would have looked like ex the enhanced developer fee, kind of have been hanging out in the 20s.

What does that equal for the full year billings growth ex that developer fee?

Yes.

So that ended up being roughly a 3 percentage point headwind to billings growth in the year in FY '19.

This concludes the Q&A portion of today's call.

I will now turn things back over to the presenters for any closing remarks.

Well, thank you, everyone, for joining us today, and we look forward to speaking with you next quarter.

This conclude today's conference call.

You may now disconnect.