Box(US:BOX)2024-05-30 20:05PART I — FINANCIAL INFORMATION Item 1. Financial Statements Presents the unaudited condensed consolidated financial statements for the quarter ended April 30, 2024 Condensed Consolidated Balance Sheets Total assets decreased to $1.18 billion, while the total stockholders' deficit narrowed to $(397.9) million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 30, 2024 | January 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $449,507 | $383,742 | | Accounts receivable, net | $143,053 | $281,487 | | Total current assets | $788,673 | $842,180 | | Total assets | $1,176,097 | $1,241,163 | | Liabilities & Stockholders' Deficit | | | | Deferred revenue (current) | $493,003 | $562,859 | | Total current liabilities | $591,438 | $679,280 | | Debt, net, non-current | $371,323 | $370,822 | | Total liabilities | $1,081,386 | $1,180,130 | | Total stockholders' deficit | $(397,874) | $(431,062) | Condensed Consolidated Statements of Operations Quarterly revenue grew 5% to $264.7 million, with net income increasing to $17.2 million Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended April 30, 2024 | Three Months Ended April 30, 2023 | | :--- | :--- | :--- | | Revenue | $264,658 | $251,898 | | Gross Profit | $206,406 | $190,247 | | Income from operations | $18,007 | $8,335 | | Net income | $17,222 | $8,350 | | Diluted net income per share | $0.08 | $0.02 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased 5% to $131.2 million for the three-month period Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended April 30, 2024 | Three Months Ended April 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $131,204 | $124,930 | | Net cash used in investing activities | $(23,170) | $(8,782) | | Net cash used in financing activities | $(35,695) | $(60,921) | | Net increase in cash | $66,128 | $53,176 | Notes to Condensed Consolidated Financial Statements Provides supplementary details on significant accounting policies, commitments, debt, and equity - As of April 30, 2024, the company had remaining performance obligations (RPO) of $1.2 billion, with 59% expected to be recognized as revenue over the next 12 months41 - Future minimum payments under non-cancellable contractual purchase obligations, primarily for public cloud hosting, totaled $316.1 million as of April 30, 20245657 - During the quarter, the company repurchased 1.4 million shares of common stock for $37.2 million, with $126.4 million remaining available for future repurchases67 - Total stock-based compensation expense for the quarter was $51.2 million, an increase from $47.3 million in the prior-year period78 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes quarterly financial performance, key metrics, and the impact of macroeconomic factors Current Period Highlights Revenue grew 5% to $264.7 million, with a 14% increase in non-GAAP free cash flow to $123.2 million Q1 FY2025 Financial Highlights vs. Q1 FY2024 | Metric | Q1 FY2025 | Q1 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $264.7M | $251.9M | +5% | | Gross Margin | 78.0% | 75.5% | +250 bps | | Operating Margin | 6.8% | 3.3% | +350 bps | | RPO | $1.212B | $1.179B | +3% | | Net Cash from Operations | $131.2M | $124.9M | +5% | | Non-GAAP Free Cash Flow | $123.2M | $108.2M | +14% | Key Business Metrics RPO grew 3% to $1.212 billion while the net retention rate declined to 101% due to customer budget scrutiny - Remaining Performance Obligations (RPO) were $1.212 billion, up 3% YoY, with growth negatively impacted by 470 basis points from foreign currency exchange rates94 - Billings were $190.5 million, a decrease of 1% YoY, primarily driven by a 550 basis point negative impact from foreign currency exchange rates97 - The net retention rate was 101% as of April 30, 2024, down from 106% as of April 30, 2023, due to heightened budget scrutiny and increased partial customer churn104 Results of Operations Revenue increased 5% to $264.7 million, driven by existing customers despite negative foreign exchange impacts - Revenue increased by $12.8 million (5%), driven by seat growth in existing customers and strong attach rates of multi-product Suites, partially offset by a 260 basis point negative currency impact115 - Cost of revenue decreased by $3.4 million (6%), primarily due to a $7.0 million decrease in depreciation expense following the completion of the migration to the public cloud117 - Sales and marketing expenses increased by $6.5 million (7%), driven by a $2.3 million increase in marketing event costs and a $2.4 million increase in stock-based compensation121 Liquidity and Capital Resources The company held $567.0 million in cash and short-term investments and generated $131.2 million in operating cash flow - The company had cash, cash equivalents, restricted cash, and short-term investments of $567.0 million as of April 30, 2024127 - Cash used in financing activities was $35.7 million, primarily driven by $32.1 million in common stock repurchases and $3.8 million in dividend payments to preferred stockholders133 - The Board of Directors authorized an additional $100 million for the share repurchase plan on March 4, 2024, with $126.5 million remaining available for repurchases as of April 30, 2024138 Item 3. Quantitative and Qualitative Disclosures About Market Risk Identifies primary market risks from interest rates and foreign currency fluctuations, particularly the Japanese Yen - The company is exposed to interest rate risk from its $150.0 million revolving loan facility, which is partially mitigated by a swap agreement with a notional value of $30.0 million148149 - Approximately one-third of revenue is denominated in foreign currencies, with fluctuations unfavorably impacting total revenue by approximately 260 basis points for the quarter150 - To mitigate foreign currency risk, the company has entered into derivative contracts to hedge a portion of its net outstanding monetary assets and liabilities152 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level154 - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls155 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is subject to ordinary course litigation but does not anticipate any material loss from current contingencies - The company is subject to litigation and claims arising in the ordinary course of business but believes that as of April 30, 2024, there was not a reasonable possibility of incurring a material loss58157 Item 1A. Risk Factors Details significant risks including intense competition, customer retention, economic conditions, and cybersecurity threats - The market for cloud content management is intensely competitive, with major competitors including Microsoft and Google, which could create pricing pressure162 - The business substantially depends on customer renewals, and the net retention rate declined to 101% from 106% a year prior, which could harm future operating results164 - Actual or perceived security vulnerabilities and unauthorized data access could harm the business, as the company stores large amounts of sensitive customer information185186 - International operations expose the company to risks, including significant fluctuations in currency exchange rates, particularly the Japanese Yen, which has negatively impacted results179181 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the repurchase of 1.4 million shares for $37.2 million and a $100 million increase to the buyback plan Share Repurchase Activity (Q1 FY2025) | Period | Total Shares Purchased (thousands) | Average Price Per Share | Total Cost (thousands) | | :--- | :--- | :--- | :--- | | Feb 2024 | 0 | N/A | $0 | | Mar 2024 | 94 | $28.43 | $2,672 | | Apr 2024 | 1,279 | $27.00 | $34,533 | | Total | 1,373 | $27.10 (weighted avg) | $37,205 | - On March 4, 2024, the Board of Directors authorized an additional $100 million for the share repurchase plan, with approximately $126.4 million remaining available as of April 30, 2024284 Item 5. Other Information Key executives and directors adopted pre-arranged Rule 10b5-1 trading plans during the quarter - CEO Aaron Levie adopted a Rule 10b5-1 trading plan on April 2, 2024, for the sale of up to 40,000 shares, commencing July 2, 2024285 - CFO Dylan Smith adopted a Rule 10b5-1 trading plan on April 2, 2024, for the sale of up to 156,000 shares, commencing July 10, 2024285 Item 6. Exhibits Lists all exhibits filed with the report, including required CEO and CFO certifications - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002290291292 - The filing includes Inline XBRL documents for financial data tagging293 Signatures The report was duly signed and authorized by the CEO and CFO on May 30, 2024 - The Form 10-Q was signed on May 30, 2024, by Aaron Levie (CEO) and Dylan Smith (CFO)296297