Box delivers solid Q4 as it focuses on content pain in the enterprise

Box CEO Aaron Levie delivered Wall St analysts a strong set of Q4 numbers this week, with revenues up 8% to $198.9 million and a solid growth forecast for the coming years. However, what was more interesting about Levie's analysis of the results was how Box is thinking about its approach to content in the enterprise. 

Whilst digital teamwork vendors across the board have experienced a surge during the COVID-19 pandemic, not all of them have a coherent long-term plan that reflects the realities of complex digital collaboration requirements. The sense from Box is that it has had the time, and has the experience, to answer some of these questions - and is thinking about its go-to-market strategy through the lens of the highly stressed buyer. 

The company is obviously seeking rapid growth, like the rest, but it appears to have a more mature response compared to some of the other companies in the market. And that's partly due to its positioning, operating as a central content management system that relies on integration across a number of other tools, such as Slack, Salesforce, Teams, WebEx and Zoom. 

Box wants to not only offer a well-rounded content portfolio for its customers - which is evident from its latest e-signature announcement (Box Sign) - but also through its attempts to help customers move away from legacy systems with its new content migration tool, Box Shuttle. 

Highlighting some of the company's customer successes over the year and an overview of Box's efforts, Levie said:

This year we delivered the category defining cloud content management platform to the market by making significant product enhancements in security and compliance, collaboration and workflow and strengthening our ecosystem of partner integrations, and to further expand our product portfolio at the start of this new fiscal year, we just recently announced Box Sign, our native e-signature product offering that will be coming out later in the summer.

In Q4, we closed wins and expansions with leading organizations like Arena Pharmaceuticals, Asahi Group Holdings in Japan, Pan-American Life Insurance Group, Twilio and UPS. Our customers are choosing Box to power high-value use cases that are integral to how they run their businesses. 

Some examples of how customers worked with Box during Q4 include: 

• A biopharmaceutical company purchased a six-figure ELA with Box's GXT and key safe offerings to help power its mission to transform the way the drugs and therapies are manufactured in the U.S.

• A global leader in the insurance sector, who has been a Box customer since 2016, purchased Box Governance to support claims processes while meeting critical compliance requirements. 

• And a Japanese manufacturing company moved to Box to address their need for a content platform to facilitate remote work as well as integrate with applications such as SAP, Salesforce and Google Workspace.

A cogent strategy

Levie noted during the call with analysts that 2020 has marked a shift for enterprises, which are now moving towards and supporting the long-term trend of virtual and distributed teams and operations. Central to this, he argues, is how organisations manage and collaborate on content. "All of these organisations, across all industries run on content," Levie said: 

As such, there's been an awakening across many companies that a cloud based content management system is critical. Levie added: 

To power these processes, the days of fragmented on-prem content storage and enterprise content management systems no longer works. Customers fundamentally need a single Content Cloud connected across all their apps to power their end-to-end content workflows on a single platform.

As the experts in content, our vision is to power the entire content journey, giving enterprises a secure platform for managing all of their content from the moment it's created to when it's uploaded, shared, edited, published, approved, signed, classified and retained. This is our vision for the Box Content Cloud. 

As noted above, Box recently acquired SignRequest to integrate e-signatures, a rapidly growing segment of the market and critical for many exchanges across company lines, into its portfolio. Levie believes that it's still early days for e-signature, despite it already being a multi-billion dollar market. Levie said: 

We want to ensure all of our customers have access to the value of Box Sign, while also enabling us to monetize the higher end signature use cases that leverage advanced functionality and APIs. Adding e-signature is a significant step in building up the complete Content Cloud.

But it's not just broader product capability that Box is thinking about. The company is also wanting to be a better partner in enabling customers to move away from legacy and on-premise systems to the cloud, through the use of its content migration tool Box Shuttle. Levie said that Box Shuttle can migrate some of the most complex and large scale content environments, but at a lower cost and at speed. He said: 

We wanted to be simple, fast and cost effective as possible to retire legacy systems and move information from sourced platforms like network file shares, SharePoint, OneDrive, Documentum and OpenText to the Box Content Cloud. And with more high-value content in Box, our customers can empower their teams to collaborate more effectively and accelerate their digital transformation initiatives.

Aligned with this is how Box is continuing to deepen its integrations with Google Workspace, Slack and WebEx, amongst other digital teamwork vendors. It now claims to have over 1,5000 integrations to make work more seamless for customers. 

In a testament to how this strategy is paying off, Box notes how it continues to see "significant headroom" in expanding with current customers - with a potential 7x increase in seats from upwelling existing clients. In other words Box is pursuing a land and expand approach, which we've seen work well with other cloud vendors, particularly when they can adopt a central role in operations. 

My take

A solid quarter for Box. Levie's strategy rings true in terms of what we are hearing from customers with regards to their challenges and what they would like to achieve in the future. But this strategy is also complemented with a realistic view of what Box needs to do on its part to get there. 

Going forward, Levie said that Box is committed to driving a revenue growth rate between 12% and 16%, with an operating margin in the mid-20s by FY2024. He finished by saying: 

We are going after one of the largest markets in software, attacking a total addressable market with over $55 billion in spend on Content Management, collaboration, storage and data security annually and with the new addition of e-signature capabilities, our market is only getting larger. We have built the leading Content Cloud with well over 100,000 customers on our platform and we have an exciting roadmap to continue pioneering in this industry going forward.