Summary
Box's fiscal 2021 third quarter, ended October 31, 2020, delivered revenue of $196.00 million, up 10.6% from the prior-year quarter. Year-to-date revenue was $571.86 million, up 11.5%. Gross profit was $139.19 million, up 15.2%, and gross margin reached 71.0%, up 2.8 percentage points. For the first nine months, gross margin was 70.9%, up 1.9 percentage points. The operating loss was $2.61 million, and operating margin was -1.3%, up 20.8 percentage points. Year-to-date operating loss was $34.36 million, and operating margin was -6.0%, up 15.6 percentage points. Net loss was $5.28 million, or -$0.03 per diluted share. Year-to-date net loss was $38.49 million, or -$0.25 per diluted share.
Cash generation improved. Operating cash flow was $45.05 million in the quarter, up 406.6%, and $139.29 million year to date, up 369.0%. Capital expenditures were $3.34 million, up 216.3%, and $7.45 million year to date, up 76.5%. Free cash flow, a non-GAAP measure, was $26.2 million in the quarter, compared with negative $1.7 million a year earlier, and $79.3 million year to date, compared with negative $7.2 million. Deferred revenue ended the quarter at $354.40 million, up 8.8%. Remaining performance obligations were $755.90 million, up 18.9%.
Operational metrics show a business expanding within its base. Billings were $185.5 million in the quarter, up 8%, and $502.4 million year to date, up 8%. RPO growth was 19% year over year. The net retention rate was 103% at October 31, 2020, compared with 104% a year earlier. Box had 75.9 million registered users, with over 100,000 paying organizations, up 3% from a year earlier. Paying users represented 20% of registered users. Non-U.S. customers contributed 28% of year-to-date revenue, compared with 25% in the prior-year period. The platform was available in 25 languages.
Non-GAAP results highlight the swing in profitability. Non-GAAP operating income was $35.220 million in the quarter. A year earlier, non-GAAP operating loss was $0.520 million. Non-GAAP net income was $32.550 million, or $0.20 per diluted share. Year to date, non-GAAP operating income was $82.476 million, non-GAAP net income was $78.350 million, and non-GAAP diluted net income per share was $0.48. These figures exclude stock-based compensation and fees related to shareholder activism.
Management's commentary points to a mix of efficiency gains and pandemic-related pressure. Revenue growth came from new customers, add-on product attach, and expansion within existing accounts. The company expects net retention rate to remain above 100% for the foreseeable future. It expects billings to increasingly concentrate in the back half of the fiscal year, especially the fourth quarter. Sales and marketing expenses fell as Box shifted BoxWorks to a virtual event, reduced travel because of COVID-19, and carried a smaller sales and marketing headcount after its fiscal 2020 restructuring. Sales and marketing headcount fell from 935 to 799, and research and development headcount fell from 449 to 425, while general and administrative headcount rose from 357 to 368. Management expects revenue to continue to increase in dollars, cost of revenue to increase in dollars but decrease slightly as a percentage of revenue, sales and marketing expenses to decrease as a percentage of revenue, research and development expenses to increase in dollars but remain relatively stable as a percentage of revenue, and general and administrative expenses to slowly increase in dollars but decrease as a percentage of revenue.
Risks remain centered on COVID-19. The pandemic has not had a material adverse impact on financial results for the first three quarters of fiscal 2021, but it has hurt many customers and prospects, especially small businesses. That has led to increased customer churn, delayed sales cycles, delayed contract signings or renewals, and reduced budgets. The pandemic also created opportunities for secure remote work. Box carries a history of losses, and its future capital needs depend on growth, renewal activity, billing frequency, data center expansion, and international activity. The company believes existing cash and cash equivalents, finance leases, and credit facilities will be sufficient for at least the next 12 months, but it may need additional equity or debt financing.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $196.0M | $192.3M | +1.9% | $177.2M | +10.6% |
| Gross profit | $139.2M | $137.0M | +1.6% | $120.9M | +15.2% |
| Gross margin | 71.0% | 71.2% | -0.2 pp | 68.2% | +2.8 pp |
| Research & development | $49.5M | $50.1M | -1.3% | $50.7M | -2.4% |
| Sales & marketing | $67.1M | $67.8M | -1.0% | $82.9M | -19.1% |
| General & administrative | $25.2M | $26.6M | -5.1% | $26.5M | -4.7% |
| Total operating expenses | $141.8M | $144.5M | -1.8% | $160.1M | -11.4% |
| Operating income (loss) | -$2.6M | -$7.5M | +65.2% | -$39.2M | +93.3% |
| Operating margin | -1.3% | -3.9% | +2.6 pp | -22.1% | +20.8 pp |
| Net income (loss) | -$5.3M | -$7.7M | +31.0% | -$40.9M | +87.1% |
| Net margin | -2.7% | -4.0% | +1.3 pp | -23.1% | +20.4 pp |
| Net retention rate | 103.0% | 106.0% | -3.0 pp | — | — |
Risks
COVID-19 has negatively impacted many customers and prospects, particularly the small business segment, leading to increased customer churn and delayed sales cycles; customers and prospects have delayed contract signing or renewals and reduced budgets. The filing notes the pandemic has not had a material adverse impact on the first three quarters of fiscal 2021 but future impact is uncertain.
Net retention rate was approximately 103% as of October 31, 2020, down from 104% as of October 31, 2019. The company states its net retention rate has decreased over time and may continue to decrease if customers do not renew, renew on less favorable terms, or fail to expand use.
The CJEU invalidated the EU-US Privacy Shield in July 2020 and imposed additional obligations on model contractual clauses for EU-to-U.S. data transfers; California's CPRA was approved on November 3, 2020. These developments may require additional steps, increase compliance costs, and limit customers' and the company's data handling.
Because Box stores large amounts of sensitive and proprietary customer information, actual or perceived security breaches, customer misconfigurations, or third-party compromises could lead to liability, indemnity claims, lost customers, and reputational harm. Insurance may be inadequate for a widespread breach.
As sales efforts increasingly target enterprise and highly-regulated customers, sales cycles may become longer and more expensive, with greater pricing pressure and implementation challenges. MD&A also cites delayed sales cycles from COVID-19, including customers delaying contract signing or renewals.
The market for cloud content management is fragmented, rapidly evolving and highly competitive, with larger competitors such as Microsoft, Google, Dropbox and Open Text. Some competitors offer lower price or free products, creating pricing pressure that could reduce sales and margins.
Government demand and payment are affected by public sector budgetary cycles; many governments and municipalities are experiencing COVID-19 budget shortfalls that may delay or reduce technology spending. Extended federal government shutdowns could also limit or delay federal spending.
Service outages and delays, including a September 2019 perimeter network configuration issue that made all Box services temporarily unavailable, could harm reputation and revenue. The company relies on third-party data center and cloud hosting facilities and has never performed a full live failover of its services.
International expansion, including a recently established Warsaw office, exposes Box to data localization and privacy laws, different pricing and longer payment cycles, staffing challenges, weaker IP protection, and geopolitical and Brexit-related uncertainty. Non-U.S. customers represented 28% of revenue for the nine months ended October 31, 2020, up from 25% in the prior-year period.
Box depends on highly skilled personnel; inability to hire, retain and motivate could impede growth. MD&A shows R&D headcount decreased from 449 as of October 31, 2019 to 425 as of October 31, 2020, and sales and marketing headcount decreased from 935 to 799, due to restructuring in Q4 fiscal 2020.
The existing credit agreement contains operating and financial restrictions, including a minimum liquidity covenant and a maximum leverage ratio. A breach could result in default and acceleration; debt outstanding under the November 2017 Facility was $50.0 million as of October 31, 2020.
Activist shareholders could disrupt operations and divert management attention. MD&A notes general and administrative expense benefited from a $1.0 million decrease in fees related to shareholder activism in the quarter ended October 31, 2020.
SaaS KPIs
All quarters →Paying Organizations
Remaining Performance Obligations Growth Rate
Net Retention Rate (period end)
Registered Users
Remaining Performance Obligations (period end)
Paying Organizations Growth (YoY)
Summary, forecast, risks and KPIs are extracted from BOX INC's SEC filings for Q3 FY2021 (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.