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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36805

 

Box, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

20-2714444

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

900 Jefferson Ave.

Redwood City, California 94063

(Address of principal executive offices and Zip Code)

(877) 729-4269

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value 
per share

BOX

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

Small reporting company

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

As of November 30, 2023 the number of shares of the registrant’s Class A common stock outstanding was 143,591,373.

 

 


 

TABLE OF CONTENTS

 

 

 

PART I – FINANCIAL INFORMATION

 

Page

Item 1.

 

Financial Statements (Unaudited)

 

5

 

 

Condensed Consolidated Balance Sheets as of October 31, 2023 and January 31, 2023

 

5

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2023 and 2022

 

6

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended October 31, 2023 and 2022

 

7

 

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit for the Three and Nine Months Ended October 31, 2023 and 2022

 

8

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2023 and 2022

 

10

 

 

Notes to Condensed Consolidated Financial Statements

 

11

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

32

Item 4.

 

Controls and Procedures

 

33

 

PART II – OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

34

Item 1A.

 

Risk Factors

 

34

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

59

Item 5.

 

Other Information

 

59

Item 6.

 

Exhibits

 

59

 

Signatures

 

61

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

our future financial and operating results; including expectations regarding revenue, deferred revenue, billings, remaining performance obligations, gross margins, operating income, and net retention rate;
our ability to maintain an adequate rate of revenue and billings growth and our expectations regarding such growth;
our market opportunity, business plan and ability to effectively manage our growth;
the effects of global economic conditions on our business and the impact of foreign exchange rates on our business;
our ability to achieve profitability and expand or maintain positive cash flow;
our ability to achieve our long-term and short-term gross and operating margin objectives;
our ability to grow our remaining performance obligations;
our expectations regarding our revenue mix;
our ability to maintain, protect and enhance our brand and intellectual property;
costs associated with defending intellectual property infringement and other claims and the frequency of such claims;
our ability to attract and retain end-customers;
our ability to further penetrate our existing customer base and expand their use of our services;
our ability to displace existing products in established markets;
our expectations regarding timing of new products, product bundles and features;
our ability to expand our leadership position as a cloud content management platform;
our ability to timely and effectively scale and adapt our new and existing technology;
our ability to innovate new products and features and bring them to market in a timely manner and the expected benefits to customers and potential customers of our products;
our investment strategy, including our plans to further invest in our business, including investment in research and development, sales and marketing, our data center infrastructure and our professional services organization, and our ability to effectively manage such investments;
our ability to expand internationally;
expectations about competition and its effect in our market and our ability to compete;
use of non-GAAP financial measures;
our belief regarding the sufficiency of our cash, cash equivalents and our credit facilities to meet our working capital and capital expenditure needs for at least the next 12 months;
our expectations concerning relationships with third parties and our ability to realize the anticipated benefits therefrom;
our ability to attract and retain qualified employees and key personnel;
the effects of new laws, policies, taxes and regulations on our business;
management’s plans, beliefs and objectives, including the importance of our brand and culture on our business;

3


 

acquisitions of or investments in complementary companies, products, services or technologies and our ability to successfully integrate such companies or assets; and
any potential repurchase of our Class A common stock.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

4


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

BOX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

October 31,

 

 

January 31,

 

 

 

2023

 

 

2023

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

377,911

 

 

$

428,465

 

Short-term investments

 

 

61,795

 

 

 

32,783

 

Accounts receivable, net

 

 

166,875

 

 

 

264,515

 

Deferred commissions

 

 

44,743

 

 

 

48,040

 

Other current assets

 

 

33,005

 

 

 

32,960

 

Total current assets

 

 

684,329

 

 

 

806,763

 

Property and equipment, net

 

 

44,195

 

 

 

69,972

 

Operating lease right-of-use assets, net

 

 

118,532

 

 

 

131,172

 

Goodwill

 

 

73,306

 

 

 

73,863

 

Deferred commissions, non-current

 

 

61,808

 

 

 

71,999

 

Other long-term assets

 

 

51,653

 

 

 

53,396

 

Total assets

 

$

1,033,823

 

 

$

1,207,165

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

59,685

 

 

$

79,810

 

Accrued compensation and benefits

 

 

26,179

 

 

 

44,086

 

Operating lease liabilities

 

 

34,097

 

 

 

47,752

 

Deferred revenue

 

 

450,666

 

 

 

544,179

 

Total current liabilities

 

 

570,627

 

 

 

715,827

 

Debt, net, non-current

 

 

370,322

 

 

 

369,351

 

Operating lease liabilities, non-current

 

 

109,199

 

 

 

118,001

 

Other long-term liabilities

 

 

32,539

 

 

 

37,847

 

Total liabilities

 

 

1,082,687

 

 

 

1,241,026

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Series A convertible preferred stock, par value of $0.0001 per share; 500 shares authorized, issued and outstanding as of October 31 (unaudited) and January 31, 2023

 

 

491,551

 

 

 

489,990

 

Stockholders’ deficit:

 

 

 

 

 

 

Class A common stock, par value $0.0001 per share; 1,000,000 shares authorized; 143,944 shares (unaudited) and 144,301 shares issued and outstanding as of October 31 and January 31, 2023, respectively

 

 

14

 

 

 

14

 

Additional paid-in capital

 

 

776,313

 

 

 

818,996

 

Accumulated other comprehensive loss

 

 

(10,743

)

 

 

(7,065

)

Accumulated deficit

 

 

(1,305,999

)

 

 

(1,335,796

)

Total stockholders’ deficit

 

 

(540,415

)

 

 

(523,851

)

Total liabilities, convertible preferred stock and stockholders’ deficit

 

$

1,033,823

 

 

$

1,207,165

 

 

See notes to condensed consolidated financial statements.

5


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

$

261,537

 

 

$

249,951

 

 

$

774,863

 

 

$

734,398

 

Cost of revenue

 

 

69,227

 

 

 

64,490

 

 

 

197,891

 

 

 

191,542

 

Gross profit

 

 

192,310

 

 

 

185,461

 

 

 

576,972

 

 

 

542,856

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

61,026

 

 

 

59,107

 

 

 

186,860

 

 

 

182,805

 

Sales and marketing

 

 

87,930

 

 

 

81,566

 

 

 

262,745

 

 

 

248,075

 

General and administrative

 

 

31,975

 

 

 

31,422

 

 

 

97,778

 

 

 

94,846

 

Total operating expenses

 

 

180,931

 

 

 

172,095

 

 

 

547,383

 

 

 

525,726

 

Income from operations

 

 

11,379

 

 

 

13,366

 

 

 

29,589

 

 

 

17,130

 

Interest and other income (expense), net

 

 

1,801

 

 

 

(1,427

)

 

 

7,412

 

 

 

(6,235

)

Income before provision for income taxes

 

 

13,180

 

 

 

11,939

 

 

 

37,001

 

 

 

10,895

 

Provision for income taxes

 

 

2,524

 

 

 

2,031

 

 

 

7,204

 

 

 

4,641

 

Net income

 

$

10,656

 

 

$

9,908

 

 

$

29,797

 

 

$

6,254

 

Accretion and dividend on series A convertible preferred stock

 

 

(4,280

)

 

 

(4,278

)

 

 

(12,811

)

 

 

(12,804

)

Undistributed earnings attributable to preferred stockholders

 

 

(729

)

 

 

(648

)

 

 

(1,938

)

 

 

 

Net income (loss) attributable to common stockholders

 

$

5,647

 

 

$

4,982

 

 

$

15,048

 

 

$

(6,550

)

Net income (loss) per share attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

0.03

 

 

$

0.10

 

 

$

(0.05

)

Diluted

 

$

0.04

 

 

$

0.03

 

 

$

0.10

 

 

$

(0.05

)

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

143,915

 

 

 

142,385

 

 

 

144,296

 

 

 

143,604

 

Diluted

 

 

147,625

 

 

 

148,127

 

 

 

149,351

 

 

 

143,604

 

 

 

See notes to condensed consolidated financial statements.

6


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31,

 

 

October 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

10,656

 

 

$

9,908

 

 

$

29,797

 

 

$

6,254

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net foreign currency translation loss

 

 

(2,960

)

 

 

(3,390

)

 

 

(3,250

)

 

 

(10,986

)

Other

 

 

(249

)

 

 

806

 

 

 

(428

)

 

 

1,712

 

Other comprehensive loss:

 

 

(3,209

)

 

 

(2,584

)

 

 

(3,678

)

 

 

(9,274

)

Comprehensive income (loss)

 

$

7,447

 

 

$

7,324

 

 

$

26,119

 

 

$

(3,020

)

 

See notes to condensed consolidated financial statements.

7


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(In thousands)

(Unaudited)

 

 

 

Three Months Ended October 31, 2023

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance as of July 31, 2023

 

 

500

 

 

$

491,021

 

 

 

 

144,045

 

 

$

14

 

 

$

787,211

 

 

$

(7,534

)

 

$

(1,316,655

)

 

$

(536,964

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

1,844

 

 

 

 

 

 

(5,093

)

 

 

 

 

 

 

 

 

(5,093

)

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,237

 

 

 

 

 

 

 

 

 

50,237

 

Accretion and dividend on series A convertible preferred stock, net of dividends paid

 

 

 

 

 

530

 

 

 

 

 

 

 

 

 

 

(4,280

)

 

 

 

 

 

 

 

 

(4,280

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

(1,945

)

 

 

 

 

 

(51,762

)

 

 

 

 

 

 

 

 

(51,762

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,209

)

 

 

 

 

 

(3,209

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,656

 

 

 

10,656

 

Balance as of October 31, 2023

 

 

500

 

 

$

491,551

 

 

 

 

143,944

 

 

$

14

 

 

$

776,313

 

 

$

(10,743

)

 

$

(1,305,999

)

 

$

(540,415

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended October 31, 2022

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance as of July 31, 2022

 

 

500

 

 

$

488,906

 

 

 

 

142,320

 

 

$

14

 

 

$

797,948

 

 

$

(11,233

)

 

$

(1,366,233

)

 

$

(579,504

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

1,699

 

 

 

 

 

 

(5,132

)

 

 

 

 

 

 

 

 

(5,132

)

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,159

 

 

 

 

 

 

 

 

 

43,159

 

Accretion and dividend on series A convertible preferred stock, net of dividends paid

 

 

 

 

 

528

 

 

 

 

 

 

 

 

 

 

(4,278

)

 

 

 

 

 

 

 

 

(4,278

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

(1,105

)

 

 

 

 

 

(29,163

)

 

 

 

 

 

 

 

 

(29,163

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,584

)

 

 

 

 

 

(2,584

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,908

 

 

 

9,908

 

Balance as of October 31, 2022

 

 

500

 

 

$

489,434

 

 

 

 

142,914

 

 

$

14

 

 

$

802,534

 

 

$

(13,817

)

 

$

(1,356,325

)

 

$

(567,594

)

 

 

See notes to condensed consolidated financial statements.

 

8


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended October 31, 2023

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance as of January 31, 2023

 

 

500

 

 

$

489,990

 

 

 

 

144,301

 

 

$

14

 

 

$

818,996

 

 

$

(7,065

)

 

$

(1,335,796

)

 

$

(523,851

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

5,403

 

 

 

1

 

 

 

(30,928

)

 

 

 

 

 

 

 

 

(30,927

)

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

158,293

 

 

 

 

 

 

 

 

 

158,293

 

Accretion and dividend on series A convertible preferred stock, net of dividends paid

 

 

 

 

 

1,561

 

 

 

 

 

 

 

 

 

 

(12,811

)

 

 

 

 

 

 

 

 

(12,811

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

(5,760

)

 

 

(1

)

 

 

(157,237

)

 

 

 

 

 

 

 

 

(157,238

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,678

)

 

 

 

 

 

(3,678

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,797

 

 

 

29,797

 

Balance as of October 31, 2023

 

 

500

 

 

$

491,551

 

 

 

 

143,944

 

 

$

14

 

 

$

776,313

 

 

$

(10,743

)

 

$

(1,305,999

)

 

$

(540,415

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended October 31, 2022

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance as of January 31, 2022

 

 

500

 

 

$

487,880

 

 

 

 

145,081

 

 

$

15

 

 

$

972,020

 

 

$

(4,543

)

 

$

(1,362,579

)

 

$

(395,087

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

7,166

 

 

 

 

 

 

(49,122

)

 

 

 

 

 

 

 

 

(49,122

)

Stock consideration in connection with fiscal 2022 acquisition

 

 

 

 

 

 

 

 

 

559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150,174

 

 

 

 

 

 

 

 

 

150,174

 

Accretion and dividend on series A convertible preferred stock, net of dividends paid

 

 

 

 

 

1,554

 

 

 

 

 

 

 

 

 

 

(12,804

)

 

 

 

 

 

 

 

 

(12,804

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

(9,892

)

 

 

(1

)

 

 

(257,734

)

 

 

 

 

 

 

 

 

(257,735

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,274

)

 

 

 

 

 

(9,274

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,254

 

 

 

6,254

 

Balance as of October 31, 2022

 

 

500

 

 

$

489,434

 

 

 

 

142,914

 

 

$

14

 

 

$

802,534

 

 

$

(13,817

)

 

$

(1,356,325

)

 

$

(567,594

)

 

 

See notes to condensed consolidated financial statements.

 

9


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

October 31,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

29,797

 

 

$

6,254

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

38,996

 

 

 

53,406

 

Stock-based compensation expense

 

 

151,517

 

 

 

140,648

 

Amortization of deferred commissions

 

 

40,803

 

 

 

39,878

 

Other

 

 

2,729

 

 

 

2,925

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

93,280

 

 

 

74,163

 

Deferred commissions

 

 

(28,361

)

 

 

(37,400

)

Operating lease right-of-use assets, net

 

 

26,302

 

 

 

30,296

 

Other assets

 

 

707

 

 

 

(7,022

)

Accounts payable, accrued expenses and other liabilities

 

 

(9,138

)

 

 

(11,724

)

Operating lease liabilities

 

 

(35,731

)

 

 

(33,105

)

Deferred revenue

 

 

(81,513

)

 

 

(52,524

)

Net cash provided by operating activities

 

 

229,388

 

 

 

205,795

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of short-term investments

 

 

(106,389

)

 

 

(87,253

)

Maturities of short-term investments

 

 

79,000

 

 

 

213,000

 

Purchases of property and equipment, net of sale proceeds

 

 

(2,790

)

 

 

(2,539

)

Capitalized internal-use software costs

 

 

(12,362

)

 

 

(7,010

)

Other

 

 

(190

)

 

 

(815

)

Net cash (used in) provided by investing activities

 

 

(42,731

)

 

 

115,383

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Repurchases of common stock

 

 

(155,922

)

 

 

(264,852

)

Payments of dividends to preferred stockholders

 

 

(11,193

)

 

 

(11,250

)

Proceeds from issuances of common stock under employee equity plans

 

 

28,017

 

 

 

25,659

 

Employee payroll taxes paid for net settlement of stock awards

 

 

(58,298

)

 

 

(74,778

)

Principal payments of finance lease liabilities

 

 

(26,131

)

 

 

(29,838

)

Other

 

 

(3,989

)

 

 

(5,122

)

Net cash used in financing activities

 

 

(227,516

)

 

 

(360,181

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(9,710

)

 

 

(19,080

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(50,569

)

 

 

(58,083

)

Cash, cash equivalents, and restricted cash, beginning of period(1)

 

 

429,040

 

 

 

416,888

 

Cash, cash equivalents, and restricted cash, end of period(1)

 

$

378,471

 

 

$

358,805

 

 

(1)
Restricted cash is included in other current assets in the condensed consolidated balance sheets for the periods presented.

 

 

See notes to condensed consolidated financial statements.

10


 

BOX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. Description of Business and Basis of Presentation

Description of Business

We were incorporated in the state of Washington in April 2005, and were reincorporated in the state of Delaware in March 2008. Box provides a leading cloud content management platform that enables organizations of all sizes to securely manage cloud content while allowing easy, secure access and sharing of this content from anywhere, on any device.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, which include the accounts of Box and its wholly owned subsidiaries, have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements.

In the opinion of our management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of our balance sheets, statements of operations, statements of comprehensive income (loss), statements of convertible preferred stock and stockholders' deficit, and the statements of cash flows for the interim periods, but are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending January 31, 2024. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended January 31, 2023, which was filed with the Securities and Exchange Commission (the SEC) on March 13, 2023.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ from these estimates. Such estimates include, but are not limited to, the fair value of acquired intangible assets, useful lives of acquired intangible assets and property and equipment, the standalone selling price allocation included in contracts with multiple performance obligations, the expected benefit period for deferred commissions, the useful life of capitalized internal-use software costs, the incremental borrowing rate we use to determine our lease liabilities, the valuation allowance of deferred income tax assets, and unrecognized tax benefits. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Certain Risks and Concentrations

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed deposit insurance coverage limits.

We sell to a broad range of customers. Our revenue is derived primarily from the United States across a multitude of industries. Accounts receivable are derived from the delivery of our services to customers primarily located in the United States. We accept and settle our accounts receivable using credit cards, electronic payments and checks. A majority of our lower dollar value invoices are settled by credit card on or near the date of the invoice. We do not require collateral from customers to secure accounts receivable. We believe collections of our accounts receivable are probable based on the size, industry diversification, financial condition and past transaction history of our customers. As of October 31, 2023, no single customer accounted for more than 10% of total accounts receivable. As of January 31, 2023 one reseller, which is also a customer, accounted for more than 10% of total accounts receivable. No single customer represented over 10% of our revenue for the three and nine months ended October 31, 2023 and 2022.

We serve our customers and users from public cloud hosting operated by third parties and data center facilities. In order to reduce the risk of down time of our subscription services, we have established data centers and third-party cloud computing and hosting providers in various locations in the United States and abroad. We have internal procedures to restore services in the event of disaster at any one of our current data center facilities and with our cloud providers. Even with these procedures for disaster recovery in place, our cloud services could be significantly interrupted during the implementation of the procedures to restore services.

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Geographic Locations

For the three and nine months ended October 31, 2023, revenue attributable to customers in the United States was 65% and 66%, respectively, and revenue attributable to customers in Japan was 21%. For the three and nine months ended October 31, 2022, revenue attributable to customers in the United States was 68% and 67% respectively, and revenue attributable to customers in Japan was 19%.

As of October 31, 2023 and January 31, 2023, substantially all of our property and equipment was located in the United States.

Summary of Significant Accounting Policies

There have been no material changes to our significant accounting policies and estimates during the nine months ended October 31, 2023 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended January 31, 2023. Additionally, we have a single reporting segment and all required segment information can be found in the condensed consolidated financial statements.

Recently Adopted and Issued Accounting Pronouncements

During the nine months ended October 31, 2023, there were no recently adopted or issued accounting pronouncements that had a material impact on our condensed consolidated financial statements.

Note 2. Revenue

Deferred Revenue

Deferred revenue was $472.0 million and $566.6 million as of October 31, 2023 and January 31, 2023, respectively. During the three months ended October 31, 2023 and 2022, we recognized $212.9 million and $210.9 million of revenue that was included in the deferred revenue balance as of July 31, 2023 and 2022, respectively. During the nine months ended October 31, 2023 and 2022, we recognized $491.4 million and $472.2 million of revenue that was included in the deferred revenue balance as of January 31, 2023 and 2022, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of October 31, 2023, we had remaining performance obligations from contracts with customers of $1.1 billion. We expect to recognize revenue on 61% of these remaining performance obligations over the next 12 months, with the substantial majority of the remaining balance expected to be recognized within 24 months.

Note 3. Fair Value of Financial Instruments

Fair Value Measurements of Assets and Liabilities Measured at Fair Value on a Recurring Basis

We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We define fair value as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1—Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.
Level 3—Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

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Financial assets subject to the fair value disclosure requirements are included in the table below. All of our financial assets are classified as Level 1. The estimated fair value of marketable securities were as follows (in thousands):

 

 

 

October 31,

 

 

January 31,

 

 

 

2023

 

 

2023

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

Money market funds

 

$

168,033

 

 

$

181,513

 

U.S. treasury securities

 

 

1,993

 

 

 

16,906

 

Total cash equivalents

 

$

170,026

 

 

$

198,419

 

Short-term investments:

 

 

 

 

 

 

U.S. treasury securities

 

$

55,692

 

 

$

32,783

 

Non-U.S. government issued securities

 

 

6,103

 

 

 

 

Total short-term investments

 

$

61,795

 

 

$

32,783

 

Total cash equivalents and short-term investments

 

$

231,821

 

 

$

231,202

 

There were no material differences between the estimated fair value and amortized cost of our marketable securities.

As of October 31, 2023, contractual maturities of marketable securities were all within one year.

As of October 31, 2023, we do not consider any portion of the unrealized losses to be credit losses.

As of October 31, 2023, we had a certificate of deposit for a total of $30.0 million with original maturity of less than three months that is classified as a cash equivalent in our condensed consolidated balance sheet. We did not have any certificates of deposit as of January 31, 2023.

Fair Value Measurements of Other Financial Instruments

In November 2017, we entered into a secured credit agreement (as amended or otherwise modified from time to time, the “November 2017 Facility”). On June 30, 2023, we entered into an amended and restated credit agreement (the “June 2023 Facility”) to amend and restate the November 2017 Facility. As of October 31, 2023 and January 31, 2023, we had total debt outstanding relating to the June 2023 Facility and the November 2017 Facility, respectivel