Market Overview

Box Reports Record Revenue of $141 Million and Delivers Cash Flow From Operations of $18 Million for Fiscal First Quarter 2019

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  • Revenue of $140.5 Million, Up 20 Percent Year-Over-Year
  • Billings of $116.7 Million, Up 17 Percent Year-Over-Year
  • Cash Flow from Operations of $18.4 Million, Up $9.9 Million
    Year-Over-Year
  • Free Cash Flow of $7.3 Million, Up $3.2 Million Year-Over-Year

Box, Inc. (NYSE:BOX), a leader in cloud content management, today
announced financial results for the first quarter of fiscal 2019, which
ended April 30, 2018.

"In the first quarter, we drove strong attach rates for new products,
expanded our international customer base and delivered product
innovation and security for some of the largest and most regulated
enterprises in the world," said Aaron Levie, co-founder and CEO of Box.
"With customers like Mitsubishi Motors Corporation, Dignity Health and
the Defense Advanced Research Projects Agency (DARPA) choosing Box to
power their digital workplace, our focus on security and collaboration,
as well as our vision for artificial intelligence, continues to
resonate."

"We delivered solid top line growth and improved cash flow from
operations by $10 million year-over-year in the first quarter," said
Dylan Smith, co-founder and CFO of Box. "Our continued focus on driving
higher product attach rates and expanding our penetration in the large
enterprise market position us for long-term growth on our path to $1
billion and beyond."

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 April 30, 2018 under ASC 605 for comparison to the prior year.

Fiscal First Quarter Financial Highlights

  • Revenue for the first quarter of fiscal 2019 was a record $140.5
    million, an increase of 20% (ASC 606 in fiscal 2019 compared to ASC
    605 in fiscal 2018) and 22% (ASC 605 in fiscal 2019 compared to ASC
    605 fiscal 2018) from the first quarter of fiscal 2018.
  • Deferred revenue as of April 30, 2018 was $286.9 million, an increase
    of 28% (ASC 606 to ASC 605) and 31% (ASC 605 to ASC 605) from April
    30, 2017.
  • Billings for the first quarter of fiscal 2019 were $116.7 million, an
    increase of 17% (ASC 606 to ASC 605 and ASC 605 to ASC 605) from the
    first quarter of fiscal 2018.
  • GAAP operating loss in the first quarter of fiscal 2019 was $35.9
    million, or 26% of revenue (ASC 606 to ASC 605), and $37.4 million, or
    26% of revenue (ASC 605 to ASC 605). This compares to GAAP operating
    loss of $40.0 million, or 34% of revenue, in the first quarter of
    fiscal 2018.
  • Non-GAAP operating loss in the first quarter of fiscal 2019 was $9.2
    million, or 7% of revenue (ASC 606), and $10.7 million, or 7% of
    revenue (ASC 605). This compares to a non-GAAP operating loss of $16.6
    million, or 14% of revenue, in the first quarter of fiscal 2018.
  • GAAP net loss per share, basic and diluted, in the first quarter of
    fiscal 2019 was $0.26 (ASC 606) and $0.28 (ASC 605) on 138.5 million
    shares outstanding. This compares to a GAAP net loss per share of
    $0.30 in the first quarter of fiscal 2018 on 131.5 million shares
    outstanding.
  • Non-GAAP net loss per share, basic and diluted, in the first quarter
    of fiscal 2019 was $0.07 (ASC 606) and $0.08 (ASC 605). This compares
    to non-GAAP net loss per share of $0.13 in the first quarter of fiscal
    2018.
  • Net cash provided by operating activities in the first quarter of
    fiscal 2019 totaled $18.4 million. This compares to net cash provided
    by operating activities of $8.5 million in the first quarter of fiscal
    2018.
  • Free cash flow in the first quarter of fiscal 2019 was $7.3 million.
    This compares to $4.0 million in the first quarter of fiscal 2018.

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

  • Grew paying customer base to more than 85,000 businesses, including
    new or expanded deployments with leading organizations such as
    Blackboard, City of Philadelphia, DARPA, Dignity Health, Hitachi High
    Technologies, Mitsubishi Motors Corporation and Pokémon.
  • Hosted
    Box World Tour Europe 2018
    in London with hundreds of IT industry
    leaders from across Europe. As the European
    Union's General Data Protection Regulation took effect May 25th
    ,
    Box, with Binding Corporate Rules, C5 and the TCDP, has
    been independently reviewed by European Data Protection Authorities
    for its privacy and cloud protection practices and is well-suited to
    support customers as they address GDPR.
  • Launched
    multizone support for Box Zones
    , giving customers the choice to
    store data in and collaborate seamlessly across any of Box's existing
    seven Zones, all from a single Box instance.
  • Announced the general availability of Box
    Drive
    to power seamless collaboration streamed directly from the
    desktop to further simplify businesses' shift to the cloud.
  • Released new capability to create
    metadata-driven retention policies for Box Governance
    , offering
    customers powerful, flexible and customizable controls over their data.
  • Launched new Box
    Admin Insights Dashboard
    , providing IT admins with enhanced
    visibility, governance and understanding of how their employees
    leverage Box globally.
  • Released Box's
    integration with Apple's office suite, iWork
    , enabling users to
    create, preview and collaborate on Pages, Numbers and Keynote files
    within Box.
  • Established
    Future of Work Council
    with Workplace by Facebook and Okta,
    bringing together leaders from enterprises like American Express, NIKE
    and Farmers Insurance® to rethink the culture, skills, organization
    and technology required to enable the future of work in the digital
    age.

Outlook

  • Q2 FY19 Guidance: Revenue is expected to be in the range of
    $146 million to $147 million. GAAP and non-GAAP basic and diluted
    earnings per share are expected to be in the range of ($0.28) to
    ($0.27) and ($0.06) to ($0.05), respectively. Weighted average basic
    and diluted shares outstanding are expected to be approximately 141
    million.
  • Full Year FY19 Guidance: Revenue is expected to be in the range
    of $603 million to $608 million. GAAP and non-GAAP basic and diluted
    earnings per share are expected to be in the range of ($1.07) to
    ($1.04) and ($0.19) to ($0.16), respectively. Weighted average basic
    and diluted shares outstanding are expected to be approximately
    140 million.

All forward-looking non-GAAP financial measures contained in this
section titled "Outlook" exclude estimates for stock-based compensation
expense, intangible assets amortization and certain legal settlement and
related costs. Box has provided a reconciliation of GAAP to non-GAAP
earnings 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:

+ 1-866-393-4306 (U.S. and Canada), conference ID: 8194155

+ 1-734-385-2616 (international), conference ID: 8194155

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:

+ 1-855-859-2056 (U.S. and Canada), conference ID: 8194155

+ 1-404-537-3406 (international), conference ID: 8194155

Box has used, and intends to continue to use, its Investor Relations
website (www.box.com/investors),
as well as certain Twitter accounts (@boxhq, @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, the demand
for its products, its ability to scale its business and drive operating
efficiencies, its ability to achieve its revenue target of $1 billion in
the coming years, expectations regarding its ability to achieve
profitability on a quarterly or ongoing basis, the timing of recent and
planned product introductions and enhancements, the short- and long-term
success, market adoption, capabilities, and benefits of such product
introductions and enhancements, and the success of strategic
partnerships, as well as expectations regarding its revenue, GAAP and
non-GAAP earnings per share, the related components of GAAP and non-GAAP
earnings per share, and weighted average basic and diluted outstanding
share count expectations for Box's fiscal second quarter and full fiscal
2019 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) Box's limited operating history, which makes it difficult to predict
future results; (6) 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; (7) Box's ability to provide timely and successful
enhancements, new features and modifications to its platform and
services; (8) actual or perceived security vulnerabilities in Box's
services or any breaches of Box's security controls; and (9) 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, 2018. 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 loss, non-GAAP operating margin, non-GAAP
net loss, non-GAAP net loss per share, billings 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 loss and non-GAAP operating margin. Box
defines non-GAAP operating 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 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 loss and non-GAAP net loss per share. Box defines
non-GAAP net loss as net loss excluding expenses related to SBC,
intangible assets amortization, and as applicable, other special items.
Box defines non-GAAP net loss per share as non-GAAP net loss divided by
the weighted average outstanding shares. Box excludes expenses related
to certain litigation because they are considered by management to be
special items outside Box's core operating results.

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 and, after adjusting for any
shifts in relative payment frequencies, a leading indicator of future
revenue. 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.

Free cash flow. Box defines free cash flow as cash provided by
operating activities less purchases of property and equipment, principal
payments of capital lease obligations, 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. Prior to the adoption of Accounting
Standards Update 2016-18, Restricted Cash, historically, these
adjusting items include the use and release of restricted cash to
guarantee a significant letter of credit for Box's Redwood City
headquarters. 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 the cloud content management company that
empowers enterprises to revolutionize how they work by securely
connecting their people, information and applications. Founded in 2005,
Box powers more than 85,000 businesses globally, including AstraZeneca,
General Electric, P&G, and The GAP. 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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