Summary
Box's preliminary fiscal 2022 second quarter results, for the period ended July 31, 2021, show revenue of $214.5 million, up 11.5% from the prior-year quarter. Billings were approximately $213 million, up 13% year over year. The net retention rate was approximately 106%, up from 103% in the first quarter of fiscal 2022. Remaining performance obligations ended the quarter at $922.4 million, up 26.9% from a year earlier. Deferred revenue was $422.0 million, up 15.6% from the prior-year quarter. Those figures point to a business that is still expanding, though the growth rate remains in the low double digits.
Profitability improved on a GAAP basis, but the bottom line stayed negative. Gross profit was $153.7 million, up 12.2% from the prior-year quarter, and gross margin was 71.7%, up 0.4 percentage points. The operating loss narrowed to $6.1 million, and the operating margin was negative 2.8%, up 1.1 percentage points. Net loss was $8.7 million, which was wider than the prior-year quarter, and diluted EPS was negative $0.08. The non-GAAP operating margin was approximately 20%, compared with guidance of 18% to 18.5%. Operating cash flow was $44.8 million for the quarter, up 38.6% from the prior-year quarter. Free cash flow, a non-GAAP measure, was positive $29.8 million, an increase of $16.5 million from positive $13.3 million in the prior-year quarter.
Operational momentum showed up in large deals. Box closed 133 new deals over $100,000 in the first half of fiscal 2022, up 28% year over year. The attach rate on Suites in deals over $100,000 was over 70%, up from 49% in the first quarter of fiscal 2022 and 45% in the fourth quarter of fiscal 2021. The company launched Box Sign, added self-service migration tools as part of Box Shuttle, and released Box Enterprise Plus. Box says its platform serves 67% of the Fortune 500. The number of paying organizations increased 6% from July 31, 2020 to July 31, 2021. Revenue from non-U.S. customers reached 32% of the total in the quarter, compared with 28% a year earlier, driven by strong growth in Japan.
Guidance points to continued revenue acceleration but stable margins. For the third quarter of fiscal 2022, Box expects revenue of $218 million to $219 million, up 11% to 12% year over year. GAAP operating margin is expected to be approximately negative 3.5%, and non-GAAP operating margin is expected to be approximately 20%. For the full fiscal year 2022, revenue is expected to be $856 million to $860 million, up 11% year over year. Full-year GAAP operating margin is expected to be approximately negative 3.0%, an improvement from previous guidance of negative 4%. Full-year non-GAAP operating margin is expected to be approximately 19.5%, an increase from previous guidance of 18% to 18.5%. The company also expects the combination of full-year revenue growth and free cash flow margin to be at least 32%, up from previous guidance of at least 30%.
Capital returns and costs are part of the story. Under the $260 million share repurchase plan authorized on July 9, 2021, Box repurchased 2.5 million shares at a weighted average price of $23.68 for $59 million as of August 11, 2021. Combined with the modified Dutch auction tender, total repurchases reached 11.8 million shares for $297 million. Risks include COVID-19 disruptions, customer churn, delayed sales cycles, competition and pricing pressure, security vulnerabilities, shareholder activism, and the challenge of integrating acquisitions.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $214.5M | $202.4M | +5.9% | $192.3M | +11.5% |
| Gross profit | $153.7M | $141.5M | +8.6% | $137.0M | +12.2% |
| Gross margin | 71.7% | 69.9% | +1.8 pp | 71.2% | +0.4 pp |
| Research & development | $52.7M | $50.9M | +3.7% | $50.1M | +5.2% |
| Sales & marketing | $72.8M | $69.8M | +4.3% | $67.8M | +7.4% |
| General & administrative | $34.3M | $31.1M | +10.3% | $26.6M | +29.0% |
| Total operating expenses | $159.8M | $151.8M | +5.3% | $144.5M | +10.6% |
| Operating income (loss) | -$6.1M | -$10.3M | +40.5% | -$7.5M | +18.6% |
| Operating margin | -2.9% | -5.1% | +2.2 pp | -3.9% | +1.1 pp |
| Net income (loss) | -$8.7M | -$14.6M | +40.3% | -$7.7M | -13.6% |
| Net margin | -4.1% | -7.2% | +3.1 pp | -4.0% | -0.1 pp |
| Net retention rate | 106.0% | 103.0% | +3.0 pp | 106.0% | ±0.0 pp |
Risks
Starboard Value filed a definitive proxy statement on July 20, 2021 to elect three director candidates to Box's board, and the contested election requires substantial legal, public relations and proxy solicitation expenses while diverting management attention. MD&A reports general and administrative expense increased 29% for the three months ended July 31, 2021, primarily due to $4.8 million in fees related to shareholder activism.
KKR's $500 million Series A Convertible Preferred Stock issued May 12, 2021 has a 3.0% cumulative dividend, redemption rights starting on the seventh anniversary, change-of-control make-whole payments, and board designation rights. These obligations can reduce cash available for operations and dilute Class A stockholders.
Box issued $345.0 million of 0.00% convertible senior notes due January 15, 2026 and elected to settle principal in cash; if holders convert or require repurchase upon a fundamental change, Box may need significant cash. The risk factor also notes that if convertibility conditions are met, the notes may be reclassified as current liabilities, materially reducing reported working capital.
A substantial portion of sales efforts is increasingly focused on cloud content management use cases and enterprise and highly regulated customers, which can lengthen and increase the cost of sales cycles, create greater pricing pressure and implementation challenges, and delay revenue recognition. MD&A notes increased traction with large enterprise customers and expects billings to concentrate more in the back half of the fiscal year.
The risk factors state net retention rate has decreased over time and may continue to decrease if customers do not renew or expand; net retention rate was approximately 106% as of July 31, 2021 and 2020. MD&A describes renewal and expansion as important to future growth and notes customers partially churning deployments.
The continuing COVID-19 pandemic has negatively impacted some customers and prospects, causing increased customer churn and delayed sales cycles as well as reduced budgets for services Box offers, although it has not had a material adverse impact on Q2 FY2022 financial results. The duration and severity remain uncertain.
The cloud content management market is intensely competitive with Microsoft and OpenText as primary competitors and Microsoft, Google and Dropbox in enterprise file sync and share; some competitors offer lower price or free products, pressuring Box's pricing and margins.
Privacy and data protection laws, including GDPR, CCPA, CPRA, the invalidated EU-US Privacy Shield and Brexit-related data transfer uncertainty, may require changes to Box's data processing practices and increase compliance costs. Some countries require local storage and processing of data, raising service delivery costs.
SaaS KPIs
All quarters →Net Retention Rate
Non-GAAP Operating Margin
Free Cash Flow
Billings Growth Rate
Remaining Performance Obligations Growth Rate
Remaining Performance Obligations (period end)
Summary, forecast, risks and KPIs are extracted from BOX INC's SEC filings for Q2 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.