Summary
Box closed the fiscal 2023 third quarter with its first $1 billion revenue run rate quarter. Revenue for the three months ended October 31, 2022 was $249.95 million, up 11.6% from $224.04 million in the prior-year quarter. Gross profit was $185.46 million, up 15.2%, and gross margin reached 74.2%, compared with 71.8% a year earlier. GAAP operating income was $13.37 million, up from an operating loss of $11.09 million, and operating margin swung to 5.3% from negative 4.9%. GAAP net income was $9.91 million, up from a net loss of $13.86 million, and diluted EPS was $0.03, up from -$0.12.
Cash generation firmed up. Operating cash flow for the quarter was $69.73 million, up 51.3% from $46.08 million in the prior-year quarter. Free cash flow, a non-GAAP measure, was $55.0 million, compared with $31.2 million a year earlier. Remaining performance obligations were $1.056 billion as of October 31, 2022, up 11.4% from $948.1 million a year earlier, or 20% growth on a constant currency basis. Deferred revenue was $467.1 million, up 8.7% from $429.7 million. Billings were $258.2 million, up 12% from $231.5 million, and the net retention rate was 110%, compared with 109%.
The profitability picture is wider than the GAAP lines. Non-GAAP operating income was $60.0 million, or 24.0% of revenue, compared with $46.4 million, or 20.7% of revenue, a year earlier. Non-GAAP diluted EPS was $0.31, compared with $0.22. Management said GAAP and non-GAAP EPS each absorbed a negative impact of 6 cents from foreign exchange. Revenue growth came from seat growth in existing customers and higher attach rates on multi-product Suites, particularly Enterprise Plus. Foreign exchange cut the quarterly revenue growth rate by 500 basis points.
Guidance for the fiscal 2023 fourth quarter calls for revenue of $255 million to $257 million, up 10% year over year at the high end of the range, or 15% growth on a constant currency basis. GAAP operating margin is expected to be approximately 6.5%, and non-GAAP operating margin approximately 24.5%. GAAP net income per share is expected to be $0.06 to $0.07, and non-GAAP diluted net income per share $0.34 to $0.35. The outlook assumes a negative foreign exchange impact of $0.05 per share. For the full fiscal year 2023, revenue is expected to be $990 million to $992 million, up 13% at the high end of the range, or 17% growth on a constant currency basis. Full-year GAAP operating margin is expected to be approximately 3.0%, and non-GAAP operating margin approximately 22.5%. GAAP net income per share is expected to be $0.02 to $0.03, and non-GAAP diluted net income per share $1.16 to $1.17, with a negative foreign exchange impact of $0.18 per share. Management repeated its commitment to a full-year FY23 target of revenue growth plus free cash flow margin of 37%.
The macro backdrop is the clearest risk. Box cited inflation, higher interest rates, slower growth, and a stronger dollar versus foreign currencies, particularly the Japanese Yen. Management said customers applied additional scrutiny to larger deals during the quarter, and it warned that IT budgets may tighten. Competition, pricing pressure, customer churn, delayed sales cycles, security vulnerabilities, and acquisition integration risk round out the stated concerns.
Product and customer activity stayed busy. Box unveiled new Box Sign features available to all users at no additional cost, announced general availability of the all-new Box Notes and Content Insights, and added Box Shield ethical wall capabilities plus flexible retention policies in Box Governance. Wins and expansions included Eurostar International Limited, Garmin International, McLarens, Mariner Wealth Advisors, Regions Bank, Warner Music Group, and Wasserman Media Group. On November 29, 2022, the board authorized a $150 million expansion of the stock repurchase program.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $250.0M | $246.0M | +1.6% | $224.0M | +11.6% |
| Gross profit | $185.5M | $181.2M | +2.4% | $161.0M | +15.2% |
| Gross margin | 74.2% | 73.6% | +0.6 pp | 71.8% | +2.4 pp |
| Research & development | $59.1M | $62.0M | -4.6% | $55.8M | +5.9% |
| Sales & marketing | $81.6M | $83.4M | -2.2% | $76.4M | +6.8% |
| General & administrative | $31.4M | $32.6M | -3.7% | $39.9M | -21.2% |
| Total operating expenses | $172.1M | $178.0M | -3.3% | $172.1M | +0.0% |
| Operating income (loss) | $13.4M | $3.1M | +325.7% | -$11.1M | +220.6% |
| Operating margin | 5.3% | 1.3% | +4.1 pp | -5.0% | +10.3 pp |
| Net income (loss) | $9.9M | $1.0M | +848.1% | -$13.9M | +171.5% |
| Net margin | 4.0% | 0.4% | +3.5 pp | -6.2% | +10.2 pp |
| Diluted EPS | $0.03 | -$0.02 | +$0.05 | — | — |
| Net retention rate | 110.0% | 112.0% | -2.0 pp | 109.0% | +1.0 pp |
Risks
MD&A states that during the quarter ended October 31, 2022 the company began to see additional customer scrutiny on larger deals due to the economic environment, with worsening conditions including inflation, higher interest rates and slower growth. It also cites a stronger dollar versus foreign currencies, particularly the Japanese Yen, as a headwind.
Revenue growth rate was negatively impacted by 500 basis points in the quarter and 300 basis points year to date due to weakening foreign currency exchange rates, and RPO growth was partially offset by negative FX. The filing identifies the Japanese Yen, British pound and Euro as currencies that recently declined against the U.S. dollar.
Sales efforts are increasingly focused on enterprise and highly regulated customers, which may lengthen and increase the cost of sales cycles, create greater pricing pressure and delay revenue recognition. Q3 FY2023 commentary notes larger deals required more scrutiny.
Risk factor highlights increased sophistication of attacks, nation-state and affiliated actors due to Russia's invasion of Ukraine, and additional risk from remote and hybrid work. Box stores sensitive data for heavily regulated industries such as healthcare, government, life sciences and financial services.
Migration from collocated data centers to third-party public cloud is expected to increase cost of revenue in absolute dollars and as a percentage of revenue in the first half of fiscal 2024 due to redundant public cloud and data center expenses. Unsuccessful data transfers could disrupt service delivery.
Primary competitors include Microsoft and OpenText in cloud content management and Microsoft, Google and Dropbox in enterprise file sync and share; some offer lower-priced or free bundled products, creating pricing pressure. Revenue was up 11.6% in Q3 FY2023, but failure to compete effectively could harm results.
Compliance with GDPR, evolving cross-border data transfer rules including new SCCs required by December 27, 2023, CPRA effective January 1, 2023, and UK SCCs may require policy changes and add costs. GDPR penalties can reach the greater of 20 million Euros or 4% of global revenue.
The company depends on key employees and highly skilled personnel, including an expanded direct sales force. R&D headcount rose 34% driven by the Poland engineering center, and a hybrid workforce may cause disruptions and decreased productivity.
Convertible senior notes due January 15, 2026 require cash settlement of principal upon conversion, and Series A preferred stock accrues cumulative 3.0% dividends and has redemption rights. These obligations could reduce liquidity and cash available for other uses.
Risk factor states a recent proxy contest with an activist shareholder was very costly and diverted significant board and management time. Future activism or board changes could create uncertainty for customers, employees and partners.
SaaS KPIs
All quarters →Billings
Net Retention Rate
Non-GAAP Operating Margin
Free Cash Flow
Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from BOX INC's SEC filings for Q3 FY2023 (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.