Summary
Box closed the third quarter of fiscal 2024 with revenue of $261.5 million for the three months ended October 31, 2023, up 4.6% from a year earlier. Constant currency growth was 7%. Gross profit rose 3.7% to $192.3 million, but gross margin slipped to 73.5%, down 0.7 percentage points. Operating income fell 14.9% to $11.4 million, and operating margin was 4.4%, down 1.0 percentage point. Net income rose 7.5% to $10.7 million, and diluted earnings per share was $0.04, up from a year earlier.
Part of the margin squeeze came from an equipment proceeds headwind of $3.3 million, an anticipated drop in proceeds from selling data center equipment as the public cloud migration finishes. That item cost 130 basis points of gross margin and operating margin and $0.02 of earnings per share. On a non-GAAP basis, gross profit was $199.6 million, or 76.3% of revenue, operating income was $64.6 million, or 24.7% of revenue, and diluted earnings per share was $0.36. Those figures strip out stock-based compensation and other items, and the gap between GAAP and non-GAAP profitability is wide.
Cash remains the strongest part of the story. Operating cash flow was $71.8 million in the quarter, up 2.9%, and $229.4 million for the first nine months, up 11.5%. Non-GAAP free cash flow was $58.3 million, up 6% from $55.0 million a year earlier. The forward-looking indicators were softer. Billings were $253.7 million, down 2% year over year, which management attributed to particularly strong payment durations a year earlier, including a large multi-year customer prepayment. The net retention rate fell to 102% from 110%, which management tied to budget scrutiny and pressure on seat expansion. Deferred revenue of $472.0 million rose 1.0%, and remaining performance obligations of $1.10 billion were up 4.2%.
The nine-month numbers show how much leverage the cost base has added. Revenue for the nine months was $774.9 million, up 5.5%. Operating income was $29.6 million, up 72.7%, and operating margin was 3.8%, up 1.5 percentage points. Gross margin for the nine months was 74.5%, up 0.5 percentage points. Net income was $29.8 million, up 376%, and diluted earnings per share was $0.10, a swing to a profit from a loss a year earlier.
Guidance for the fourth quarter of fiscal 2024 calls for revenue of $262 million to $264 million, up 3% year over year at the high end of the range, or 5% in constant currency. GAAP operating margin is guided to about 5.0% and non-GAAP operating margin to about 25.5%. GAAP diluted earnings per share is expected in a range of $0.05 to $0.06, and non-GAAP diluted earnings per share in a range of $0.38 to $0.39. For the full fiscal year 2024, revenue is guided to $1.037 billion to $1.039 billion, up 5% at the high end, or 8% in constant currency, with GAAP operating margin near 4.0%, non-GAAP operating margin near 24.5%, GAAP earnings per share of $0.15 to $0.16, and non-GAAP earnings per share of $1.42 to $1.43.
Two headwinds sit in front of the fourth quarter. The equipment proceeds drag grows to roughly $4 million, and a Redwood City office lease modification adds a one-time expense of $1.6 million. Roughly one third of revenue is generated outside the United States, with about 60% of that in Japanese yen, so exchange rates keep cutting into results. Management also pointed to heightened budget scrutiny on larger deals, delayed sales cycles, lower seat expansion and increased churn as live risks. Box bought back 1.9 million shares in the quarter at a weighted average price of $26.59 for $51.7 million, leaving $83.5 million available, and public cloud hosting costs climbed $9.3 million as redundant data center spending ran alongside the migration.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $261.5M | $261.4M | +0.0% | $250.0M | +4.6% |
| Gross profit | $192.3M | $194.4M | -1.1% | $185.5M | +3.7% |
| Gross margin | 73.5% | 74.4% | -0.8 pp | 74.2% | -0.7 pp |
| Research & development | $61.0M | $63.3M | -3.6% | $59.1M | +3.2% |
| Sales & marketing | $87.9M | $88.6M | -0.8% | $81.6M | +7.8% |
| General & administrative | $32.0M | $32.6M | -2.0% | $31.4M | +1.8% |
| Total operating expenses | $180.9M | $184.5M | -2.0% | $172.1M | +5.1% |
| Operating income (loss) | $11.4M | $9.9M | +15.2% | $13.4M | -14.9% |
| Operating margin | 4.3% | 3.8% | +0.6 pp | 5.3% | -1.0 pp |
| Net income (loss) | $10.7M | $10.8M | -1.3% | $9.9M | +7.5% |
| Net margin | 4.1% | 4.1% | -0.1 pp | 4.0% | +0.1 pp |
| Diluted EPS | $0.04 | $0.04 | ±$0.00 | $0.03 | +$0.01 |
| Net retention rate | 102.0% | 103.0% | -1.0 pp | 110.0% | -8.0 pp |
Risks
Adverse economic conditions and customer budget scrutiny have resulted in reduced sales, longer sales cycles, reduced renewal rates, slower adoption of new technologies and increased price competition. MD&A states the company continued to see additional customer scrutiny on larger deals and lower seat expansion rates due to the challenging macroeconomic environment, and has experienced increased customer churn and delayed sales cycles.
Sales efforts are increasingly focused on cloud content management use cases and enterprise and highly-regulated customers, which may lengthen and increase the cost of sales cycles and create greater pricing pressure and implementation and customization challenges. MD&A notes larger deals required more scrutiny across verticals and geographies.
Net retention rate declined to approximately 102% as of October 31, 2023 from 110% as of October 31, 2022, primarily due to heightened budget scrutiny putting pressure on seat expansion within existing customers. If customers do not renew or expand, revenue may decline.
Generative AI may fundamentally alter the market for Box services and reduce customer demand, while integrating AI and machine learning into offerings may cause brand or reputational harm, legal liability, regulatory scrutiny, and increased computing costs. MD&A highlights Box AI and Box Hubs, whose success depends on timely completion and market acceptance.
The cloud content management market is intensely competitive, with primary competitors including Microsoft SharePoint and OneDrive, OpenText Documentum, Google Drive, and Dropbox. Some competitors offer lower prices or free bundled products, placing pricing pressure on Box and potentially reducing sales and margins.
Fluctuations in foreign currency exchange rates, particularly the Japanese Yen, negatively affected results. MD&A states weakening foreign currency exchange rates negatively impacted revenue growth rate by 200 basis points for the three months ended October 31, 2023 and 230 basis points for the nine months ended October 31, 2023.
Billings for the three months ended October 31, 2023 were $253.7 million, a year-over-year decrease of 2%, driven by particularly strong payment durations including a large multi-year customer prepayment in the prior-year period. Quarterly billings may increasingly concentrate in the back half of the fiscal year, especially the fourth quarter.
Privacy and data protection laws are evolving, with new U.S. state privacy laws effective between 2024 and 2026 and CPRA enforcement delayed until March 29, 2024. Compliance may require changes to data processing practices and incur substantial costs, and data localization requirements could limit Box's ability to provide services in some regions.
Box issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026, and has elected to settle principal in cash. If holders convert or require repurchase upon a fundamental change, Box may not have sufficient cash or be able to obtain financing, and reclassification to current could materially reduce reported working capital.
Series A Convertible Preferred Stock has preferential liquidation, cumulative 3.0% dividends, and redemption rights, including repurchase at 100% of liquidation preference plus accrued dividends after the seventh anniversary. These obligations could impact liquidity and reduce cash available for working capital, capital expenditures, and growth.
SaaS KPIs
All quarters →Billings
Net Retention Rate
Non-GAAP Operating Margin
Remaining Performance Obligations (RPO)
Non-GAAP Free Cash Flow
Non-GAAP Gross Margin
Summary, forecast, risks and KPIs are extracted from BOX INC's SEC filings for Q3 FY2024 (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.