M+E Connections

Continued customer adoption of Relay, Shield and the bundled Suite offering, along with strong initial demand for the All-New Box experience announced in May helped Box overcome COVID-19 challenges in the second quarter (ended July 31), according to company executives.

“We’re seeing healthy expansion within our existing enterprise customers, stable customer retention rates and continued momentum in Suite sales,” CFO Dylan Smith told analysts on an earnings call Aug. 26.

Total Box revenue for the second quarter of fiscal year 2021 Q2 was $192.3 million, an increase of 11% from the same quarter of fiscal year 2020.

Noting the company “launched a bunch of new features that really help customers better collaborate, better organize [and] better share their content on Box,” CEO Aaron Levie told analysts the company is “now focused on really driving the adoption of the All-New Box, which we’re seeing early signs of having some very, very kind of sticky and enhanced features that we’re super excited about.”

In Q2, Box “delivered more product innovation than ever to ensure our customers have the most secure and collaborative experience when working remotely,” Levie said.

The All-New Box features an “updated, simplified design and much faster performance,” with enhancements including Collections that Levie said  “provides the ability to organize files and folders around the topics and work streams important to that individual user.”

Also new was Annotations, enabling users to “leave pre-formed markups and text comments directly in Box on all of their content,” Levie pointed out, adding: “Since Annotations became available to customers in late July, the feature has been used to increase productivity on everything from marketing campaigns to legal contract reviews.”

Meanwhile, for Box Shield, the company in July announced Auto Classification, which Levie said “leverages advanced machine learning to automatically scan files and classify them based on their content, helping businesses detect and secure sensitive data.”

And with Box Relay, the company “significantly expanded our library of templates to simplify workflows in sales, marketing, HR, legal, finance and more and added an integration with File Request,” Levie noted.

“With remote work driving the need for more digital business processes, we are doubling down on workflow to automate and digitize content-centric processes across the enterprise,” Levie told analysts, adding: “Looking ahead, we have an exciting road map of innovation and enhancements that will continue to drive adoption and enable our customers to work in all new ways.”

The company will share some of those advancements at this year’s BoxWorks on Sept. 17, which Levie noted “will be an all-digital event for the first time ever.”

Although the “future macroeconomic impact of COVID-19 remains uncertain, we believe we are in a strong position to continue delivering long-term, healthy growth with increased profitability,” Levie told analysts, adding: “To drive efficient and consistent revenue growth, we will continue to execute on our multiproduct strategy and drive more efficiency into our go-to-market initiatives. We are going after one of the largest markets in enterprise software and our focus is on growing existing accounts by driving add-on product adoption and seat expansion with Box Suites, as well as efficiently driving new logo acquisition in key markets.”

As part of the company’s effort “to drive greater profitability, we are focused on three key initiatives: Optimizing workforce expenses, improving gross margin and taking” a return on investment-based approach to all areas of spending, Levie said.

Box “laid the foundation to significantly improve our margins a year ago, and we are confident that our focus on efficient growth and cost discipline will continue to be an advantage in today’s uncertain environment and in the future when COVID-19 is behind us,” Levie went on to say.

In addition, “looking at our pipeline, we are seeing stronger demand for six-figure enterprise deals, and we expect to see solid year-over-year growth in our large deal counts in the third quarter,” Smith told analysts.

Box is also “on track to open our first Engineering Center of Excellence outside the U.S. in the back half of this year in Poland, which will contribute to our ability to scale our R&D investments more efficiently going forward,” Smith noted.

Also, during the Q&A, Levie told analysts Box was “starting to see more momentum”  with its Enterprise License Agreement (ELA) program. “It’s something that we’ve had kind of renewed interest in from the customer base right now, especially as companies want to be able to go more wall-to-wall,” he said, adding: “It’s becoming a greater focus of our sales motion, both to be able to sell Suites across the enterprise, as well as being able to sell the core Box as well. But the ELA program is really, more than anything, a way for customers to be able to deploy Box across their enterprise.”