BOX INC (BOX) SEC Filing 10-Q Quarterly report for the period ending Wednesday, October 31, 2018

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Exhibit 99.1

Box Reports Record Revenue of $155.9 Million, Up 21 Percent Year-Over-Year, for Fiscal Third Quarter 2019

 

Revenue of $155.9 Million, Up 21 Percent Year-Over-Year

 

GAAP and Non-GAAP Operating Margin Up 8 Percentage Points Year-Over-Year

 

More than 40 Percent Growth in Deals Greater than $100K and Strong Add-On Product Attach Rates Demonstrate Progress in Solution Selling

 

REDWOOD CITY, Calif. – November 28, 2018 –

Box, Inc. (NYSE:BOX), a leader in cloud content management, today announced financial results for the third quarter of fiscal 2019, which ended October 31, 2018.

 

“Our solution selling strategy continues to gain momentum with strong attach rates for add-on products and large deal growth in the third quarter. With more than 90,000 customers, including BBVA Compass, National Bank of Canada, and Shiseido Company, Box continues to expand its role as a strategic technology partner to power digital transformation for enterprises,” said Aaron Levie, co-founder and CEO of Box. “Businesses need a single, open platform for cloud content management with enterprise-grade security and powerful workflow capabilities, and Box is the only solution with this uncompromising focus.”

 

“In the third quarter, we delivered solid revenue growth and continued to drive operational efficiencies, and we're on track to deliver our first quarter of non-GAAP profitability in Q4,” said Dylan Smith, co-founder and CFO of Box. “With more than 40% growth in deals worth more than $100K and our attach rate for add-on products increasing to over 80% of these deals, we are capturing our market opportunity while driving continued leverage for long-term growth.”

 

Adoption of the New Revenue Recognition Standard - ASC Topic 606

Box adopted the new revenue recognition accounting standard Accounting Standards Codification Topic 606 (“ASC 606”) on a modified retrospective basis, effective February 1, 2018. Financial results for reporting periods in Box’s fiscal year ending January 31, 2019 are presented in compliance with the new revenue recognition standard. Historical financial results for reporting periods prior to fiscal 2019 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard Accounting Standards Codification Topic 605 (“ASC 605”). This press release includes additional information regarding Box’s financial results for the quarter ended October 31, 2018 under ASC 605 for comparison to the prior year.

 

Fiscal Third Quarter Financial Highlights

 

Revenue for the third quarter of fiscal 2019 was a record $155.9 million, an increase of 21% (ASC 606 in fiscal 2019 compared to ASC 605 in fiscal 2018) and 23% (ASC 605 in fiscal 2019 compared to ASC 605 in fiscal 2018) from the third quarter of fiscal 2018.

 

Deferred revenue as of October 31, 2018 was $301.2 million, an increase of 19% (ASC 606 to ASC 605) and 20% (ASC 605 to ASC 605) from October 31, 2017.

 

Billings for the third quarter of fiscal 2019 were $155.6 million, an increase of 10% (ASC 606 to ASC 605 and ASC 605 to ASC 605) from the third quarter of fiscal 2018.

 

GAAP operating loss in the third quarter of fiscal 2019 was $39.5 million, or 25% of revenue (ASC 606), and $42.3 million, or 27% of revenue (ASC 605). This compares to GAAP operating loss of $42.6 million, or 33% of revenue, in the third quarter of fiscal 2018.

 

Non-GAAP operating loss in the third quarter of fiscal 2019 was $7.7 million, or 5% of revenue (ASC 606), and $10.5 million, or 7% of revenue (ASC 605). This compares to non-GAAP operating loss of $17.0 million, or 13% of revenue, in the third quarter of fiscal 2018.

 

GAAP net loss per share, basic and diluted, in the third quarter of fiscal 2019 was $0.28 (ASC 606) and $0.30 (ASC 605) on 142.4 million shares outstanding. This compares to GAAP net loss per share of $0.32 in the third quarter of fiscal 2018 on 134.6 million shares outstanding.

 

Non-GAAP net loss per share, basic and diluted, in the third quarter of fiscal 2019 was $0.06 (ASC 606) and $0.08 (ASC 605). This compares to non-GAAP net loss per share of $0.13 in the third quarter of fiscal 2018.

 

Net cash provided by operating activities in the third quarter of fiscal 2019 totaled $6.8 million. This compares to net cash provided by operating activities of $14.1 million in the third quarter of fiscal 2018.

 


The following information was filed by BOX INC on Wednesday, November 28, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • 18487876_227
    Financial - Shares / Equity
    Cash used in financing activities of $17.3 million for the nine months ended October 31, 2018 was primarily due to $36.9 million of employee payroll taxes paid related to net share settlement of restricted stock units reflecting an increase in the valuation of our share price and $17.2 million of payments of capital lease obligations, partially offset by $21.9 million of proceeds from issuances of common stock under the 2015 ESPP and $15.0 million of proceeds from the exercise of stock options.
  • 18487876_74
    Revenue - Product
    Billings are recognized when invoiced, while the related subscription and premier services revenue is recognized over the contract term.
  • 18487876_162
    Financial - Earnings
    We expect to continue to invest aggressively to capture our large market opportunity globally and capitalize on our competitive position with continued focus on our long-term margin objectives.
  • 18487876_190
    Financial - Earnings
    We expect to continue to invest aggressively to capture our large market opportunity globally and capitalize on our competitive position with continued focus on our long-term margin objectives.
  • 18487876_23
    Revenue - Product
    Our objective is to build an enduring business that creates sustainable revenue and earnings growth over the long term.
  • 18487876_206
    Other - Other
    On November 27, 2017, we paid in full all amounts outstanding under the December 2015 Facility, including the outstanding principal balance of $40.0 million, and terminated the December 2015 Facility and all related loan and collateral documents, in conjunction with entering into a secured credit agreement (November 2017 Facility) with a different lender with a maturity date of November 27, 2020.
  • 18487876_262
    Financial - Shares / Equity
    Non-GAAP net loss and net loss per share We define non-GAAP net loss as net loss excluding expenses related to stock-based compensation, intangible assets amortization and as applicable, other special items.
  • 18487876_154
    Financial - Expense
    The increase in research and development expenses was partially offset by a $1.3 million increase of capitalized internal-use software costs associated with the development of additional significant features and functionality to our products during the same period.
  • 18487876_181
    Financial - Expense
    The increase in research and development expenses was partially offset by a $1.3 million increase of capitalized internal-use software costs associated with the development of additional significant features and functionality to our products during the same period.
  • 18487876_105
    Revenue - Product
    Subscription and premier services revenue are generally recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer.
  • 18487876_225
    Other - Other
    Cash used in investing activities of $14.4 million for the nine months ended October 31, 2018 was primarily due to our facilities capacity expansions in Austin, Tokyo, New York, and London, as well as capital expenditures in connection with fixed asset purchases to support our increased headcount.
  • 18487876_45
    Financial - Expense
    These costs include sales and marketing costs associated with acquiring new customers, such as sales commission expenses, only a portion of which are deferred and then amortized over a period of benefit, and marketing costs, which are expensed as incurred.
  • 18487876_113
    Financial - Expense
    Our cost of revenue consists primarily of costs related to providing our subscription services to our paying customers, including employee compensation and related expenses for datacenter operations, customer support and professional services personnel, payments to outside technology service providers, depreciation of servers and equipment, security services and other tools, as well as amortization expense associated with capitalized internal-use software and acquired technology.
  • 18487876_94
    Revenue - Product
    We believe our retention rate is an important metric that provides insight into the long-term value of our subscription agreements and our ability to retain and grow revenue from our customer base.
  • 18487876_47
    Financial - Earnings
    Although our objective is for each customer to be profitable for us over the duration of our relationship, the costs we incur with respect to any customer relationship, whether a new customer or an expansion within an existing customer, may exceed revenue in earlier periods because we recognize those costs faster than we recognize the associated revenue.
  • 18487876_127
    Revenue - Product
    Sales and marketing expense also consists of datacenter and customer support costs related to providing our cloud-based services to our free users.
  • 18487876_143
    Revenue - Product
    The increase in revenue was primarily driven by an increase in subscription services.
  • 18487876_170
    Revenue - Product
    The increase in revenue was primarily driven by an increase in subscription services.
  • 18487876_119
    Financial - Expense
    Operating expenses also include allocated overhead costs for facilities, information technology costs, and employee benefit costs.
  • 18487876_150
    Financial - Expense
    As we continue to optimize infrastructure efficiencies and expand our data center infrastructure to support the growth in our paying customers, we expect our cost of revenue spending in absolute dollars and as a percentage of revenue to increase during the remainder of the fiscal year ending January 31, 2019.
  • 18487876_177
    Financial - Expense
    As we continue to optimize infrastructure efficiencies and expand our data center infrastructure to support the growth in our paying customers, we expect our cost of revenue spending in absolute dollars and as a percentage of revenue to increase during the remainder of the fiscal year ending January 31, 2019.
  • 18487876_26
    Other - Other
    We believe this approach not only helps us build a critical mass of users but also has a viral effect within organizations as more of their employees use our service and encourage their IT professionals to deploy our services to a broader user base.
  • 18487876_102
    Revenue - Product
    We derive our revenue primarily from three sources: (1) subscription revenue, which is comprised of subscription fees from customers who have access to our cloud content management platform and other subscription-based services, which all include routine customer support; (2) revenue from customers purchasing our premier services package; and (3) revenue from professional services such as implementing best practice use cases, project management and implementation consulting services.
  • 18487876_22
    Revenue - Product
    We recognize subscription and premier services revenue ratably over the contract term beginning on the date that our service is made available to the customer.
  • 18487876_277
    Other - Other
    We compensate for these limitations by reconciling non-GAAP financial measures to the most comparable GAAP financial measures.
  • 18487876_278
    Other - Other
    We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view our non-GAAP financial measures in conjunction with the most comparable GAAP financial measures.
  • 18487876_250
    Other - Other
    We believe 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 our institutional investors and the analyst community to help them analyze the health of our business.
  • 18487876_114
    Financial - Expense
    We allocate overhead such as rent, information technology costs and employee benefit costs to all departments based on headcount.
  • 18487876_141
    Revenue - Product
    36 Revenue was $155.9 million for the three months ended October 31, 2018, compared to $129.3 million for the three months ended October 31, 2017, representing an increase of $26.6 million, or 21%.
  • 18487876_168
    Revenue - Product
    Revenue was $444.7 million for the nine months ended October 31, 2018, compared to $369.5 million for the nine months ended October 31, 2017, representing an increase of $75.2 million, or 20%.
  • 18487876_189
    Revenue - Product
    Sales and marketing expenses as a percentage of revenue decreased seven points year-over-year due to the adoption of ASC Topic 606, our focus on sales and marketing productivity, and a decrease in cost to support our free users.
  • 18487876_43
    MA - Other
    We make significant investments in acquiring new customers and believe that we will be able to achieve a positive return on these investments by retaining customers, cross-selling our add-on products and expanding the size of our deployments within our customer base over time.
  • 18487876_182
    Financial - Expense
    Research and development expense as a percentage of revenue decreased one point year-over-year.
  • 18487876_95
    Revenue - Product
    We focus on contracts that have a value of $5,000 or more because, over time, these customers give us the best indicator for the growth of our business and the potential for incremental business as they renew and expand their deployments, and contracts with these customers represented a substantial majority of our revenue for the nine months ended October 31, 2018.
  • 18487876_248
    Other - Other
    We believe that both management and investors benefit from referring to these non-GAAP financial measures and key metrics in assessing our performance and when planning, forecasting, and analyzing future periods.
  • 18487876_255
    Financial - Expense
    Although stock-based compensation is an important aspect of the compensation of Box?s employees and executives, determining the fair value of certain of the stock-based instruments we utilize 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.
  • 18487876_53
    Revenue - Product
    These differences are primarily driven by the higher compensation we provide to our sales force for new customers and customer subscription expansions compared to the compensation we provide to our sales force for routine subscription renewals by customers.
  • 18487876_13
    Revenue - Product
    The continual evolution of our platform features allowed our sales team to sell into increasingly larger organizations.
  • 18487876_199
    Revenue - Product
    Our future capital requirements will depend on many factors including our growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing and international operation activities, the introduction of new and enhanced services offerings, and the continuing market acceptance of our services.
  • 18487876_100
    Revenue - Product
    We believe our go-to-market efforts to deliver a solution sales strategy and our investments in product, Customer Success, and Box Consulting have been a significant factor in our strong customer retention results.
  • 18487876_122
    Financial - Earnings
    Our research and development efforts are focused on scaling our platform, building an ecosystem of best of breed applications and platforms, and adding enterprise grade features, functionality and advanced security, workflow automation, as well as artificial intelligence and machine learning capabilities to enhance the ease of use of our cloud content management services.
  • 18487876_161
    Revenue - Product
    Sales and marketing expenses as a percentage of revenue decreased nine points year-over-year due to the adoption of ASC Topic 606 and our focus on sales and marketing productivity.
  • 18487876_54
    Revenue - Product
    In addition, our sales and marketing expenses, even after considering deferred direct compensation we provide to our sales force, are generally higher for acquiring new customers versus expansions or renewals of existing customer subscriptions.
  • 18487876_214
    Other - Other
    The proceeds of the revolving loans may be used for general corporate purposes.
  • 18487876_82
    Financial - Cash Flow
    We consider 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 our business and strengthening the? balance sheet; but it is not intended to represent the residual cash flow available for discretionary expenditures.
  • 18487876_270
    Financial - Cash Flow
    We consider 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 our business and strengthening the? balance sheet; but it is not intended to represent the residual cash flow available for discretionary expenditures.
  • 18487876_152
    Financial - Expense
    The increase in absolute dollars was primarily due to an increase of $4.7 million in employee and related costs and an increase of $2.3 million in stock-based compensation expense primarily driven by the increase in headcount from 333 employees as of October 31, 2017 to 401 employees as of October 31, 2018.
  • 18487876_158
    Financial - Expense
    The increase in absolute dollars was primarily due to an increase of $4.0 million in employee and related costs and an increase of $1.5 million in stock-based compensation expense primarily driven by the increase in headcount from 859 employees as of October 31, 2017 to 948 employees as of October 31, 2018.
  • 18487876_174
    Financial - Expense
    The increase in absolute dollars was primarily due to an increase of $7.2 million in employee and related costs and an increase of $2.3 million in stock-based compensation expense primarily driven by the increase in headcount from 258 as of October 31, 2017 to 306 as of October 31, 2018 and the timing of employee equity grants from prior periods.
  • 18487876_179
    Financial - Expense
    The increase in absolute dollars was primarily due to an increase of $12.5 million in employee and related costs and an increase of $5.2 million in stock-based compensation expense primarily driven by the increase in headcount from 333 employees as of October 31, 2017 to 401 employees as of October 31, 2018 and the timing of employee equity grants from prior periods.
  • 18487876_186
    Financial - Expense
    The increase in absolute dollars was primarily due to an increase of $15.7 million in employee and related costs and an increase of $3.8 million in stock-based compensation expense primarily driven by the increase in headcount from 859 employees as of October 31, 2017 to 948 employees as of October 31, 2018 and the timing of employee equity grants from prior periods.
  • 18487876_70
    Revenue - Product
    Although we consider billings to be a significant performance measure, we do not consider it to be a non-GAAP financial measure given that it is calculated using exclusively revenue, deferred revenue, and contract assets, all of which are financial measures calculated in accordance with GAAP.
  • 18487876_155
    Financial - Expense
    Research and development expense as a percentage of revenue remained stable year-over-year.
  • 18487876_193
    Financial - Expense
    The increase in absolute dollars was primarily due to an increase of $5.1 million in stock-based compensation expense and an increase of $3.8 million in employee and related costs primarily driven by the increase in headcount from 276 employees as of October 31, 2017 to 313 employees as of October 31, 2018, an increase in equity grants, and the timing of employee equity grants from prior periods.
  • 18487876_48
    Financial - Earnings
    Because of these dynamics, we experience a range of profitability with our customers depending in large part upon their current stage of the customer phase.
  • 18487876_60
    Other - Other
    We believe these 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 institutional investors and the analyst community to help analyze the health of our business.
  • 18487876_83
    Financial - Cash Flow
    A reconciliation of free cash flow to cash provided by operating activities, its nearest GAAP equivalent, is presented in the non-GAAP Financial Measures section of this report.
  • 18487876_271
    Financial - Cash Flow
    A reconciliation of free cash flow to cash provided by operating activities, its nearest GAAP equivalent, is presented in the non-GAAP Financial Measures section of this report.
  • 18487876_279
    Financial - Shares / Equity
    43 Our reconciliation of the non-GAAP financial measures for the three and nine months ended October 31, 2018 and 2017 are as follows (in thousands, except per share data and percentages): As reported under ASC Topic 606 ** As reported under ASC Topic 605 44
  • 18487876_67
    Revenue - Product
    We consider billings a significant performance measure and after adjusting for any shifts in relative payment frequencies, a leading indicator of future revenue.
  • 18487876_165
    Financial - Expense
    The increase in absolute dollars was primarily due to an increase of $1.6 million in both stock-based compensation expense and employee and related costs primarily driven by the increase in headcount from 276 employees as of October 31, 2017 to 313 employees as of October 31, 2018 as well as an increase in equity grants.
  • 18487876_37
    Other - Other
    We also expect to continue to make investments in both our infrastructure to meet the needs of our growing global user base and our professional services organization (Box Consulting) to address the strategic needs of our customers in more complex deployments and to drive broader adoption across a wide array of use cases.
  • 18487876_76
    Revenue - Product
    Over time, we expect to continue to normalize payment durations such that, aside from the impact from the enhanced developer fee, we expect our billings growth and revenue growth to correlate with one another.
  • 18487876_33
    Other - Other
    Organizations typically purchase our solution in the following ways: (i) employees in one or more small groups within the organization may individually purchase our service; (ii) organizations may purchase IT-sponsored, enterprise-level agreements with deployments for specific, targeted use cases ranging from tens to thousands of user seats; (iii) organizations may purchase IT- sponsored, enterprise-level agreements where the number of user seats sold is intended to accommodate and enable nearly all information workers within the organization in whatever use cases they desire to adopt over the term of the subscription; and (iv) organizations may purchase our Box Platform service to create custom business applications for their internal use and extended ecosystem of customers, suppliers and partners.

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Exhibit 32.1 - SECTION 1350 CERTIFICATION

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  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001564590-18-030602
  • Submitted to the SEC: Thursday, December 6, 2018 4:06:44 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: October 2018
  • Industry: Prepackaged Software