Box Reports Revenue of $163.0 Million for Fiscal First Quarter 2020, Up 16 Percent Year-Over-Year

Box, Inc. (NYSE:BOX), a leader in cloud content management, today
announced financial results for the first quarter of fiscal year 2020,
which ended April 30, 2019.

“In the first quarter, we drove record add-on product attach rates of
more than 90% across our six-figure deals. Customers are increasingly
adopting Box as a platform for secure content management, workflow, and
collaboration,” said Aaron Levie, co-founder and CEO of Box. “While we
are encouraged by the demand for these larger, more strategic
deployments, these deals often have longer sales cycles, which is
reflected in our updated guidance. Our go-to-market initiatives, in
combination with our expanded product portfolio, will enable us to
improve sales productivity and meet the demand for Cloud Content
Management.”

“We continued to drive operational efficiencies in the first quarter,
with strong improvements in free cash flow and operating margin,” said
Dylan Smith, co-founder and CFO of Box. “We remain focused on driving
long-term growth as enterprises adopt more robust implementations of our
expanded product portfolio. In Q1, 89% of our total recurring revenue
base came from customers paying at least $5,000 annually. Of this base,
more than half of our recurring revenue came from customers who have
purchased at least one add-on product. We will continue to focus on
opportunities to drive further operating margin improvement in the
future, with a non-GAAP operating margin target of 6-7% in FY21.”

Adoption of the New Lease Standard – ASC Topic 842

Box adopted the new lease standard, Accounting Standards Codification
Topic 842 (“ASC 842”), on a modified retrospective basis,
effective February 1, 2019. Financial results for reporting periods in
Box’s fiscal year ending January 31, 2020 are presented in compliance
with the new lease standard. Historical financial results for reporting
periods prior to fiscal year 2020 are presented in conformity with
amounts previously disclosed under the prior lease standard, Accounting
Standards Codification Topic 840 (“ASC 840”). The adoption of ASC 842
did not have a material effect on our condensed consolidated statements
of operations and cash flows, however, did materially increase our
assets and liabilities on the condensed consolidated balance sheet.

Fiscal First Quarter Financial Highlights

• Revenue for the first quarter of fiscal year 2020 was $163.0 million,
  an increase of 16% from the first quarter of fiscal year 2019.
• Remaining performance obligations as of April 30, 2019 were $637.4
  million, an increase of 16% from the first quarter of fiscal year 2019.
• Deferred revenue as of April 30, 2019 was $330.4 million, an increase
  of 15% from the first quarter of fiscal year 2019.
• Billings for the first quarter of fiscal year 2020 were $118.4
  million, an increase of 1% from the first quarter of fiscal year 2019.
• GAAP operating loss in the first quarter of fiscal year 2020 was $35.4
  million, or 22% of revenue. This compares to a GAAP operating loss of
  $35.9 million, or 26% of revenue, in the first quarter of fiscal year
  2019.
• Non-GAAP operating loss in the first quarter of fiscal year 2020 was
  $3.0 million, or 2% of revenue. This compares to a non-GAAP operating
  loss of $9.2 million, or 7% of revenue, in the first quarter of fiscal
  year 2019.
• GAAP net loss per share, basic and diluted, in the first quarter of
  fiscal year 2020 was $0.25 on 145.3 million weighted average shares
  outstanding. This compares to a GAAP net loss per share of $0.26 in
  the first quarter of fiscal year 2019 on 138.5 million weighted
  average shares outstanding.
• Non-GAAP net loss per share, basic and diluted, in the first quarter
  of fiscal year 2020 was $0.03. This compares to a non-GAAP net loss
  per share of $0.07 in the first quarter of fiscal year 2019.
• Net cash provided by operating activities in the first quarter of
  fiscal year 2020 totaled $25.5 million. This compares to net cash
  provided by operating activities of $18.4 million in the first quarter
  of fiscal year 2019.
• Free cash flow in the first quarter of fiscal year 2020 was positive
  $13.4 million. This compares to positive $7.3 million in the first
  quarter of fiscal year 2019.

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 enterprises such as
  Blackboard, BT Group, ChargePoint, Dignity Health, Fanatics, and Rémy
  Cointreau Group.
• Announced an all new Box
  Relay, a powerful workflow engine, to simplify and accelerate
  business processes across any organization’s extended enterprise of
  employees, partners and customers.
• Launched new product integrations with best-of-breed partners,
  including Autodesk
  AutoCAD, Google
  Calendar and Microsoft
  Outlook, allowing customers to leverage Box as a unified, secure
  content hub across all of their applications.
• Launched Box
  KeySafe support for AWS KMS Customer Key Store, providing control
  and protection of dedicated hardware devices without requiring
  customers to manage hardware to secure their encryption keys.
• Launched enhancements to Box’s core security features with two-factor
  authentication for external users, enabling a frictionless
  experience for admins to setup powerful controls to add and verify
  external collaborators.
• Received a top score of 100 on the 2019
  Human Rights Campaign Corporate Equality Index (CEI).
• Recognized as one of LinkedIn’s
  Top 50 Companies: Where the U.S. Wants to Work Now for 2019.
• Welcomed
  Peter Leav, former President and CEO of BMC Software, to Box’s
  Board of Directors, effective as of the end of Box’s upcoming Annual
  Meeting of Stockholders.

Outlook

• Q2 FY20 Guidance: Revenue is expected to be in the range of
  $169 million to $170 million. GAAP and non-GAAP basic and diluted net
  loss per share are expected to be in the range of $0.29 to $0.28 and
  $0.02 to $0.01, respectively. Weighted average basic and diluted
  shares outstanding are expected to be approximately 147 million.
• Full Year FY20 Guidance: Revenue is expected to be in the range
  of $688 million to $692 million. GAAP basic and diluted net loss per
  share are expected to be in the range of $1.05 to $1.03. Non-GAAP
  basic and diluted net income per share are expected to be in the range
  of $0.00 to $0.02. The weighted average basic and diluted shares
  outstanding are expected to be approximately 148 million and 155
  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, certain
legal settlement and related costs. 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 access details for the live conference call are:
+
1-833-231-7240 (U.S. and Canada), conference ID: 3887679
+
1-647-689-4084 (international), conference ID: 3887679

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: 3887679
+ 1-416-621-4642 (international), conference ID: 3887679

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 and uncertainties, including statements regarding Box’s
expectations regarding the size of its market opportunity, expectations
regarding its leadership position in the cloud content management
market, the demand for its products, its ability to scale its business
and drive operating efficiencies, its ability to achieve revenue
targets, expectations regarding its ability to achieve profitability on
a quarterly or ongoing basis, its expectations regarding free cash flow,
its ability to continue to grow unrecognized revenue and remaining
performance obligations, the timing of recent and planned product
introductions and enhancements, the short- and long-term success, market
adoption and retention, capabilities, and benefits of such product
introductions and enhancements, and the success of strategic
partnerships, as well as expectations regarding its revenue, 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, and weighted average outstanding
share count expectations for Box’s fiscal second quarter and full fiscal
year 2020 in the section titled “Outlook” above. 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; (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, 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; and (8) Box’s
ability to realize the expected benefits of its third-party partnerships.

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, 2019. 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.

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 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, one that is not typically
affected by operations during any particular period. Box further
excludes expenses related to certain litigation because they are
considered by management to be special items outside Box’s core
operating results.

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. 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
will help 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 given that 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 as 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 a leading Cloud Content Management platform 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
works with 70 percent of the Fortune 500, including AstraZeneca, General
Electric, JLL, and Nationwide, to drive business outcomes. Box is
headquartered in Redwood City, CA, with offices across the United
States, Europe and Asia. To learn more about Box, visit http://www.box.com.

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