BOX – Box Inc – May 19, 2022

The quote “content is king” is very often used in conjunction with content marketing and SEO. It implies that unique, high-quality, interesting, and relevant content contributes significantly to the success of companies on the internet. Box Inc is extending that concept beyond internet-based companies to any organization wanting to maximize the value of their content, from videos to documents, podcasts to PDFs, and much more, as the quality of the content a business produces has far-reaching implications for success.

Box’s cloud content management platform enables customers to securely manage their entire content lifecycle. From the moment a file is created or ingested to when it is shared, edited, published, approved, signed, classified, and retained. Box keeps content secure and compliant, whilst also allowing easy access and sharing of this content from anywhere, and on any device. With the software-as-a-service platform, users can collaborate on content both internally and with external parties, automate content-driven business processes, and develop custom applications. All while implementing data protection, security and compliance features to comply with legal and regulatory requirements, internal policies, and industry standards.

The Box Content Cloud aims to accelerate business processes, improve employee productivity, enable secure remote work, and protect an organization’s most valuable data. The platform enables a broad set of business use cases across enterprises, hundreds of file formats and media types, and user experiences. In addition, it integrates with leading enterprise business applications, operating systems, and devices, ensuring that workers can securely access their critical business content whenever and wherever they need it.

With over 100k customers, Box is currently committed to executing a three-year strategy focused on delivering growth as it looks to extend its share of a $74 billion market.

Born from an idea for a university paper on the industry for storing digital files online, Aaron Levie started developing the Box service in 2004. Dropping out of school the following year to work on the idea full-time with a long-time friend and cofounder Dylan Smith, the duo initially developed the software in the attic of Smith’s parents’ house. Soon joined by fellow co-founders Jeff Queisser and Sam Ghods, the group bootstrapped the business until billionaire entrepreneur, Mark Cuban, invested $350,000 in seed funding in 2005. The Box service was released in the same year and by 2010 the company had raised almost $30 million in funding and the service had four million users.

Box was initially focused on consumers, however, many of those used the service at work. As a result, Box pivoted to focus on business users and the company developed features to embed Box in common business applications. In 2009, it acquired Increo Solutions, which developed software for previewing and collaborating on digital files. And by 2011, a reworked version of the Box service was released with technical improvements designed for handling large numbers of business users, changes to the user interface, and more collaboration features. The company then developed its first industry-specific features for heavily regulated industries, as it introduced tools for HIPAA compliance at healthcare organizations.

Box soon expanded internationally, with offices in London, Berlin, and Tokyo, among other locations, and in the years following continued to secure major funding from investors including DFJ, Meritech Capital, and Scale Venture Partners to support its data centers and make several key acquisitions. These included Crocodoc, which developed software for opening documents online, dLoop, which focused on digital file analytics, Streem for its synchronization technology, MedXT, which developed medical software, along with cloud management service, Airpost. In January 2015 Box went public on the NYSE valued at $1.6 billion, before more recently acquiring search engine company, Butter.ai, along with e-signature start-up, SignRequest.

In one of its biggest deals, Box partnered with Microsoft in 2017 on an ambitious plan to integrate AI and machine learning capabilities into the platform and build upon Microsoft’s Azure server technology, creating a way to unite the dozens of disparate CMS and systems in place across the cloud in one secure, decentralized platform. While in 2020, Box announced a new version of its service with improved integration with videotelephony software, as well as a feature called Collections that allows users to customize their personal folder structure, due to the increase in remote work during the covid pandemic.

Box continues to focus on innovation and building capabilities as it seeks to be the leading content cloud powering critical workflows across enterprise customers.

As the visionary behind the Box product and platform strategy, co-founder Aaron Levie continues to lead the company in the role of chief executive officer, driving its mission to “transform the way people and businesses work”. Fellow co-founder, Dylan Smith maintains the role of chief financial officer, where he leads investor relations and all aspects of Box’s financial operations, which have been instrumental in the growth and development of the company. Currently tasked with leading Box’s operations and go-to-market strategy is chief operating officer, Stephanie Carullo, as she drives continued growth in the enterprise and guides international expansion.

As of January 2022, Box services over 100k organizations with its solution that is offered in 25 languages to both public and private, organizations and institutions, including 67% of the Fortune 500. The company’s go-to-market strategy is focused on selling the platform as a solution for the entire enterprise with the full set of capabilities aimed at driving high-value outcomes.

This strategy combines high-touch sales efforts with end-user-driven adoption. The company focuses its efforts on larger enterprises, as it aims to capitalize on international growth, utilizing a partner ecosystem. However, individual users and organizations can also simply sign up to use the solution online. By offering individuals a free basic version that allows them to experience the easy-to-use solution, the use of Box often spreads virally within and across organizations, as users invite others to collaborate. This approach has helped build a critical mass of users as employees encourage their IT professionals to deploy the service to a broader user base.

In addition, an organization will frequently purchase Box for one use case and then later expand its deployment to other contexts with larger groups of employees, leading to deeper engagement of the service. As a result, the company directs its sales strategy on ensuring that new and existing customers fully understand and experience the transformative impact of the product. Ultimately, Box is delivered as a subscription-based service, with fees based on the requirements of customers, including the number of users and functionality deployed.

Furthermore, in-house enterprise developers and independent software developers can use Box’s developer platform and open application programming interfaces to rapidly build and provision new applications that leverage and extend the core functionality of Box’s services.

By building a rich technology partner ecosystem, with more than 1,500 pre-built integrations including Microsoft, IBM, Salesforce, Apple, Google, Slack, Adobe, Zoom, and many others, Box gives users easy access to their content without leaving individual applications. And with web, mobile, and desktop applications for cloud content management catering to industry-specific capabilities on a platform that also allows for the development of custom applications, Box’s core capabilities set it apart from competitors. Frictionless security and compliance coupled with the flexibility of global cloud architecture, seamless collaboration, workflow automation, and expansive integrations are directly serving the new paradigm of remote working.

The megatrends driving the future of work such as “anywhere, anytime, from any app or device” are keeping Box committed to delivering innovation as they launch several new products including:
• Box Sign – an e-signature solution natively integrated into Box enabling businesses to digitize and modernize the way agreements are managed and governed in the cloud;
• New self-service migration tools for customers as part of Box Shuttle, the company’s cost-effective and easy-to-use content migration service;
• Major new developments in its partnership with Microsoft, including giving customers the ability to default to Box as a storage option in Microsoft Teams, and the ability to co-author in real-time in the Microsoft Office desktop and mobile apps;
• New deep learning-based malware scanning in Box Shield, to enable even more rigorous protections against sophisticated malware attacks, including ransomware.

Box’s range of premium packages, known as “Suites”, have driven strong upsells and revenue acceleration in recent quarters. The company is aiming to further take advantage of this push to higher pricing tiers by consolidating these packages into a new single Enterprise Plus tier that will also drive gross margins higher. Enterprise Plus will provide everything Box has to offer in one suite, serving higher-value, differentiated use cases that will promote increased adoption across organizations. It is expected this all-in-one offering will remove the technical difficulties that come with fragmented content solutions, and that also leave users with complicated technology stacks that push spending on redundant technology higher.

Box also intends to continue scaling the organization to meet the increasingly complex needs of customers. In addition to continued development efforts to deliver more features and capabilities, investments in sales and marketing teams, as well as infrastructure, will be able to help further grow its global user base, while catering to more complex deployments that will ultimately drive broader adoption across a wider array of use cases.

Thanks to supportive industry tailwinds, coupled with strong execution in FY22, Box achieved solid results across its key financial metrics, while exceeding guidance for growth and profitability. Revenue for the fourth quarter of FY22 was $233.4 million, a 17% increase on the prior 2021 period of $198.9 million. The strong result took revenue for the full fiscal year to $874.3 million, a 13% increase on 2021 at $770.8 million, as well as being an improvement from the prior year’s growth of 11%.

Non-GAAP gross profit also pushed higher as a percentage of total revenue at 74%, even despite the increased revenue base, resulting in $650.1 million versus $565.0 million in 2021. Likewise, operating income for the year hit $173.4 million, or 20% of revenue, up from $118.8 million, or 15% of revenue in 2021.

Looking ahead, Box is forecasting, in line with consensus estimates, full-year FY23 revenue to be in the range of $990 million to $996 million, up 14% year-over-year at the high-end of the range. It also represents an acceleration from last year’s growth rate of 13%. While consensus EPS growth of 34% would see earnings per share come in at $1.14, up from $0.85 in 2021.

The cloud content management market is large, highly competitive, and highly fragmented. It is subject to rapidly evolving technology, shifting customer needs, and frequent introductions of new products and services. Box face competition from a broad spectrum of technology providers including traditional cloud content management vendors who deploy on-premises and offer deep records management, newer mobile enterprise vendors, and those specializing in specific functionalities.

However, Box’s comprehensive solution competes favorably with its industry-leading security and compliance, cloud-native approach to real-time, internal and external collaboration, and integrations, all while being on an open platform.

Businesses today are adopting a digital-first, cloud-delivered focus, reimagining how they work in a world of distributed and hybrid teams. Content is at the center of this shift, and Box is uniquely positioned to capitalize on this opportunity. With impressive metrics across revenue growth, product development, and margin expansion, supported by an enormous customer base, Box offers a solid proposition for exposure to the tech/SaaS sector during a volatile market.