Box Reports Strong Fiscal First Quarter 2022 Financial Results

Rhea-AI Summary

Box, Inc. (NYSE:BOX) reported strong financial results for Q1 FY22, with revenue of $202.4 million, a 10% increase year-over-year. Remaining performance obligations (RPO) rose 20% to $864.8 million, while billings grew 24% to $159.4 million. The GAAP net loss per share improved to $0.09 from $0.17 in Q1 FY21. Non-GAAP net income per share was $0.18, up from $0.10. The company expects Q2 revenue to be between $211 million and $212 million and forecasts full-year revenue of $845 million to $853 million. Box also announced a strategic partnership with KKR, including a $500 million investment.

Positive

• Revenue increased 10% to $202.4 million.
• Remaining performance obligations rose 20% to $864.8 million.
• Billings grew 24% to $159.4 million.
• Non-GAAP net income per share improved to $0.18 from $0.10.
• Free cash flow reached $75.9 million, up from $39.9 million.

Negative

• GAAP operating loss was $10.3 million, although improved from $24.2 million last year.
• GAAP net loss per share remains negative at $0.09.

Box, Inc. (NYSE:BOX), the leading Content Cloud, today announced financial results for the first quarter of fiscal year 2022, which ended April 30, 2021.

"Our vision for the Content Cloud is resonating with our customers. They recognize the strategic importance of securing, automating, integrating, and collaborating on content, and are investing in the full power of Box," said Aaron Levie, co-founder and CEO of Box. "The strategy we've been executing on is yielding positive results as reflected in our strong start to FY22 and we’re poised to build on our leadership and drive our next phase of growth.”

"Q1 was an excellent start to the year, highlighted by strong billings, RPO, and revenue growth, in addition to increased profitability," said Dylan Smith, Box’s co-founder and CFO. “As we build on this momentum and continue to focus on driving profitable growth, we're well positioned to accelerate revenue growth over time and achieve our long-term financial targets.”

Fiscal First Quarter Financial Highlights

• Revenue for the first quarter of fiscal year 2022 was $202.4 million, an increase of 10% from the first quarter of fiscal year 2021.
• Remaining performance obligations as of April 30, 2021 were $864.8 million, an increase of 20% from the first quarter of fiscal year 2021.
• Deferred revenue as of April 30, 2021 was $423.2 million, an increase of 15% from the first quarter of fiscal year 2021.
• Billings for the first quarter of fiscal year 2022 were $159.4 million, an increase of 24% from the first quarter of fiscal year 2021.
• GAAP gross profit for the first quarter of fiscal year 2022 was $141.5 million, or 70% of revenue. This compares to a GAAP gross profit of $129.6 million, or 71% of revenue, in the first quarter of fiscal year 2021.
• Non-GAAP gross profit for the first quarter of fiscal year 2022 was $147.9 million, or 73% of revenue. This compares to a non-GAAP gross profit of $134.1 million, or 73% of revenue, in the first quarter of fiscal year 2021.
• GAAP operating loss in the first quarter of fiscal year 2022 was $10.3 million, or 5% of revenue. This compares to a GAAP operating loss of $24.2 million, or 13% of revenue, in the first quarter of fiscal year 2021.
• Non-GAAP operating income in the first quarter of fiscal year 2022 was $34.4 million, or 17% of revenue. This compares to a non-GAAP operating income of $17.2 million, or 9% of revenue, in the first quarter of fiscal year 2021.
• GAAP net loss per share, basic and diluted, in the first quarter of fiscal year 2022 was $0.09 on 161.7 million weighted-average shares outstanding. This compares to a GAAP net loss per share of $0.17 in the first quarter of fiscal year 2021 on 151.9 million weighted-average shares outstanding.
• Non-GAAP net income per share, diluted, in the first quarter of fiscal year 2022 was $0.18. This compares to a non-GAAP net income per share of $0.10 in the first quarter of fiscal year 2021.
• Net cash provided by operating activities in the first quarter of fiscal year 2022 was $94.8 million, an increase of 53% from net cash provided by operating activities of $61.9 million in the first quarter of fiscal year 2021.
• Free cash flow in the first quarter of fiscal year 2022 was positive $75.9 million. This compares to free cash flow of positive $39.9 million in the first quarter of fiscal year 2021.

For more information on the non-GAAP financial measures and key metrics discussed in this press release, please see the section titled, “About Non-GAAP Financial Measures and Other Key Metrics,” and the reconciliations of non-GAAP financial measures and certain key metrics to their nearest comparable GAAP financial measures at the end of this press release.

Business Highlights since Last Earnings Release

• Delivered wins and expansions with leading organizations such as D.A. Davidson Companies, DoorDash, IQVIA, Isuzu Motors Limited, Penguin Random House, and Tokyo Institute of Technology.
• Continued integration of the SignRequest team and development of Box Sign, Box's native e-signature capability, which is expected to launch this summer.
• Enhanced Box for Microsoft 365 to make it easier for joint customers to securely work in the cloud, from any location. Building on Box’s seamless experience within Microsoft environments, these updates included new security integrations, enhanced functionality in Teams and Office Online, and a new Box connector for Microsoft Graph.
• Announced new and deepened integrations with Cisco Webex to enable customers to work securely and effectively in the cloud. The new integration will make it even easier for users to create workflows that span the two platforms.
• Introduced a new integration with Dolby, a leader in immersive entertainment experiences, that makes production-quality audio as simple as uploading a file to Box.
• Announced more advanced security features in Box to prevent accidental data leaks and protect content in the cloud. These included enhanced auto-classification functionality within Box Shield, in addition to a set of identity and permission management updates to the core product.
• Announced new Annotations and document scanning enhancements in Box, to help power productivity and keep work moving forward in the Content Cloud.
• Announced the addition of Sebastien Marotte as the new President for Box EMEA. Sebastien will join Box after more than 10 years at Google Cloud.
• Recognized as one of Fortune's Best Workplaces in Technology for 2021.
• Announced a strategic partnership with KKR, including a $500 million KKR-led investment and appointment of John Park, KKR’s Head of Americas Technology Private Equity, to the Board of Directors.

Outlook

The following outlook reflects the impact of Box’s preferred stock issuance and anticipated common stock repurchase. On a quarterly basis, until conversion of the preferred stock into common stock, Box anticipates a roughly 2.5¢ non-cash accounting impact to EPS related to the preferred stock dividend, which Box expects to settle in shares of common stock. This preferred stock dividend will appear below the net income line in Box’s Statements of Operations and in the Earnings Per Share Note accompanying Box’s financial statements. Note that this preferred stock dividend will have no impact on Box’s reported net income. Additionally, for Q2 and full year FY22, Box anticipates a 2¢ impact from a temporarily elevated share count during the period between the issuance of the preferred stock on May 12, 2021, and Box’s anticipated common stock repurchase. Combined, these items will result in a 4¢ impact to EPS in Q2, and a 9¢ impact to EPS for the full year.

• Q2 FY22 Guidance: Revenue is expected to be in the range of $211 million to $212 million. GAAP operating margin is expected to be in the range of negative 5% to negative 4.5%, and non-GAAP operating margin is expected to be in the range of 18% to 18.5%. GAAP basic and diluted net loss per share are expected to be in the range of $0.13 to $0.12. Non-GAAP diluted net income per share is expected to be in the range of $0.17 to $0.18. Weighted-average basic and diluted shares outstanding are expected to be approximately 160 million and 167 million, respectively.
• Full Year FY22 Guidance: Revenue is expected to be in the range of $845 million to $853 million. GAAP operating margin is expected to be negative 4%, and non-GAAP operating margin is expected to be in the range of 18% to 18.5%. GAAP basic and diluted net loss per share are expected to be in the range of $0.50 to $0.45. Non-GAAP diluted net income per share is expected to be in the range of $0.71 to $0.76. Weighted-average basic and diluted shares outstanding are expected to be approximately 154 million and 161 million, respectively.

All forward-looking non-GAAP financial measures contained in this section titled “Outlook” exclude estimates for stock-based compensation expense, intangible assets amortization, and as applicable, other special items. Box has provided a reconciliation of GAAP to non-GAAP net income (loss) per share guidance at the end of this press release.

Webcast and Conference Call Information

Box’s management team will host a conference call today beginning at 2:00 PM (PT) / 5:00 PM (ET) to discuss Box’s financial results, business highlights and future outlook. A live audio webcast of this call will be available through Box’s Investor Relations website at www.box.com/investors for a period of 90 days after the date of the call.

The conference call can be accessed by registering online at http://www.directeventreg.com/registration/event/3751856, at which time registrants will receive dial-in information as well as a passcode and registrant ID. A telephonic replay of the call will be available approximately two hours after the call and will run for one week. The replay can be accessed by dialing:

+ 1-800-585-8367 (U.S. and Canada), conference ID: 3751856
+ 1-416-621-4642 (international), conference ID: 3751856

Box has used, and intends to continue to use, its Investor Relations website (www.box.com/investors), as well as certain Twitter accounts (@box, @levie and @boxincir), as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Information on or that can be accessed through Box’s Investor Relations website, these Twitter accounts, or that is contained in any website to which a hyperlink is provided herein is not part of this press release, and the inclusion of Box’s Investor Relations website address, these Twitter accounts, and any hyperlinks are only inactive textual references.

This press release, the financial tables, as well as other supplemental information including the reconciliations of non-GAAP financial measures and certain key metrics to their nearest comparable GAAP financial measures, are also available on Box’s Investor Relations website. Box also provides investor information, including news and commentary about Box’s business and financial performance, Box’s filings with the Securities and Exchange Commission, notices of investor events and Box’s press and earnings releases, on Box’s Investor Relations website.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks, uncertainties, and assumptions, including statements regarding Box’s expectations regarding the size of its market opportunity, its leadership position in the cloud content management market, the demand for its products, the impact of its acquisitions on future Box product offerings, the benefits to its customers from completing acquisitions, the time needed to integrate acquired businesses into Box, the impact of the COVID-19 pandemic on its business, its ability to grow and scale its business and drive operating efficiencies, its ability to achieve revenue targets and billings expectations, its ability to achieve profitability on a quarterly or ongoing basis, its free cash flow, its ability to continue to grow unrecognized revenue and remaining performance obligations, the timing of recent and planned product introductions, enhancements and integrations, the short- and long-term success, market adoption and retention, capabilities, and benefits of such product introductions and enhancements, the success of strategic partnerships, its revenue, billings, gross margin, GAAP and non-GAAP net income (loss) per share, non-GAAP operating margins for future periods, the related components of GAAP and non-GAAP net income (loss) per share, weighted-average outstanding share count expectations for Box’s fiscal second quarter and full fiscal year 2022 in the section titled “Outlook” above, the KKR-led investment and achievement of its potential benefits, any potential repurchase of its common stock, whether, when, in what amount and by what method (whether by tender offer or otherwise) any such repurchase would be consummated, and the share price of any such repurchase. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: (1) adverse changes in general economic or market conditions, including those caused by the COVID-19 pandemic; (2) delays or reductions in information technology spending; (3) factors related to Box’s highly competitive market, including but not limited to pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by Box’s current or future competitors; (4) the development of the cloud content management market; (5) the risk that Box’s customers do not renew their subscriptions, expand their use of Box’s services, or adopt new products offered by Box on a timely basis, or at all; (6) Box’s ability to provide timely and successful enhancements, integrations, new features and modifications to its platform and services; (7) actual or perceived security vulnerabilities in Box’s services or any breaches of Box’s security controls; (8) Box’s ability to realize the expected benefits of its third-party partnerships; (9) the potential impact of shareholder activism on Box’s business and operations; and (10) Box’s ability to successfully integrate acquired businesses and achieve the expected benefits from those acquisitions. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Box. While Box believes these estimates are meaningful, they could differ from the actual amounts that Box ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2021. Box assumes no obligations and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended April 30, 2021.

Additional information on potential factors that could affect Box’s financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings Box makes with the Securities and Exchange Commission from time to time, including the Annual Report on Form 10-K filed for the fiscal year ended January 31, 2021. These documents are available on the SEC Filings section of Box’s Investor Relations website located at www.box.com/investors. Box does not assume any obligation to update the forward-looking statements contained in this press release to reflect events that occur or circumstances that exist after the date on which they were made.

Certain Information Regarding the Tender Offer

The description contained herein is for informational purposes only and is not a recommendation, an offer to buy or the solicitation of an offer to sell any shares of Box’s common stock. A tender offer for the outstanding shares of Box’s common stock has not commenced. If a tender offer is commenced, if ever, Box will file or cause to be filed a Tender Offer Statement on Schedule TO with the SEC. The Tender Offer Statement (including an Offer to Purchase, a related Letter of Transmittal and other tender offer documents) will contain important information that should be read carefully before any decision is made with respect to the tender offer. Those materials will be made available to Box’s stockholders at no expense to them through Box’s Investor Relations website at www.boxinvestorrelations.com. In addition, those materials (and any other documents filed with the SEC) will be available at no charge on the SEC’s website at www.sec.gov.

About Non-GAAP Financial Measures and Other Key Metrics

To supplement Box’s consolidated financial statements, which are prepared and presented in accordance with GAAP, Box provides investors with certain non-GAAP financial measures and other key metrics, including non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, billings, remaining performance obligations, and free cash flow. The presentation of these non-GAAP financial measures and key metrics is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures and key metrics, please see the reconciliation of these non-GAAP financial measures and certain key metrics to their nearest comparable GAAP financial measures at the end of this press release.

Box uses these non-GAAP financial measures and key metrics for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Box’s management believes that these non-GAAP financial measures and key metrics provide meaningful supplemental information regarding Box’s performance by excluding certain expenses that may not be indicative of Box’s recurring core business operating results. Box believes that both management and investors benefit from referring to these non-GAAP financial measures and key metrics in assessing Box’s performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures and key metrics also facilitate management's internal comparisons to Box’s historical performance as well as comparisons to Box’s competitors' operating results. Box believes these non-GAAP financial measures and key metrics are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by Box’s institutional investors and the analyst community to help them analyze the health of Box’s business.

A limitation of non-GAAP financial measures and key metrics is that they do not have uniform definitions. Further, Box’s definitions will likely differ from the definitions used by other companies, including peer companies, and therefore comparability may be limited. Thus, Box’s non-GAAP financial measures and key metrics should be considered in addition to, and not as a substitute for, or in isolation from, measures prepared in accordance with GAAP. Additionally, in the case of stock-based compensation expense, if Box did not pay a portion of compensation in the form of stock-based compensation expense, the cash salary expense included in cost of revenue and operating expenses would be higher, which would affect Box’s cash position.

Non-GAAP operating income (loss) and non-GAAP operating margin. Box defines non-GAAP operating income (loss) as operating income (loss) excluding expenses related to stock-based compensation (“SBC”), intangible assets amortization, and as applicable, other special items. Non-GAAP operating margin is defined as non-GAAP operating income (loss) divided by revenue. Although SBC is an important aspect of the compensation of Box’s employees and executives, determining the fair value of certain of the stock-based instruments Box utilizes involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options, which is an element of Box’s ongoing stock-based compensation expense, is determined using a complex formula that incorporates factors, such as market volatility, that are beyond Box’s control. For restricted stock unit awards, the amount of stock-based compensation expenses is not reflective of the value ultimately received by the grant recipients. Management believes it is useful to exclude SBC in order to better understand the long-term performance of Box’s core business and to facilitate comparison of Box’s results to those of peer companies. Management also views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s developed technology and trade names, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense that is not typically affected by operations during any particular period. Furthermore, Box excludes the following expenses as they are considered by management to be special items outside of Box’s core operating results: (1) fees related to shareholder activism, which include directly applicable third-party advisory and professional service fees, (2) expenses related to certain litigation, (3) expenses associated with restructuring activities, consisting primarily of severance and other personnel-related costs, and (4) expenses related to announced acquisitions, including transaction and discrete tax costs. There are no expenses related to litigation excluded from non-GAAP operating income (loss) in any of the periods presented.

Non-GAAP net income (loss) and non-GAAP net income (loss) per share. Box defines non-GAAP net income (loss) as GAAP net income (loss) excluding expenses related to SBC, intangible assets amortization, and as applicable, other special items as described in the preceding paragraph. In January 2021, Box issued $345 million aggregate principal amount of 0.00% convertible senior notes due in 2026 (the “Notes”). Upon issuance, Box recorded a debt discount for the conversion feature of the Notes, separately accounted for as equity, which was amortized as interest expense together with the issuance costs of the Notes. Box excluded the amortization of the debt discount and issuance costs associated with the Notes, in addition to the expenses described above, as they are considered by management to be special items outside of Box’s core operating results. Box adopted Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivative and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), effective February 1, 2021, and upon adoption, eliminated the debt discount for the conversion feature of the Notes. Box defines non-GAAP net income (loss) per share as non-GAAP net income (loss) divided by the weighted-average outstanding shares.

Billings. Billings reflect, in any particular period, (1) sales to new customers, plus (2) subscription renewals and (3) expansion within existing customers, and represent amounts invoiced for all products and professional services. Box calculates billings for a period by adding changes in deferred revenue and contract assets in that period to revenue. Box believes that billings help investors better understand sales activity for a particular period, which is not necessarily reflected in revenue as a result of the fact that Box recognizes subscription revenue ratably over the subscription term. Box considers billings a significant performance measure. Box monitors billings to manage the business, make planning decisions, evaluate performance and allocate resources. Box believes that billings offers valuable supplemental information regarding the performance of the business and helps investors better understand the sales volumes and performance of the business. Although Box considers billings to be a significant performance measure, Box does not consider it to be a non-GAAP financial measure because it is calculated using exclusively revenue, deferred revenue, and contract assets, all of which are financial measures calculated in accordance with GAAP.

Remaining performance obligations. Remaining performance obligations (“RPO”) represent, at a point in time, contracted revenue that has not yet been recognized. RPO consists of deferred revenue and backlog, offset by contract assets. Backlog is defined as non-cancellable contracts deemed certain to be invoiced and recognized as revenue in future periods. Future invoicing is determined to be certain when we have an executed non-cancellable contract and invoicing is not dependent on a future event such as the delivery of a specific new product or feature, or the achievement of contractual contingencies. While Box believes RPO is a leading indicator of revenue as it represents sales activity not yet recognized in revenue, it is not necessarily indicative of future revenue growth as it is influenced by several factors, including seasonality, contract renewal timing, average contract terms and foreign currency exchange rates. Box monitors RPO to manage the business and evaluate performance. Box considers RPO to be a significant performance measure. Box does not consider RPO to be a non-GAAP financial measure because it is calculated in accordance with GAAP, specifically under ASC Topic 606.

Free cash flow. Box defines free cash flow as cash flows from operating activities less purchases of property and equipment, principal payments of finance lease liabilities, capitalized internal-use software costs, and other items that did not or are not expected to require cash settlement and that management considers to be outside of Box’s core business. Box specifically identifies adjusting items in the reconciliation of GAAP to non-GAAP financial measures. Box considers free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in Box's business and strengthening its balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures. The presentation of non-GAAP free cash flow is also not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity. The accompanying tables have more details on the reconciliations of non-GAAP financial measures and certain key metrics to their nearest comparable GAAP financial measures.

About Box

Box (NYSE:BOX) is the leading Content Cloud that enables organizations to accelerate business processes, power workplace collaboration, and protect their most valuable information, all while working with a best-of-breed enterprise IT stack. Founded in 2005, Box simplifies work for leading organizations globally, including AstraZeneca, JLL, and Morgan Stanley. Box is headquartered in Redwood City, CA, with offices in the United States, Europe, and Asia. To learn more about Box, visit http://www.box.com. To learn more about how Box powers nonprofits to fulfill their missions, visit Box.org.

BOX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
		April 30,				January 31,
		2021				2021
ASSETS
Current assets:
Cash and cash equivalents		$	561,459			$	595,082
Short-term investments			50,000				—
Accounts receivable, net			112,253				228,309
Prepaid expenses and other current assets			26,371				16,785
Deferred commissions			39,514				39,110
Total current assets			789,597				879,286
Property and equipment, net			146,100				160,148
Operating lease right-of-use assets, net			183,401				194,253
Goodwill			75,597				18,740
Deferred commissions, non-current			63,487				66,481
Other long-term assets			51,949				32,774
Total assets		$	1,310,131			$	1,351,682
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities		$	34,904			$	32,128
Accrued compensation and benefits			20,761				39,123
Finance lease liabilities			47,110				49,888
Operating lease liabilities			43,881				47,771
Deferred revenue			406,049				443,929
Total current liabilities			552,705				612,839
Debt, net, non-current			366,061				297,614
Finance lease liabilities, non-current			49,877				60,351
Operating lease liabilities, non-current			182,348				192,531
Other long-term liabilities			34,327				37,282
Total liabilities			1,185,318				1,200,617
Stockholders’ equity:
Common stock (1)			16				16
Additional paid-in capital			1,462,038				1,474,843
Treasury stock			(1,177	)			(1,177	)
Accumulated other comprehensive loss			(371	)			(938	)
Accumulated deficit			(1,335,693	)			(1,321,679	)
Total stockholders’ equity			124,813				151,065
Total liabilities and stockholders’ equity		$	1,310,131			$	1,351,682
(1) As of April 30, 2021, there were 162,762 shares of Box’s Class A common stock outstanding.

BOX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
		Three Months Ended
		April 30,
		2021				2020
Revenue		$	202,441			$	183,561
Cost of revenue (1)			60,947				53,995
Gross profit			141,494				129,566
Operating expenses:
Research and development (1)			50,859				53,114
Sales and marketing (1)			69,811				72,750
General and administrative (1)			31,

FAQ

What were Box's Q1 FY22 financial results?

Box reported a revenue of $202.4 million for Q1 FY22, a 10% increase from the previous year.

What is Box's guidance for Q2 FY22?

Box anticipates Q2 revenue between $211 million and $212 million.

What is Box's full-year revenue forecast for FY22?

Box expects full-year revenue to be between $845 million and $853 million.

What impact will the preferred stock issuance have on Box's EPS?

The preferred stock issuance is expected to result in a 4¢ impact on EPS for Q2 and a 9¢ impact for the full year.

What significant partnership did Box announce recently?

Box announced a strategic partnership with KKR, which includes a $500 million investment.