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What changed in BOX INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BOX INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+435 added−392 removedSource: 10-K (2023-03-13) vs 10-K (2022-03-16)

Top changes in BOX INC's 2023 10-K

435 paragraphs added · 392 removed · 326 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

66 edited+21 added−12 removed50 unchanged
Biggest changeSome examples include using reusable bottles, plates, silverware, and sustainable packaging, while limiting single-use plastics; electric vehicle charging stations free to employees at Box headquarters; and certain subsidized transit benefits to U.S. employees returning to the office. • Renewable energy: We focus on continuing to reduce our carbon footprint and using data centers that have achieved, or have committed to achieve, 100% renewable energy targets. 14 • The Green Team: As part of our company values, employees are encouraged to "be an owner" inside and outside Box.
Biggest changeAdditional sustainability actions in our offices include: installation of water stations for refillable bottles, use of compostable plates/silverware, limiting single-use plastics; offering electric vehicle charging stations free to employees at Box headquarters; and holding events focused on sustainability that engage both remote and office-based employees throughout the year, including beach and community clean-ups, tree plantings, clothing swaps, tech donation drives (upcycling and recycling of hardware) and more. • Green Operations: We focus on continuing to reduce our carbon footprint and using data centers that have achieved, or have committed to achieve, 100% renewable energy targets.
Our recruiting team has specifically embedded unconscious bias topics into our company wide hiring guides, also known as the Box Recruiting Guides. Additionally, we have implemented programs such as culture interviewing and standardized assessments across the company to further limit unconscious bias in our hiring process.
Our recruiting team has specifically embedded unconscious bias topics into our company-wide hiring guides, also known as Box Recruiting Guides. Additionally, we have implemented programs such as culture interviewing and standardized assessments across the company to further limit unconscious bias in our hiring process.
The principal competitive factors in our market include: • enterprise-grade security and compliance; • scalability of product and infrastructure for large deployments; • ability to store content in multiple geographic locations; • speed, availability, and reliability of the service; • low-cost, quick deployment; • agnostic to device, operating system, and file type; • ease of user experience; • customer-centric product development; • current and forward-thinking product development; • automation and workflow management; • depth of integration into enterprise applications, including office productivity, desktop and mobile tools; • rich ecosystem of channel partners and applications; • open, extensible platform and APIs for custom application development; • intelligent content management including metadata capabilities; • superior customer service and commitment to customer success; • strength of professional services organization; and • self-service content migration tools.
The principal competitive factors in our market include: • enterprise-grade security and compliance; • scalability of product and infrastructure for large deployments; • ability to store content in multiple geographic locations; • speed, availability, and reliability of the service; • low-cost, quick deployment; • agnostic to device, operating system, and file type; • ease of user experience; • customer-centric product development; • current and forward-thinking product development; • automation and workflow management; • depth of integration into enterprise applications, including office productivity, desktop and mobile tools; 10 • rich ecosystem of channel partners and applications; • open, extensible platform and APIs for custom application development; • intelligent content management including metadata capabilities; • superior customer service and commitment to customer success; • strength of professional services organization; and • self-service content migration tools.
There is no one-size-fits-all career path at Box, so we seek to ensure that every Boxer has the tools and support they need to drive their career. We do this by giving all Boxers access to learning and development opportunities based around individual needs in order to build up skill sets and experience.
There is no one-size-fits-all career path at Box, so we seek to ensure that every Boxer has the tools and support they 12 need to drive their career. We do this by giving all Boxers access to learning and development opportunities based around individual needs in order to build up skill sets and experience.
There are more than 2,000 courses available at the disposal of any Boxer eager to learn, including over 600 courses aimed at personal development, management, and leadership plus hundreds of tech-based functional skill trainings. 13 Pay Equity We hold ourselves accountable, which is why we signed the California Equal Pay Pledge.
There are more than 2,000 courses available at the disposal of any Boxer eager to learn, including over 600 courses aimed at personal development, management, and leadership plus hundreds of tech-based functional skill trainings. Pay Equity We hold ourselves accountable, which is why we signed the California Equal Pay Pledge.
We further expand our market reach by leveraging our network of channel partners that comprises value-added resellers and systems integrators as well as our own consulting services. We offer individuals a free basic version of Box that allows them to experience first-hand our easy-to-use and secure solution.
We further expand our market reach by leveraging our network of channel partners that comprises value-added resellers and systems integrators as well as our own consulting services. We offer individuals a free version of Box that allows them to experience first-hand our easy-to-use and secure solution.
To give our customers the flexibility to choose between à la carte and bundled subscription options, we offer Box Shield, Box Governance, Box GxP, Box KeySafe, and Box Zones both as standalone add-ons and as part of our bundled Enterprise Plus plan. 7 Seamless Collaboration and Workflow • Internal and External Collaboration.
To give our customers the flexibility to choose between à la carte and bundled subscription options, we offer Box Shield, Box Governance, Box GxP, Box KeySafe, and Box Zones both as standalone add-ons and as part of our bundled Enterprise Plus plan. Seamless Collaboration and Workflow • Internal and External Collaboration.
We stand behind the idea that enabling our employees to work cross-functionally and within different teams provides a broader perspective of Box that will allow them to succeed in the future. • LearnFest: LearnFest, our learning lineup for skill development and personal and professional growth, happens three times each year.
We stand behind the idea that enabling our employees to work cross-functionally and within different teams provides a broader perspective of Box that will allow them to succeed in the future. • LearnFest: LearnFest, our learning lineup for skill development and personal and professional growth, happens two times each year.
Backlog We generally sign annual and multi-year subscription contracts for our cloud content management services. The frequency of our invoices to each customer is negotiated and varies among our subscription contracts. We continued to focus on annual payment frequencies for multi-year contracts in the twelve months ended January 31, 2022.
Backlog We generally sign annual and multi-year subscription contracts for our cloud content management services. The frequency of our invoices to each customer is negotiated and varies among our subscription contracts. We continued to focus on annual payment frequencies for multi-year contracts in the twelve months ended January 31, 2023.
Boxer Experience Surveys We survey employees two times a year to ensure that everyone’s voice gets heard and we better understand the key areas where we can improve employee experience. These key areas include our experience with our managers, our ability to get work done, and our sense of belonging at work.
Boxer Experience Surveys We survey employees once a year to ensure that everyone’s voice gets heard and we better understand the key areas where we can improve employee experience. These key areas include our experience with our managers, our ability to get work done, and our sense of belonging at work.
Our cloud-based software allows organizations to deploy our products easily, quickly, and inexpensively. IT administrators can quickly add users, set up permissions, create folders and policies, and begin using our products almost immediately without the need to procure and provision hardware or install and configure software.
Our cloud-based software allows organizations to deploy our products easily, quickly, and inexpensively. IT administrators can quickly add users and groups, set up permissions, migrate content, create folders and policies, and begin using our products almost immediately without the need to procure and provision hardware or install and configure software.
By enabling users to share, preview, and annotate files in Box, we provide a consistent collaboration layer so that all feedback is captured and preserved within Box.
By enabling users to share, preview, and annotate files in Box, we provide a unified collaboration layer so that all feedback is captured and preserved within Box.
Item 1. BUSINESS Overview Box is the Content Cloud: one secure, cloud-native platform for managing the entire content journey. Content – from blueprints to wireframes, videos to documents, proprietary formats to PDFs – is the source of an organization’s unique value.
Item 1. BUSINESS Overview Box is the Content Cloud: a single, secure, cloud-native platform for managing the entire content journey. Content – from blueprints to wireframes, videos to documents, proprietary formats to PDFs – is the source of an organization’s unique value.
For example, Box GxP Validation provides life sciences companies with an approach for maintaining always-on GxP compliance in the cloud and enables organizations subject to Food and Drug Administration regulations to manage both unregulated and regulated content within Box.
For example, Box for GxP Validation provides life sciences organizations with an approach for maintaining GxP compliance in the cloud and enables organizations subject to Food and Drug Administration regulations to manage both unregulated and regulated content within Box.
We also give organizations the ability to apply machine learning algorithms from leading providers such as IBM, Microsoft, and Google, as well as specialized industry-specific vendors directly to content within Box using Box Skills.
We also give organizations the ability to apply machine learning algorithms from leading providers such as Amazon Web Services, Google, IBM, and Microsoft, as well as specialized industry-specific vendors directly to content within Box using Box Skills.
Box Shield also uses advanced machine learning to scan files for sophisticated malware (including ransomware) and identify suspicious user behavior to help organizations detect and prevent threats before they become data breaches. • Comprehensive Data Governance Strategy.
Box Shield also uses advanced machine learning to scan files for sophisticated malware (including ransomware) and identify suspicious user behavior to help organizations detect and prevent threats before they become data breaches.
Our goal is to fully leverage and engage the individual talents and capabilities of our diverse teams, ultimately creating an inclusive environment where Boxers feel they belong. As of January 31, 2022 , we employed 2,172 people. None of our employees are represented by a labor union.
Our goal is to fully leverage and engage the individual talents and capabilities of our diverse teams, ultimately creating an inclusive environment where Boxers feel they belong. As of January 31, 2023, we employed 2,487 people. None of our employees are represented by a labor union.
Box Sign provides a seamless signer and sender experiences across web and mobile devices, with flexible template options, support for more than 20 languages, and additional security features like signer verification and password protection.
Box Sign provides a seamless signer and sender experience across web and mobile devices, with flexible template options, support for more than 20 languages, and additional security features like signer authentication and password protection.
Our native content authoring tool, Box Notes, enables users to seamlessly share and collaborate in real time with internal teams and external partners. Box Notes combines lightweight word processing functionality with easy-to-use tables, content organization, and commenting features to make it easy for users to work together on projects in real time. • Mobility.
Our native content authoring tool, Box Notes, enables users to seamlessly share and collaborate in real time with internal teams and external partners. Box Notes combines lightweight word processing functionality with easy-to-use tables, content organization, and commenting features to make it simple for users to work together on projects in real time. 7 • Whiteboarding and Visual Collaboration.
Our cloud content management platform enables our customers, including 67% of the Fortune 500, to securely manage the entire content lifecycle, from the moment a file is created or ingested to when it’s shared, edited, published, approved, signed, classified, and retained.
The Box Content Cloud enables our customers, including 69% of the Fortune 500, to securely manage the entire content lifecycle, from the moment a file is created or ingested to when it’s shared, edited, published, approved, signed, classified, and retained.
Accordingly, we believe that fluctuations in backlog are not always a reliable indicator of future revenue and we do not utilize backlog as a key management metric internally. Human Capital Resources Our company is built on people: We call them Boxers. They come from a range of backgrounds and experiences, and each of them has a unique story to tell.
Accordingly, we believe that fluctuations in backlog are not always a reliable indicator of future revenue. Human Capital Resources Our company is built on people: We call them Boxers. They come from a range of backgrounds and experiences, and each of them has a unique story to tell.
When it comes to recruiting, our hiring philosophy is centered around the belief that building diverse teams enables us to do our best work. Our people and communities team hosts various training sessions focused on unconscious bias and interviewing best practices that are available to all Boxers through our LearnFest training series every quarter.
When it comes to recruiting, our hiring philosophy is centered around the belief that building diverse teams enables us to do our best work. Our people and communities team hosts various training sessions focused on unconscious bias and interviewing best practices that all Boxers are encouraged to take.
The Box Content Cloud accelerates business processes, improves employee productivity, enables secure remote work, and protects an organization’s most valuable data. Our platform enables a broad set of high-value business use cases across enterprises, hundreds of file formats and media types, and user experiences.
The Box Content Cloud accelerates business processes, improves employee productivity, enables secure hybrid work, and protects an organization’s most valuable data. Our platform enables a broad set of high-value business use cases across enterprises and user experiences.
Users can securely access, share, and collaborate on all types of information, regardless of format or file type, including large media files, from virtually any device or operating system. • Automation and Workflow Management. Box Relay, our no-code process automation tool for content-centric workflows, accelerates productivity by enabling anyone to build simple process automations without code.
Users can securely access, share, and collaborate on all types of information, regardless of format or file type, including large media files, from virtually any device or operating system. • Automation and Workflow Management. Box Relay, our no-code process automation tool for content-centric workflows, enables users to build process automations in Box in a matter of minutes without writing code.
With both self-serve and managed migration options available through Box Consulting, organizations can accelerate their digital transformation by quickly and easily migrating data into the cloud at petabyte scale. • Focus on Industry-Specific Capabilities. In order to facilitate easier and faster time to market, we offer industry-specific capabilities for those industries that have more complex content and collaboration challenges.
With both self-serve and managed migration options available through Box Consulting, organizations can accelerate their digital transformation by quickly and easily migrating data into the cloud at petabyte scale. 6 • Focus on Industry-Specific Capabilities. Box offers capabilities that meet industry-specific needs for those industries that have more complex content and collaboration challenges.
Our platform integrates with leading enterprise business applications, and is compatible with multiple application environments, operating systems and devices, ensuring that workers can securely access their critical business content whenever and wherever they need it.
Our platform integrates with more than 1,500 leading enterprise business applications, supports hundreds of file formats and media types, and is compatible with multiple application environments, operating systems and devices, ensuring that workers can securely access their critical business content whenever and wherever they need it.
Box was recognized as #5 in Glassdoor Best Places to Work in 2022 and as one of Great Place to Work’s Best Workplaces for Parents in 2021. 12 Diversity and Inclusion One of our core values is creating a space where all Boxers can “Bring your (_____) self to work.” We take great pride in celebrating our differences, and we hire the best talent from all backgrounds.
Diversity and Inclusion One of our core values is creating a space where all Boxers can “Bring your (_____) self to work.” We take great pride in celebrating our differences, and we hire the best talent from all backgrounds.
Accordingly, due to our subscription model, we recognize revenue for our subscription and premier services ratably over the term of the contract. We employ a direct sales team to offer a higher touch experience. We also make it easy for users and organizations to subscribe to paid versions of our service on our self-service web portal.
We employ a direct sales team to offer a higher touch experience. We also make it easy for users and organizations to subscribe to paid versions of our service on our self-service web portal.
Available Information We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended.
Other trademarks, service marks, or trade names appearing in this Annual Report on Form 10-K are the property of their respective owners. 14 Available Information We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended.
In response to the COVID-19 crisis, we convened a cross-functional team made up of leaders from across our organization who continue to meet frequently to ensure Boxers' safety and that business crisis plans are enacted, communicated, and running smoothly. As part of these plans, Box is currently offering flexible remote work arrangements to employees.
We offer a comprehensive health and wellness benefits package to all employees. In response to the COVID-19 crisis, we convened a cross-functional team made up of leaders from across our organization who continue to meet frequently to ensure Boxers’ safety and that business crisis plans are enacted, communicated, and running smoothly.
We may face future competition in our markets from other large, established companies, as well as from smaller specialized companies. In addition, we expect continued consolidation in our industry which could adversely alter the competitive dynamics of our markets including both pricing and our ability to compete successfully for customers.
In addition, we expect continued consolidation in our industry which could adversely alter the competitive dynamics of our markets including both pricing and our ability to compete successfully for customers.
We successfully serve customers in highly regulated industries with specific requirements relating to compliance with certain security and regulatory standards, such as GxP and FedRAMP, and those required by HIPAA, FINRA, and the HITECH Act. • Administrative Controls. We give IT administrators powerful tools to define access rights by user, content type, device, and business need.
We successfully serve customers in highly regulated industries with specific requirements relating to compliance with certain security and regulatory standards, such as GxP, FedRAMP, and StateRAMP, and those required by HIPAA, FINRA, and the HITECH Act. • Enterprise Administrative Controls.
Cloud technology, coupled with a flexible, open culture and best-of-breed solutions, allows us to work sustainably while supporting customers when and how they need us most. • Keeping our workplace green: We go to great lengths to reduce our impact and promote sustainability in our offices, especially as our offices begin to re-open.
Cloud technology, coupled with a flexible, open culture and best-of-breed solutions, allows us to work sustainably while supporting customers when and how they need us most. • Sustainable offices: We prioritize reducing our impact and promoting sustainability in our offices.
Our powerful migration technology allows for in-depth analysis of existing data on 3rd party source systems, native simulation of the migration for testing purposes, and execution of a comprehensive migration that moves files, metadata, and version history. Additionally, organizations can seamlessly transform file permissions and ownership to ensure that users can continue work uninterrupted.
Our powerful migration technology allows for in-depth analysis of existing data on third party source systems, native simulation of the migration for testing purposes, and execution of a comprehensive migration that moves files, metadata, and version history.
To the extent future invoicing is determined to be certain, we consider such future subscription invoices to be non-cancellable backlog, which is disclosed as part of remaining performance obligations.
To the extent future invoicing is determined to be certain, we consider such future subscription invoices to be non-cancellable backlog, which is disclosed as part of remaining performance obligations. Future invoicing is determined to be certain when we have an executed non-cancellable contract or a significant penalty that is due upon cancellation.
With our easy-to-use APIs, businesses can create a single source of truth for their content, allowing IT teams to deploy key business applications while easily managing how content is accessed, collaborated on, and secured.
With our easy-to-use APIs, businesses can create a single source of truth for their content, allowing IT teams to deploy key business applications while easily managing how content is accessed, collaborated on, and secured. Coupled with our robust developer tools, the Box Platform enables organizations to build applications faster, without having to invest in building their own content management infrastructure.
We had $541.5 million and $438.1 million of non-cancellable backlog as of January 31, 2022 and 2021, respectively. The increase of non-cancellable backlog as of January 31, 2022 was primarily driven by expansion within existing customers as they broadened their deployment of our product offerings, longer customer contract durations, the addition of new customers, and the timing of customer-driven renewals.
We had $681.3 million and $541.5 million of non-cancellable backlog as of January 31, 2023 and 11 2022, respectively. The increase of non-cancellable backlog as of January 31, 2023 was primarily driven by expansion within existing customers as they broadened their deployment of our product offerings through the conversion to multi-product Suites, resulting in extended customer contract durations.
Some competitors may be able to devote greater resources to the development, promotion and sale of their products than we can to ours, which could allow them to respond more quickly than we can to new technologies and changes in customer needs. 11 Intellectual Property We rely on a combination of trade secrets, patents, copyrights and trademarks, as well as contractual protections, to establish and protect our intellectual property rights.
Some competitors may be able to devote greater resources to the development, promotion and sale of their products than we can to ours, which could allow them to respond more quickly than we can to new technologies and changes in customer needs.
This helps organizations address region-specific compliance mandates associated with data residency and privacy. • Content Migration. Box Shuttle, our content migration offering, allows organizations of all sizes to easily and cost-effectively migrate their data into Box, regardless of file type or source system.
Box Shuttle, our content migration offering, allows organizations of all sizes to easily migrate their data into Box at low cost, regardless of file type or source system.
We also offer an open API that allows organizations to power e-signatures in their custom integrations and applications, as well as integrations with tools like Salesforce to embed e-signature workflows in common business processes. Box Sign is available globally and Box Business and Enterprise plans include unlimited web-based signatures available at no additional cost. • Real-Time Collaboration and Content Authoring.
We also offer an open API that allows organizations to power e-signatures in their custom integrations and applications, as well as integrations with tools like Appian, Certa, Crooze CLM, Jotform, Salesforce, UiPath, and VersaFile docuflow, to embed e-signature workflows in common business processes. • Real-Time Collaboration and Content Authoring.
Three core capabilities differentiate Box from potential competitors: frictionless security and compliance powered by our global cloud architecture, seamless external and internal collaboration and workflow automation, and expansive integrations and APIs that extend the value of our Content Cloud to every organization. Box features and functionality include the following: Frictionless Security and Compliance • Global Cloud Architecture.
Three core capabilities differentiate Box from potential competitors: frictionless security and compliance, seamless collaboration and workflow, and integrations and APIs that connect your content across all applications. Box features and functionality include the following: Frictionless Security and Compliance • Global Cloud Architecture.
We require our employees, contractors, consultants and other third parties to enter into confidentiality and proprietary rights agreements and control access to software, documentation and other proprietary information.
We intend to pursue additional patent protection to the extent that we believe it would be beneficial and cost effective. We require our employees, contractors, consultants and other third parties to enter into confidentiality and proprietary rights agreements and control access to software, documentation and other proprietary information.
With Box KeySafe, organizations can implement higher levels of data security and protection by keeping control of the encryption keys that protect their content. This advanced encryption feature is valuable to many organizations, including those in highly regulated industries such as financial services, health care, government and legal. • Intelligent Threat Detection and Smart Access with Box Shield.
This advanced encryption feature is valuable to many organizations, including those in highly regulated industries such as financial services, health care, government and legal. • Intelligent Threat Detection and Smart Access with Box Shield. Box Shield provides granular, near real-time threat detection and protection capabilities.
These relationships include software and technology partners, as well as consulting and implementation services providers that enable Box to address a broader set of use cases for our customers. Sales and marketing expenses were $298.6 million, $275.7 million and $317.6 million for the years ended January 31, 2022, 2021 and 2020, respectively.
These relationships include software and technology partners, as well as consulting and implementation services providers that enable Box to address a broader set of use cases for our customers.
Box Shield uses machine learning to provide granular, real-time threat detection and prevention capabilities. Box Shield reduces the risk of accidental data leakage through native security classifications and granular access controls by, for example, automatically applying classification to files that contain personal identifiable information.
Box Shield reduces the risk of accidental data leakage through native security classifications and granular access controls by automatically applying classification to files that contain content like predefined attributes or personal identifiable information. • Comprehensive Data Governance Strategy.
Employee Health and Safety The health and safety of our employees is one of our top priorities. We strive to create an environment where Boxers are physically and mentally safe and healthy. We offer a comprehensive health and wellness benefits package to all employees.
For the year ended January 31, 2023, our employees had a record 96% participation rate in the survey. Employee Health and Safety The health and safety of our employees is one of our top priorities. We strive to create an environment where Boxers are physically and mentally safe and healthy.
Our geographic revenue and segment information is set forth in Notes 2 and 15, respectively, of our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 9 Sales and Marketing We offer our solution to customers as a subscription-based service, with subscription fees based on customer requirements, including the number of users and functionality deployed.
No customer represented 10% or more of our revenue in the year ended January 31, 2023. Our geographic revenue and segment information is set forth in Notes 2 and 15, respectively, of our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
To date, tens of thousands of third-party developers have leveraged our platform as the secure content layer for their applications. We are committed to powering how the world does more good together. Box.org mobilizes our technology, talent, partners and institutional assets to enable nonprofits to innovate and fulfill their missions.
To date, tens of thousands of third-party developers have leveraged our platform as the secure content layer for their applications. We are committed to powering how the world does more good together. Founded in 2014, Box.org serves over 11,000 nonprofits globally with donated or discounted Box product, employee volunteer hours and grants from the Box Impact Fund .
In practice, we develop and maintain a set of sophisticated software services (e.g., search, share, secure, convert/view, logging) around content. These services, which comprise our platform, are used to develop our own applications (e.g., sync, desktop, web, native mobile) and also support the development of third-party applications.
These services, which comprise our platform, are used to develop our own applications (e.g., sync, desktop, web, native mobile) and also support the development of third-party applications. Our product development organization is responsible for the specification, design, development and testing of our platform and applications.
Box serves as a secure, centralized system of record for retaining content for operational use while ensuring adherence to applicable laws and regulations, using data retention and Data Loss Prevention (DLP) capabilities.
Box serves as a secure, centralized system of record for retaining content for operational use while ensuring adherence to applicable laws and regulations. Box Governance allows our users to manage the lifecycle of content and has robust integrations with leading eDiscovery and data privacy vendors.
Our Box Governance solution allows customers to manage retention policies, legal holds, and disposition of data. 6 • Box Zones for In-Region Data Storage. Box Zones enables businesses around the globe to adopt Box as their modern content management platform, while letting them store and manage their data locally in certain regions.
Box Zones enables businesses around the globe to adopt Box as their modern content management platform, while letting them store and manage their content locally in certain regions. This helps organizations address region-specific compliance mandates associated with data residency and privacy. • Content Migration.
The majority of our customers subscribe to our service through one-year contracts, although we also offer our services for terms ranging from one month to three years or more. We typically invoice our customers at the beginning of the contract term, in multi-year, annual, quarterly or monthly installments. We recognize revenue as we satisfy our performance obligation.
We typically invoice our customers at the beginning of the contract term, in multi-year, annual, quarterly or monthly installments. We recognize revenue as we satisfy our performance obligations. Accordingly, due to our subscription model, we recognize revenue for our subscription and premier services ratably over the term of the contract.
Our product development organization is responsible for the specification, design, development and testing of our platform and applications. We focus our efforts on providing a platform that accelerates business processes, improves employee productivity, enables secure remote work, and protects an organization’s most valuable data.
We focus our efforts on providing a platform that accelerates business processes, improves employee productivity, enables secure remote work, and protects an organization’s most valuable data. We strive to continually improve our applications so that they help users and teams become more productive in their day-to-day work.
Our primary competitors in the cloud content management market include, but are not limited to, Microsoft and OpenText (Documentum). In 10 the enterprise file sync and share market, our primary competitors include, but are not limited to, Microsoft, Google and, to a lesser extent, Dropbox.
In the enterprise file sync and share market, our primary competitors include, but are not limited to, Microsoft (OneDrive), Google (Drive) and, to a lesser extent, Dropbox. We may face future competition in our markets from other large, established companies, as well as from smaller specialized companies.
This eliminates the need for customers to create and manage separate document repositories for performing functions such as image and character recognition, video and audio analysis and transcriptions, and document analysis on business content, thus improving content searchability and business process automation. Box Platform is available as a standalone add-on and as part of our bundled Enterprise Plus plan.
This eliminates the need for customers to create and manage separate document repositories for performing functions such as image and character recognition, video and audio analysis and transcriptions, and document analysis on business content. 8 Customers As of January 31, 2023, we had over 100,000 paying organizations, and our solution was offered in 25 languages.
We have not experienced any work stoppages, and we consider our relations with our employees to be very good.
We have not experienced any work stoppages, and we consider our relations with our employees to be very good. Box was recognized as number two in Glassdoor Best Places to Work in 2023 and as one of Great Place to Work’s Best Workplaces for Parents in 2022.
The information on, or that can be accessed through, our website is not part of this Annual Report on Form 10-K. We were incorporated in 2005 as Box.Net, Inc., a Washington corporation, and later reincorporated in 2008 under the same name as a Delaware corporation. In November 2011, we changed our name to Box, Inc.
We were incorporated in 2005 as Box.Net, Inc., a Washington corporation, and later reincorporated in 2008 under the same name as a Delaware corporation. In November 2011, we changed our name to Box, Inc. The Box design logo, “Box” and our other registered and common law trade names, trademarks and service marks are the property of Box, Inc.
We focus our sales strategy on ensuring that new and existing customers understand and experience the transformative impact of Box. We are building a rich technology partner ecosystem around Box.
We focus our sales strategy on ensuring that new and existing customers understand and experience the transformative impact of Box. We have a rich technology partner ecosystem, offering more than 1,500 pre-built integrations with partners like Adobe, Apple, Cisco, Cloudfare, Google, IBM, Microsoft, Okta, Palo Alto Networks, Salesforce, ServiceNow, Slack, and Zoom.
Sustainability Left unchecked, climate change disrupts the global economy, our company, and our stakeholders — so we take to heart our responsibility to protect the planet. We move organizations from legacy and paper-based processes to the cloud so customers can work securely and efficiently from anywhere. This reduces both office waste and commuting.
We help organizations move from legacy and paper-based processes to the cloud so customers can work securely and efficiently from anywhere. This allows our customers to reduce their office waste and mitigate the environmental impact of having their employees commute to work.
We strive to continually improve our applications so that they help users and teams become more productive in their day-to-day work. Research and development expenses were $218.5 million, $201.3 million and $199.8 million for the years ended January 31, 2022, 2021 and 2020, respectively. Competition The cloud content management market is large, highly competitive and highly fragmented.
Research and development expenses were $243.5 million, $218.5 million and $201.3 million for the years ended January 31, 2023, 2022 and 2021, respectively. Competition The cloud content management market is large, highly competitive and highly fragmented. It is subject to rapidly evolving technology, shifting customer needs and frequent introductions of new products and services.
Founded in 2014, Box.org now serves over 10,000 nonprofits with donated or discounted Box access, employee volunteer hours and cash grants from the Box.org Fund. 5 The Box Solution We offer web, mobile and desktop applications for cloud content management on a platform for developing custom applications, as well as industry-specific capabilities.
Box.org focuses on areas where Box is uniquely positioned to make an impact, including child welfare, crisis response and the environment. 5 The Box Solution We offer web, mobile and desktop applications for cloud content management on a platform for developing custom applications, as well as industry-specific capabilities.
Research and Development Our ability to compete depends in large part on our continuous commitment to product development and our ability to rapidly introduce new applications, technologies, features and functionality. In simple conceptual form, we provide a single, secure, easy-to-use platform built for the entire content lifecycle.
Sales and marketing expenses were $331.4 million, $298.6 million and $275.7 million for the years ended January 31, 2023, 2022 and 2021, respectively. 9 Research and Development Our ability to compete depends in large part on our continuous commitment to product development and our ability to rapidly introduce new applications, technologies, features and functionality.
Administrators can set specific content policies such as expiration dates to auto-delete files or deactivate links to time-sensitive materials. They can also manage mobile and sync security settings, including specification of which devices have access to Box and whether certain features are enabled. • Tracking and Reporting for Visibility.
We give IT administrators powerful enterprise-grade tools and automations to securely define access rights and permissions by users and groups, content type, devices, and business needs. Administrators can set specific content policies and restrictions, such as access by external groups, expiration dates to auto-delete files or deactivate links to time-sensitive materials. • Reporting and Insights for Visibility.
To support the well-being of Boxers during these challenging times, we launched “Fresh Air Fridays” and "Mental Health Mondays," global company-wide days of paid time off, offered subscriptions to an app for meditation and mental health, partnered with a third-party family support system for families at Box, and provided additional paid time off for our employees, among other things.
To support the well-being of Boxers, we launched “Fresh Air Days” to support them taking a few paid days off a year in addition to our generous paid time off programs and holidays, we offered an app for meditation, a number of free coaching and therapy sessions, partnered with a third-party to offer family support, and provided additional benefits. 13 Sustainability Left unchecked, climate change disrupts the global economy, our company, and our stakeholders — so we take to heart our responsibility to protect the planet.
For example, documents can be routed to specific folders or flagged for user action based on the content of the document. In addition, we provide pre-built workflow templates and reporting capabilities to make it easy for users to track and manage their own workflows.
In addition, we provide a library of more than 20 pre-built workflow templates and reporting capabilities to make it easy for users to track and manage their own workflows. Plus, Box Relay integrates with Box Shield to automatically secure content and with Box Sign to automate e-signature workflows. Integrations and Developer Platform • Pre-built Integrations with Best-of-Breed Applications.
All actions taken by paying business users and their external collaborators in Box are tracked and auditable by our customers’ authorized administrators through Box’s native administrative applications. The tracking and audit data are also accessible to administrators with the appropriate access rights via our APIs. • Simple and Rapid Deployment.
All internal and external user activity and content interactions in Box can be tracked and is auditable by our customers’ authorized administrators through the Box Admin Console and via APIs. Administrators can gain insights with easy to use dashboards and visualizations for monitoring and reporting. • Simple and Rapid Deployment.
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We offer more than 1,500 pre-built integrations with partners including Microsoft, IBM, Salesforce.com, Apple, Google, Slack, Adobe, Palo Alto Networks, Okta, Zoom and others, giving our users easy access to their content in Box without leaving these applications.
Added
This gives our users seamless and secure access to their content across all their workflows and applications.
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Our data security policies allow customers to apply quarantine or notification-only policies to sensitive confidential files, such as those containing predefined attributes, such as credit card or social security system numbers, and we provide robust integrations for leading eDiscovery and DLP systems.
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Box also provides security controls like multi-factor authentication that ensure user identity when allowing access to content, as well as endpoint security tools to restrict access to only properly vetted devices. With Box KeySafe, organizations can implement higher levels of data security and protection by keeping control of the encryption keys that protect their content.
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This allows customers to accelerate the flow of information through their organizations and increase the efficiency of their business processes. Box Relay is available within our Business and Enterprise plans. 8 Integrations and Developer Platform • Easy Integration with Other Cloud-Based Applications. Our open platform allows for easy integration with other cloud-based and enterprise applications.
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Our Box Governance solution allows customers to create and manage retention policies, including both modifiable and non-modifiable policies, depending on an enterprises’ specific business needs. Box Governance also enables legal holds to protect content from being deleted and the automated disposition of data, helping customers to reduce legal risk. • Box Zones for In-Region Data Storage.
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We offer more than 1,500 pre-built integrations with partners including Microsoft, Google, Adobe, Slack, Palo Alto Networks, Salesforce.com, Zoom, Okta, IBM, Workday, and more, as well as an open API for organizations to integrate Box with other packaged and home-grown applications, including solution applications our customers build for their customers. • Box Platform.
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Box Canvas (public beta), our native visual collaboration and white boarding tool, brings working together to life with new ways to connect, innovate, and share securely. Box Canvas offers a flexible, virtual environment where users can ideate, brainstorm and collaborate visually directly in Box, right where their content lives. • Content Insights.
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Coupled with our robust developer tools, the Box Platform helps organizations accelerate their transformation into digital businesses by building applications faster, without having to invest in building their own content management infrastructure.
Added
Content insights shows how each piece of content is being used, who is using it, and when it is being accessed. With easy-to-understand visualizations and the ability to filter and drill down to see performance over time, Content Insights provides users with a clear picture of content performance and gives them the information needed to make data-driven decisions. • Mobility.
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Customers As of January 31, 2022, we had over 100,000 paying organizations, and our solution was offered in 25 languages.
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For example, Box Relay provides for more than 75 triggers and outcomes that enable a wide variety of actions such as routing documents to specific folders, assigning tasks to individuals or teams, and adding metadata.
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No customer represented 10% or more of our revenue in the year ended January 31, 2022.
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Box provides a unified and secure content layer across the enterprise technology stack. We offer more than 1,500 pre-built integrations with seamless interoperability that boosts user productivity and maintains enterprise set security, privacy and compliance policies.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurthermore, any failure in our delivery of high-quality customer support services may adversely affect our relationships with our customers and our financial results. • Actual or perceived security vulnerabilities in our services or any breaches of our security controls and unauthorized access to our or a customer’s data could harm our business and operating results. • Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our services and harm our business. • If we are not able to satisfy data protection, security, privacy, and other government- and industry-specific requirements, our growth could be harmed. • Our platform must integrate with a variety of operating systems and software applications that are developed by others, and if we are unable to ensure that our solutions interoperate with such systems and applications, our service may become less competitive, and our operating results may be harmed. 16 • If we fail to effectively manage our technical operations infrastructure, our customers may experience service outages and delays in the deployment of our services, which may adversely affect our business. • Interruptions or delays in service from our third-party data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services and harm our business. • Our services are becoming increasingly mission-critical for our customers and if these services fail to perform properly or if we are unable to scale our services to meet the needs of our customers, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims. • Our growth depends in part on the success of our strategic relationships with third parties. • We depend on our key employees and other highly skilled personnel to grow and operate our business, and if we are unable to hire, retain and motivate our personnel, we may not be able to grow effectively. • Failure to adequately expand and optimize our direct sales force and successfully maintain our online sales experience will impede our growth. • Any acquisitions and investments we make could disrupt our business and harm our financial condition and operating results. • We may be sued by third parties for alleged infringement of their proprietary rights. • Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and brand. • Servicing our future debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to settle conversions of our convertible senior notes in cash, repay the convertible senior notes at maturity, or repurchase the convertible senior notes as required following a fundamental change. • Our business could be negatively affected as a result of actions of activist shareholders. • Our Series A Convertible Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to the rights of, our Class A common stockholders, which could adversely affect our liquidity and financial condition.
Biggest changeFurthermore, any failure in our delivery of high-quality customer support services may adversely affect our relationships with our customers and our financial results. • Our international operations expose us to significant risks, including the impact of fluctuations in currency exchange rates. • Actual or perceived security vulnerabilities in our services or any breaches of our security controls and unauthorized access to our or a customer’s data could harm our business and operating results. • Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our services and harm our business, and we may not be able to satisfy data protection, security, privacy, and other government- and industry-specific requirements, which may harm our growth. • Our platform must integrate with a variety of operating systems and software applications that are developed by others, and if we are unable to ensure that our solutions interoperate with such systems and applications, our service may become less competitive, and our operating results may be harmed. • If we fail to effectively manage our technical operations infrastructure or suffer from interruptions or delays in service from our third-party providers, the delivery of our services may be harmed, which may adversely affect our business. • Our services are becoming increasingly mission-critical for our customers and if these services fail to perform properly or if we are unable to scale our services to meet the needs of our customers, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims. 16 • Our growth depends in part on the success of our strategic relationships with third parties. • We depend on our key employees and other highly skilled personnel to grow and operate our business, and if we are unable to hire, retain and motivate our personnel, including expanding and optimizing our direct sales force, we may not be able to grow effectively. • We may be sued by third parties for alleged infringement of their proprietary rights. • Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and brand. • Our Series A Convertible Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to the rights of, our Class A common stockholders, which could adversely affect our liquidity and financial condition.
The risks we face in connection with acquisitions include: • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • coordination of research and development and sales and marketing functions; • retention of key employees from the acquired company; • cultural challenges associated with integrating employees from the acquired company into our organization; • integration of the acquired company’s technology and products into our business, particularly if the acquired company’s software and services are not easily adapted to work with our products; • integration of the acquired company’s accounting, management information, human resources and other administrative systems, as well as the acquired operations, and any unanticipated expenses related to such integration; • the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; • liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; • completing the transaction and achieving the anticipated benefits of the acquisition within the expected timeframe or at all; 32 • unanticipated write-offs, expenses, charges or risks associated with the transaction; • litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties, which may differ from or be more significant than the risks our business faces; and • acquisitions could result in dilutive issuances of equity securities or the incurrence of debt.
The risks we face in connection with acquisitions include: 32 • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • coordination of research and development and sales and marketing functions; • retention of key employees from the acquired company; • cultural challenges associated with integrating employees from the acquired company into our organization; • integration of the acquired company’s technology and products into our business, particularly if the acquired company’s software and services are not easily adapted to work with our products; • integration of the acquired company’s accounting, management information, human resources and other administrative systems, as well as the acquired operations, and any unanticipated expenses related to such integration; • the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; • liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; • completing the transaction and achieving the anticipated benefits of the acquisition within the expected timeframe or at all; • unanticipated write-offs, expenses, charges or risks associated with the transaction; • litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties, which may differ from or be more significant than the risks our business faces; and • acquisitions could result in dilutive issuances of equity securities or the incurrence of debt.
Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited.
Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended (the "Code"), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited.
Additionally, perceived uncertainties as to our future direction as a result of shareholder activism or changes to the composition of our board of directors may lead to the perception of a change in the direction of our business or other instability, which may be exploited by our competitors and/or other activist shareholders and cause concern to our current or potential customers, employees, investors, strategic partners and other constituencies, which could result in lost sales and the loss of business opportunities and make it more difficult 40 to attract and retain qualified personnel and business partners.
Additionally, perceived uncertainties as to our future direction as a result of shareholder activism or changes to the composition of our board of directors may lead to the perception of a change in the direction of our business or other instability, which may be exploited by our competitors and/or other activist shareholders and cause concern to our current or potential customers, employees, investors, strategic partners and other constituencies, which could result in lost sales and the loss of business opportunities and make it more difficult to attract and retain qualified personnel and business partners.
While our customer contracts contain limitations on our liability in connection with these obligations and indemnities, if an actual or perceived security breach or incident occurs, the market perception of the effectiveness of our security measures could be harmed, we could be subject to indemnity or damage claims in certain customer contracts, and we could lose future sales and customers, any of which could harm our business and operating results.
While our customer contracts generally contain limitations on our liability in connection with these obligations and indemnities, if an actual or perceived security breach or incident occurs, the market perception of the effectiveness of our security measures could be harmed, we could be subject to indemnity or damage claims in certain customer contracts, and we could lose future sales and customers, any of which could harm our business and operating results.
If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity, which could adversely affect our reputation and our business. 27 Interruptions or delays in service from our third-party data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services and harm our business.
If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity, which could adversely affect our reputation and our business. Interruptions or delays in service from our third-party data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services and harm our business.
Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results, and cause a decline in the market price of our Class A common stock. 35 Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results, and cause a decline in the market price of our Class A common stock. Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
In addition, liabilities associated with taxes are often subject to an extended or indefinite statute of limitations period. Therefore, we may be subject to additional tax liability (including penalties and interest) for a particular year for extended periods of time. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
In addition, liabilities associated with taxes are often subject to an extended or indefinite statute of limitations period. Therefore, we may 36 be subject to additional tax liability (including penalties and interest) for a particular year for extended periods of time. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
If there is a reduction in demand for cloud-based services, it could result in decreased revenue, harm our growth rates, and adversely affect our business and operating results. 18 Because we recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results.
If there is a reduction in demand for cloud-based services, it could result in decreased revenue, harm our growth rates, and adversely affect our business and operating results. Because we recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results.
As we increase our customer base, our brand becomes more widely known and recognized, and our service is used in more heavily regulated industries where there may be a greater concentration of sensitive and protected data, such as healthcare, government, life sciences, and financial services, we may become more of a target for these malicious third parties.
As we increase our customer base, our brand becomes more widely known and recognized, and our service is used in more heavily regulated industries where there may be a greater concentration of sensitive and protected data, such as healthcare, government, life sciences, and financial services, we have become more of a target for these malicious third parties.
Privacy Shield in light of the CJEU’s decision. These developments or other developments relating to cross-border data transfer may result in the EC and European data protection regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from the European Economic Area (EEA), Switzerland, or the United Kingdom (UK) to the U.S.
Privacy Shield in light of the CJEU’s decision. These developments or other developments relating to cross-border data transfer may result in the EC, European Data Protection board and/or other regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from the European Economic Area (EEA), Switzerland, or the United Kingdom (UK) to the U.S.
We and our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities.
We and our third-party intermediaries may have direct or indirect interactions with officials and employees of 37 government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities.
In addition, pricing pressures and increased competition could result in reduced sales, lower margins, losses or the failure of our services to achieve or maintain widespread market acceptance, any of which could harm our business. 17 Many of our competitors are able to devote greater resources to the development, promotion and sale of their products or services.
In addition, pricing pressures and increased competition could result in reduced sales, lower margins, losses or the failure of our services to achieve or maintain widespread market acceptance, any of which could harm our business. Many of our competitors are able to devote greater resources to the development, promotion and sale of their products or services.
Additionally, the consent of the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock is required in order for us to take certain actions, including issuances of securities that are senior to, or equal in priority with, the Series A Convertible Preferred Stock, and payments of special dividends in excess of an agreed upon amount.
Additionally, the consent of the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock is required in order for us to take certain actions, including issuances of securities that are senior to, 42 or equal in priority with, the Series A Convertible Preferred Stock, and payments of special dividends in excess of an agreed upon amount.
In the case of clause (ii) above, we will also be required to pay the holders of our Series A Preferred Stock a “make-whole” premium consisting of dividends that would have otherwise accrued from the effective date of such change of control through the fifth anniversary of the original issuance date.
In the case of clause (ii) above, we will also be required to pay the holders of our Series A Convertible Preferred Stock a “make-whole” premium consisting of dividends that would have otherwise accrued from the effective date of such change of control through the fifth anniversary of the original issuance date.
The United States and other key international economies have experienced cyclical downturns from time to time that have resulted in a significant weakening of the economy, more limited availability of credit, a reduction in business confidence and activity, and other difficulties that may 19 affect the industries to which we sell our services.
The United States and other key international economies have experienced cyclical downturns from time to time that have resulted in a significant weakening of the economy, more limited availability of credit, a reduction in business confidence and activity, and other difficulties that may affect the industries to which we sell our services.
Moreover, our ability to attract and hire personnel may be materially adversely affected by changes to immigration laws or the availability of work visas. We may need to invest significant amounts of cash and equity to attract and retain new employees, and we may never realize returns on these investments.
We may need to invest significant amounts of cash and equity to attract new employees and retain existing employees, and we may never realize returns on these investments. Moreover, our ability to attract and hire personnel may be materially adversely affected by changes to immigration laws or the availability of work visas.
We may not be able to obtain any further patents, and our pending applications may not lead to the issuance of patents. We may also have to expend significant resources to obtain additional patents as we expand our international operations. 33 In order to protect our intellectual property rights, we may spend significant resources to monitor and protect these rights.
We may not be able to obtain any further patents, and our pending applications may not lead to the issuance of patents. We may also have to expend significant resources to obtain additional patents as we expand our international operations. In order to protect our intellectual property rights, we may spend significant resources to monitor and protect these rights.
Our ability to obtain additional financing, if and when required, will depend on investor and lender demand, our operating performance, the condition of the capital markets and other factors. We cannot guarantee that additional financing will be available to us on favorable terms when required, or at all.
Our ability to refinance or obtain additional financing, if and when required, will depend on investor and lender demand, our operating performance, the condition of the capital markets and other factors. We cannot guarantee that additional financing will be available to us on favorable terms when required, or at all.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting 35 obligations and may result in a restatement of our financial statements for prior periods.
Cyberattacks and other malicious internet-based activity, including ransomware, malware and viruses, continue to increase in frequency and magnitude and we 23 face security threats from malicious third parties that could obtain unauthorized access to, or disrupt, our systems, infrastructure and networks.
Cyberattacks and other malicious internet-based activity, including ransomware, malware and viruses, continue to increase in frequency and magnitude and we face security threats from malicious third parties that could obtain unauthorized access to, or disrupt, our systems, infrastructure and networks.
In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar 36 rules may apply under state tax laws.
In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.
Additionally, our ability to properly manage our technical operations infrastructure depends on the reliability of the global supply chain for hardware, network, and platform infrastructure equipment. Significant and unforeseen disruptions to the supply chain may impede our ability to meet our infrastructure capacity requirements.
Additionally, our ability to properly manage our technical operations infrastructure depends on the reliability of the 27 global supply chain for hardware, network, and platform infrastructure equipment. Significant and unforeseen disruptions to the supply chain may impede our ability to meet our infrastructure capacity requirements.
Our board of directors and management team are committed to acting in the best interests of all of our shareholders. Responding to actions by activist stockholders could be costly and time-consuming, disrupt our operations and divert the attention of management and our employees.
Our board of directors and management team are committed to acting in the best interests of all of our shareholders. Responding to actions by activist shareholders could be costly and time-consuming, disrupt our operations and divert the attention of management and our employees.
If any of the analysts who cover us adversely change their recommendations regarding our Class A common stock or provide more favorable recommendations about our competitors, the market price of our Class A common stock would likely decline.
If any of the analysts who cover us adversely change their recommendations regarding our Class A common stock or provide 43 more favorable recommendations about our competitors, the market price of our Class A common stock would likely decline.
If our or our partners’ business continuity and disaster recovery arrangements prove to be inadequate, our services could be interrupted. Our partners, suppliers, and customers are also subject to the risk of catastrophic events.
If our or our partners’ business continuity and disaster recovery arrangements prove to be inadequate, our services could be interrupted. Our 30 partners, suppliers, and customers are also subject to the risk of catastrophic events.
In addition, upon prior written notice of certain change of control events, the shares of the 41 Series A Preferred Stock will automatically be redeemed by us for a repurchase price equal to the greater of (i) the value of the shares of Series A Preferred Stock as converted into Class A common stock at the then-current conversion price and (ii) an amount in cash equal to 100% of the then-current liquidation preference thereof plus all accrued but unpaid dividends.
In addition, upon prior written notice of certain change of control events, the shares of the Series A Convertible Preferred Stock will automatically be redeemed by us for a repurchase price equal to the greater of (i) the value of the shares of Series A Convertible Preferred Stock as converted into Class A common stock at the then-current conversion price and (ii) an amount in cash equal to 100% of the then-current liquidation preference thereof plus all accrued but unpaid dividends.
Our services are becoming increasingly mission-critical to our customers’ business operations, as well as their ability to comply with legal requirements, regulations, and standards such as GxP, FINRA, HIPAA, and FedRAMP.
Our services are becoming increasingly mission-critical to our customers’ business operations, as well as their ability to comply with legal requirements, regulations, and standards such as GxP, FINRA, HIPAA, FedRAMP and StateRAMP.
These service disruptions could diminish the overall attractiveness to existing and potential customers of services that depend on the internet and could cause demand for our services to suffer.
These service disruptions could 31 diminish the overall attractiveness to existing and potential customers of services that depend on the internet and could cause demand for our services to suffer.
If we are unsuccessful in detecting material exposures in a timely manner, any hedging strategies we deploy are not effective, or there are no hedging strategies available for certain exposures that are prudent given the associated risks and the potential mitigation of the underlying exposure achieved, our operating results or financial position could be adversely affected in the future.
If we are unsuccessful in detecting material exposures in a timely manner, any hedging strategies we deploy are not effective, or there are no hedging strategies available for certain exposures that are prudent given the associated risks and the potential mitigation of the underlying exposure achieved, our operating results or financial position could be negatively affected in the future.
From time to time, the counterparties to the capped call transactions or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes.
From time to time, the counterparties to the Capped Calls or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes.
Our use of additional or alternative third-party software would require us to enter into additional license agreements with third parties.
Our use of additional or alternative 29 third-party software would require us to enter into additional license agreements with third parties.
Our company culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, and our business may be harmed. We believe that our culture has been and will continue to be a key contributor to our success.
Our company culture has contributed to our success, and if we cannot maintain this culture, we could lose the innovation, creativity and teamwork fostered by our culture, and our business may be harmed. We believe that our culture has been and will continue to be a key contributor to our success.
For example, we were recently engaged in a proxy contest with an activist shareholder that was very costly and diverted a significant amount of time from our board of directors and management.
For example, in 2021, we were engaged in a proxy contest with an activist shareholder that was very costly and diverted a significant amount of time from our board of directors and management.
Although we currently have certain certifications such as AICPA SOC 1, 2 and 3 reports, and ISO/IEC 27001, 27017, and 27018, we may not be successful in continuing to maintain those certifications or in obtaining other certifications or otherwise being able to adhere to or comply with all customer requirements.
Although we currently have certain certifications such as AICPA SOC 1, 2 and 3 reports, and ISO/IEC 27001, 27017, 27018, and 27701 we may not be successful in continuing to maintain these certifications or in obtaining other certifications or otherwise being able to adhere to or comply with all customer requirements.
In addition, upon a default or other failure to perform, or a termination of obligations, by a counterparty, the counterparty may fail to deliver the consideration required to be delivered to us under the capped call transactions and we may experience more dilution than we currently anticipate with respect to our Class A common stock.
In addition, upon a default or other failure to perform, or a termination of obligations, by a counterparty, the counterparty may fail to deliver the consideration required to be delivered to us under the Capped Calls and we may experience more dilution than we currently anticipate with respect to our Class A common stock.
Holders of the Notes also have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.
Holders of the Notes also have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any.
For example, the European Commission enacted the General Data Protection Regulation (GDPR), which imposes significant obligations on companies regarding the handling of personal data and provides for penalties for noncompliance of up to the greater of 20 million euros or four percent of a company’s global revenue.
For example, the European Commission enacted the General Data Protection Regulation (GDPR), which imposed significant obligations on companies regarding the handling of personal data and penalties for noncompliance of up to the greater of 20 million Euros or four percent of a company’s global revenue.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding capital stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding Class A common stock not held by such stockholder.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of the voting power of our outstanding capital stock from engaging in certain business combinations without approval of the holders of at least two-thirds of the voting power of our outstanding capital stock not held by such stockholder.
The capped call transactions we entered into in connection with the issuance of the Notes may affect the value of our Class A common stock. In connection with the issuance of the Notes, we entered into capped call transactions with various counterparties.
The capped call transactions we entered into in connection with the issuance of the Notes may affect the value of our Class A common stock. In connection with the issuance of the Notes, we entered into capped call transactions with various counterparties (the “Capped Calls”).
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our Class A common stock.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our securities.
There can be no assurance that any security measures that we or third parties on which we rely have implemented will be effective against current or future security threats, and we cannot guarantee that our systems and networks or those of such third parties have not been breached or otherwise compromised, or that they and any software in our or their supply chains do not contain bugs, vulnerabilities, or compromised code that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support us or our products or services.
We cannot guarantee that any security measures that we or third parties on which we rely have implemented will be completely effective against current or future security threats, or that our systems and networks or those of such third parties have not been breached or otherwise compromised, or that they and any software in our or their supply chains do not contain bugs, vulnerabilities, or compromised code that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support us or our products or services.
The capped call transactions are expected generally to reduce or offset the potential dilution to our Class A common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.
The Capped Calls are expected generally to reduce or offset the potential dilution to our Class A common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.
Pursuant to the Investment Agreement, KKR has the right to designate one candidate for nomination for election to our board of directors for so long as KKR and its permitted transferees maintain minimum aggregate holdings of our stock as described in further detail in the Investment Agreement.
(the “Investment Agreement”), KKR has the right to designate one candidate for nomination for election to our board of directors for so long as KKR and its permitted transferees maintain minimum aggregate holdings of our stock as described in further detail in the Investment Agreement.
Factors that may cause fluctuations in our quarterly financial results include, but are not limited to: • our ability to attract and retain new customers; • our ability to convert users of our limited free version to paying customers; • the addition or loss of large customers, including through acquisitions or consolidations; • changes in our net retention rate; • the timing of revenue recognition; • the impact on billings of customer shifts between payment frequencies; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure; • network or service outages, internet disruptions, disruptions to the availability of our service, or actual or perceived security breaches, incidents and vulnerabilities; • general economic, industry and market conditions, including those caused by the COVID-19 pandemic and the Russian invasion of Ukraine; • changes in our go-to-market strategies and/or pricing policies and/or those of our competitors; • seasonal variations in our billings results and sales of our services, which have historically been highest in the fourth quarter of our fiscal year; • the timing and success of new services and product introductions by us and our competitors or any other change in the competitive dynamics of our industry, including consolidation or new entrants among competitors, customers or strategic partners; • changes in usage or adoption rates of content management services; • the success of our strategic partnerships, including the performance of our resellers; and • the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.
Factors that may cause fluctuations in our quarterly financial results include, but are not limited to: • our ability to attract and retain new customers; • our ability to convert users of our limited free version to paying customers; • the addition or loss of large customers, including through acquisitions or consolidations; • changes in our net retention rate; • the timing of revenue recognition; • the impact on billings of customer shifts between payment frequencies; • the timing of cash collections and payments and its impact on cash flows; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure; • network or service outages, internet disruptions, disruptions to the availability of our service, or actual or perceived security breaches, incidents and vulnerabilities; • general economic, industry and market conditions, including those caused by the COVID-19 pandemic and the Russian invasion of Ukraine and as a result of inflation, rising interest rates, or bank failures; • changes in our go-to-market strategies and/or pricing policies and/or those of our competitors; • seasonal variations in our billings results and sales of our services, which have historically been highest in the fourth quarter of our fiscal year; • the timing and success of new services and product introductions by us and our competitors or any other change in the competitive dynamics of our industry, including consolidation or new entrants among competitors, customers or strategic partners; • changes in usage or adoption rates of content management services; • the success of our strategic partnerships, including the performance of our resellers; and • the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.
The counterparties to the capped call transactions that we entered into are financial institutions, and we will be subject to the risk that one or more of the counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the capped call transactions.
The counterparties to the Capped Calls that we entered into are financial institutions, and we will be subject to the risk that one or more of the counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the Capped Calls.
If a counterparty to one or more capped call transactions becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under such transaction.
If a counterparty to one or more Capped Calls becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under such transaction.
The CCPA requires covered companies to, among other things, provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. Additionally, a new privacy law, the California Privacy Rights Act (CPRA), was approved by California voters in November 2020.
The CCPA requires covered companies to, among other things, provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. Additionally, the California Privacy Rights Act (CPRA) was approved by California voters in November 2020 and amended and expanded the CCPA.
This activity could also cause or prevent an increase or a decrease in the market price of our Class A common stock or the Notes. We are subject to counterparty risk with respect to the capped call transactions.
This activity could also cause or prevent an increase or a decrease in the market price of our Class A common stock or the Notes. 41 We are subject to counterparty risk with respect to the Capped Calls.
In addition, we will face challenges in doing business internationally that could adversely affect our business, including: • the need to localize and adapt our services for specific countries, including translation into foreign languages and associated expenses; • laws (and changes to such laws) relating to privacy, data protection and data transfer that, among other things, could require that customer data be stored and processed in a designated territory; • difficulties in staffing and managing foreign operations; • different pricing environments, longer sales cycles and longer accounts receivable payment cycles and collections issues; 21 • new and different sources of competition; • weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States; • laws and business practices favoring local competitors, including economic tariffs; • changes in the geopolitical environment, the perception of doing business with U.S. based companies, and changes in regulatory requirements that impact our operating strategies, access to global markets or hiring; • compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations; • increased financial accounting and reporting burdens and complexities; • restrictions on the transfer of funds; • reliance on third-party resellers and other parties; • adverse tax consequences; and • unstable regional, economic, social and political conditions, such as the Russian invasion of Ukraine.
In addition, we will face challenges in doing business internationally that could adversely affect our business, including: • the need to localize and adapt our services for specific countries, including translation into foreign languages and associated expenses; • laws (and changes to such laws) relating to privacy, data protection and data transfer that, among other things, could require that customer data be stored and processed in a designated territory; • difficulties in staffing and managing foreign operations especially in new markets with diverse cultures, languages, customs and legal systems; • different pricing environments, longer sales cycles and longer accounts receivable payment cycles and collections issues; • differing labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the United States; • new and different sources of competition; • weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States; • laws and business practices favoring local competitors, including economic tariffs; • changes in the geopolitical environment, the perception of doing business with U.S. based companies, and changes in regulatory requirements that impact our operating strategies, access to global markets or hiring; • compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations; • increased financial accounting and reporting burdens and complexities; • currency exchange rate fluctuations; • restrictions on the transfer of funds; • reliance on third-party resellers and other parties; • adverse tax consequences; and • unstable regional, economic, social and political conditions, such as the Russian invasion of Ukraine.
The capped call transactions cover, subject to customary adjustments, the number of shares of our Class A common stock initially underlying the Notes.
The Capped Calls cover, subject to customary adjustments, the number of shares of our Class A common stock initially underlying the Notes.
We expect to continue to hire additional employees as we expand our business. If we do not continue to develop our company culture or maintain our core values as we grow and evolve both in the United States and abroad, we may be unable to foster the innovation, creativity and teamwork we believe we need to support our growth.
If we do not continue to develop our company culture or maintain our core values as we grow and evolve both in the United States and abroad, we may be unable to foster the innovation, creativity and teamwork we believe we need to support our growth.
We also may not use the cash proceeds we raised through the issuance of the Notes in an optimally productive and profitable manner. Since inception, our business has generated net losses, and we may continue to incur significant losses.
We also may not use the cash proceeds we raised through the issuance of the Notes in an optimally productive and profitable manner. Since inception, our business has generated net losses, and while we were profitable in fiscal year 2023, we may continue to incur significant losses in the future.
As our sales efforts are increasingly focused on cloud content management use cases and are targeted at enterprise and highly-regulated customers, our sales cycles may become longer and more expensive, we may encounter greater pricing pressure and implementation and customization challenges, and we may have to delay revenue recognition for more complicated transactions, all of which could harm our business and operating results.
As our sales efforts are increasingly focused on cloud content management use cases and are targeted at enterprise and highly-regulated customers, our sales cycles may become longer and more expensive, and we may encounter greater pricing pressure and implementation and customization challenges, all of which could harm our business and operating results.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the market price of our Class A common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally or those in our industry in particular; • purchases and sales of shares of our Class A common stock by us or our stockholders; • whether our results of operations meet the expectations of securities analysts or investors and changes in actual or future expectations of investors or securities analysts; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; 38 • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • network or service outages, internet disruptions, the availability of our service, security breaches or perceived security breaches and vulnerabilities; • changes in accounting standards, policies, guidelines, interpretations or principles; • actions instituted by activist shareholders or others; • any significant change in our management; and • general economic conditions and slow or negative growth of our markets.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report 39 on Form 10-K, factors that could cause fluctuations in the market price of our Class A common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of technology or other public company stocks; • changes in operating performance and stock market valuations of other technology companies generally or those in our industry in particular; • general economic conditions and slow or negative growth of our markets; • purchases and sales of shares of our Class A common stock by us or our stockholders; • whether our results of operations meet the expectations of securities analysts or investors and changes in actual or future expectations of investors or securities analysts; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • network or service outages, internet disruptions, the availability of our service, security breaches or perceived security breaches and vulnerabilities; • changes in accounting standards, policies, guidelines, interpretations or principles; • actions instituted by activist shareholders or others, and our response to such actions; • any significant change in our management; • fluctuations in foreign currency exchange rates; and • catastrophic events, including pandemics, earthquakes, fires, floods, tsunamis or other weather events, power loss, telecommunications failures, software or hardware malfunctions, cyber-attacks, wars, or terrorist attacks.
On June 4, 2021, the EC published new standard contractual clauses (SCCs) that are required to be implemented by companies relying on the SCCs as a basis for cross-border transfers of personal data.
For example, on June 4, 2021, the EC published new standard contractual clauses (SCCs) that were required to be implemented by companies relying on the SCCs as a basis for cross-border transfers of personal data by December 27, 2022.
In addition, changes to our data center infrastructure could occur over a period longer than planned, require greater than expected investment and other internal and external resources and cause us to incur increased costs as we operate multiple data center facilities.
In addition, changes to our data center infrastructure could occur over a period longer than planned, require greater than expected investment and other internal and external resources, and cause us to incur increased costs as we operate multiple data center facilities while we increase our third-party cloud computing capacity.
We may not always be able to support or comply with all of these customer requirements. If we cannot adequately comply with these requirements, our growth could be adversely impacted, we may face a loss of customers or difficulty attracting new customers in impacted industries, and we could incur significant liability and our reputation and business could be harmed.
If we cannot adequately comply with these requirements, our growth could be adversely impacted, we may face a loss of customers or difficulty attracting new customers in impacted industries, and we could incur significant liability and our reputation and business could be harmed.
If we are unable to enhance our existing services or offer new services such as our electronic signature offering, Box Sign, that achieve market acceptance or keep pace with rapid technological developments, our business could be adversely affected.
If we are unable to enhance our existing services or offer new services such as our electronic signature offering, Box Sign, or our recently launched beta version of our virtual whiteboarding offering, Box Canvas, that achieve market acceptance or keep pace with rapid technological developments, our business could be adversely affected.
In order for us to improve our operating results and continue to grow our business, it is important that we continue to attract new customers and expand deployment of our solutions and products with existing customers.
To improve our operating results and continue growing our business, it is important that we continue to attract new customers and expand deployment of our solutions and products with existing customers.
Aspects of the interpretation and enforcement of the CCPA, CPRA and other enacted and proposed state laws remain unclear. We cannot fully predict the impact of these laws on our business or operations, but they may require us to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply.
We cannot fully predict the impact of these laws and other proposed federal and state privacy laws on our business or operations, but they may require us to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply.
If our systems were to fail or be negatively impacted as a result of a natural disaster, pandemic or other catastrophic event, our ability to deliver our services to our customers would be impaired, we could lose critical data, our reputation could suffer and we could be subject to contractual penalties. 30 If we overestimate or underestimate our data center capacity requirements, our operating results could be adversely affected.
If our systems were to fail or be negatively impacted as a result of a natural disaster, pandemic or other catastrophic event, our ability to deliver our services to our customers would be impaired, we could lose critical data, our reputation could suffer and we could be subject to contractual penalties.
We currently manage our exchange rate risk by matching foreign currency assets with payables and by maintaining minimal non-U.S. dollar cash reserves, but we do not have any other hedging programs in place to limit the risk of exchange rate fluctuation.
We currently manage our exchange rate risk by maintaining offsetting foreign currency assets and liabilities and by minimizing non-U.S. dollar cash balances, but we do not have any other hedging programs in place to limit the risk of exchange rate fluctuation.
These factors could increase our costs, lengthen our sales cycles and leave fewer sales support and professional services resources for other customers. Professional services may also be performed by a third party or a combination of our own staff and a third party.
In addition, larger enterprises may demand more customization, integration, support services, and features. These factors could increase our costs, lengthen our sales cycles and leave fewer sales support and professional services resources for other customers. Professional services may also be performed by a third party or a combination of our own staff and a third party.
Item 1A. RI SK FACTORS Investing in our Class A common stock involves a high degree of risk.
Item 1A. RI SK FACTORS Investing in our securities involves a high degree of risk.
Servicing our future debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to settle conversions of our convertible senior notes in cash, repay the convertible senior notes at maturity, or repurchase the convertible senior notes as required following a fundamental change.
Servicing our future debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to settle conversions of our Notes in cash, repay the Notes at maturity, or repurchase the Notes as required following a fundamental change. In January 2021, we issued $345.0 million aggregate principal amount of Notes.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the operation or growth of our business could be significantly impaired and our operating results may be harmed. 34 Financing agreements we are party to or may become party to may contain operating and financial covenants that restrict our business and financing activities.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the operation or growth of our business could be significantly impaired and our operating results may be harmed.
These sources can also implement social engineering techniques to induce our partners, users, employees or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ data.
These sources can also implement social engineering techniques, such as 23 “phishing,” “smishing” or "vishing" attacks, to induce our partners, users, employees or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ data.
We generally recognize revenue from customers ratably over the terms of their subscription agreements, which are typically one year, although we also offer our services for terms ranging from one month to three years or more. As a result, most of the revenue we report in each quarter is the result of subscription agreements entered into during prior quarters.
We generally recognize revenue from customers ratably over the terms of their subscription agreements, which range from one month to three years or more. As a result, most of the revenue we report in each quarter is the result of subscription agreements entered into during prior quarters.
Income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted or amended at any time, such as the Tax Cuts and Jobs Act in the United States, possibly with retroactive effect, and could be applied solely or disproportionately to services provided over the internet.
Income, sales, use, value added or other tax laws, statutes, rules, regulations or ordinances could be enacted or amended at any time, possibly with retroactive effect, and could be applied solely or disproportionately to services provided over the internet.
Failure in this regard may significantly impair our revenue growth and our future financial results. In addition, because our services are designed to operate on a variety of systems, we must continuously modify and enhance our services to keep pace with changes in internet-related hardware, mobile operating systems, and other software, communication, browser and database technologies.
In addition, because our services are designed to operate on a variety of systems, we must continuously modify and enhance our services to keep pace with changes in internet-related hardware, mobile operating systems, and other software, communication, browser and database technologies.
If we are unable to develop and offer services that meet our legal duties or help our customers meet their obligations under the laws or regulations relating to privacy, data protection, or information security, we may become subject to significant fines and penalties, which would harm our business.
If we are unable to develop and offer services that meet these obligations or help our customers meet their requirements under the laws, regulations, case law or guidance issued relating to privacy, data protection, or information security, we may become unable to provide services in these regions and/or be subject to significant fines and penalties, which would harm our business.
Our failure to repurchase Notes following a fundamental change or to pay cash upon conversion or at maturity of the Notes as required by the indenture would constitute a default under such indenture.
In addition, our ability to repurchase or pay cash upon conversion or at maturity of the Notes may be limited by law or regulatory authority. Our failure to repurchase Notes following a fundamental change or to pay cash upon conversion or at maturity of the Notes as required by the indenture would constitute a default under such indenture.
In the future, however, to the extent our foreign currency exposures become more material, we may elect to deploy normal and customary hedging practices designed to more proactively mitigate such exposure. We cannot be certain such practices will ultimately be available and/or effective at mitigating all foreign currency risk to which we are exposed.
In the future, we may elect to deploy normal and customary hedging practices designed to more proactively mitigate such exposure. Such practices may not ultimately be available and/or effective at mitigating the foreign currency risk to which we are exposed.
Many of our competitors and potential competitors are larger and have greater brand recognition, longer operating histories, and significantly greater resources than we do. Our primary competitors in the cloud content management market include Microsoft and OpenText (Documentum). In the enterprise file sync and share market, our primary competitors include Microsoft, Google and, to a lesser extent, Dropbox.
Many of our competitors and potential competitors are larger and have greater brand recognition, longer operating histories, and significantly greater resources than we do. Our primary competitors in the cloud content management market include Microsoft (SharePoint) and OpenText (Documentum).
Although our net retention rate has increased in recent quarters, it may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our services, the effectiveness of our customer support services, the performance of our partners and resellers, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base, our ability to successfully integrate acquired technology into our products, our ability to execute on our product roadmap, the effects of global economic conditions, such as those arising from the COVID-19 pandemic, or reductions in our customers’ spending levels.
Our net retention rate was approximately 108% and 111% as of January 31, 2023 and 2022, respectively. 17 Our net retention rate may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our services, the effectiveness of our customer support services, the performance of our partners and resellers, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base, our ability to successfully integrate acquired technology into our products, our ability to execute on our product roadmap, the effects of global economic conditions, such as those arising from the COVID-19 pandemic, or reductions in our customers’ spending levels, especially if adverse macroeconomic trends continue.
Any acquisitions and investments we make could disrupt our business and harm our financial condition and operating results. We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our services and grow our business. For example, in February 2021 we acquired SignRequest.
Any acquisitions and investments we make could disrupt our business and harm our financial condition and operating results. We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our services and grow our business. We may not be able to successfully complete or integrate identified acquisitions.
We may not be able to successfully complete or integrate identified acquisitions. Moreover, we may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition.
Moreover, we may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition.
In May 2021, we issued 500,000 shares of our Series A Convertible Preferred Stock to a group of investors led by KKR.
In May 2021, we issued 500,000 shares of our Series A Convertible Preferred Stock to a group of investors led by KKR & Co. Inc. (“KKR,” and such group of investors, the “Investors”).
In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption. Our business will also be harmed if our customers and potential customers believe our service is unreliable.
We may only have limited remedies against third-party providers in the event of any service disruptions. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption. Our business will also be harmed if our customers and potential customers believe our service is unreliable.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations. 42
Biggest changeWe believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. LEGAL PROCEEDINGS Refer to Note 9 in Part II, Item 8 of this Annual Report on Form 10-K under the subheading “Legal Matters,” which is incorporated herein by reference. Item 4. MINE SAF ETY DISCLOSURE Not applicable. 43 PART II
Biggest changeItem 3. LEGAL PROCEEDINGS Refer to Note 9 in Part II, Item 8 of this Annual Report on Form 10-K under the subheading “Legal Matters,” which is incorporated herein by reference. Item 4. MINE SAF ETY DISCLOSURE Not applicable. 44 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeUnder this plan, shares may be repurchased in open market transactions until February 28, 2022. In July 2021, we entered into a pre-set trading plan adopted in accordance with Rule 10b5-1 to effect repurchases under our Share Repurchase Plan.
Biggest changeWe have entered into pre-set trading plans adopted in accordance with Rule 10b5-1 to effect such repurchases. The authorized repurchase plan will expire on November 29, 2023.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock 45 and in each index on January 31, 2017 and its relative performance is tracked through January 31, 2022. The returns shown are based on historical results and are not intended to suggest future performance.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock 46 and in each index on January 31, 2018 and its relative performance is tracked through January 31, 2023. The returns shown are based on historical results and are not intended to suggest future performance.
Prior to that date, there was no public trading market for shares of our Class A common stock. Holders of Record As of February 28, 2022, there were 140 holders of record of our Class A common stock.
Prior to that date, there was no public trading market for shares of our Class A common stock. Holders of Record As of February 28, 2023, there were 111 holders of record of our Class A common stock.
Refer to Note 11 in Part II, Item 8 of this Annual Report on Form 10-K for more information about such dividends.
Refer to Note 11 in Part II, Item 8 of this Annual Report on Form 10-K for more information about such dividends. Unregistered Sales of Equity Securities In February 2022, we issued 559,336 shares of our Class A common stock to certain former holders of capital stock and employees of SignRequest B.V.
Base Period Company/Index 01/31/2017 01/31/2018 01/31/2019 01/31/2020 01/31/2021 01/31/2022 Box, Inc. $ 100 $ 130 $ 123 $ 88 $ 102 $ 153 S&P 500 Index 100 124 119 142 163 198 NASDAQ Computer Index 100 141 138 199 291 365 Item 6. [ R ESERVED] Not applicable. 46
Base Period Company/Index 01/31/2018 01/31/2019 01/31/2020 01/31/2021 01/31/2022 01/31/2023 Box, Inc. $ 100 $ 94 $ 68 $ 78 $ 117 $ 144 S&P 500 Index 100 96 114 132 160 144 NASDAQ Computer Index 100 98 141 206 258 200 Item 6. R ESERVED Not applicable. 47
Removed
Unregistered Sales of Equity Securities We did not sell any equity securities which were not registered under the Securities Act during the fiscal year ended January 31, 2022 that were not otherwise disclosed in our Quarterly Reports on Form 10-Q or our Current Reports on Form 8-K. 44 Issuer Purchases of Equity Securities Share repurchase activity during the three months ended January 31, 2022 was as follows (in thousands, except per share data): Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) November 1, 2021 to November 30, 2021 721 $ 24.10 721 $ 54,419 December 1, 2021 to December 31, 2021 1,847 $ 26.17 1,847 $ 206,075 January 1, 2022 to January 31, 2022 2,942 $ 25.36 2,942 $ 131,487 Total 5,510 5,510 (1) On July 9, 2021, our board of directors authorized a $260 million share repurchase plan (Share Repurchase Plan) to opportunistically repurchase additional shares of our Class A common stock.
Added
(the “Recipients”) as payment of the stock consideration in connection with our acquisition of SignRequest, B.V.
Removed
On November 27, 2021, our board of directors authorized a $200 million expansion of the Share Repurchase Plan and an extension of the expiration date of the repurchase plan to February 28, 2023.
Added
The issuance of the shares was deemed to be exempt from the registration requirement of the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(a)(2) of the Securities Act, on the basis that, among other factors: (1) each of the Recipients represented that they were an “accredited investor” within the meaning of Rule 501(a) of Regulation D; (2) there was no general solicitation or advertising in connection with the issuance of the shares; (3) each of the Recipients represented that such Recipients (i) understood that the shares had not been registered under applicable federal and state securities laws, (ii) has the ability to bear the economic risks of their investments, (iii) acquired the shares for investment purposes and not with a view to resale, and (iv) will not sell or otherwise dispose of the shares while they are subject to restricted securities legends in the absence of registration or an applicable exemption from registration requirements; and (4) each Recipient or their purchaser representative, as applicable, received or had access to required information and had an opportunity to obtain additional information about us a reasonable period of time prior to the issuance of the shares. 45 Issuer Purchases of Equity Securities Share repurchase activity during the three months ended January 31, 2023 was as follows (in thousands, except per share data): Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) November 1, 2022 to November 30, 2022 — — — 150,204 December 1, 2022 to December 31, 2022 145 $ 28.25 145 146,109 January 1, 2023 to January 31, 2023 183 $ 28.49 183 140,891 Total 328 328 (1) Between July 2021 and January 31, 2023, our board of directors authorized the repurchase of up to an aggregate of $760 million of shares of our Class A common stock and we have repurchased approximately $595.3 million under these authorizations.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The following tables set forth our results of operations for the periods presented (in thousands and as a percentage of our revenue): Year Ended January 31, 2022 2021 2020 Consolidated Statements of Operations Data: Revenue $ 874,332 $ 770,770 $ 696,264 Cost of revenue (1) 249,484 224,738 215,577 Gross profit 624,848 546,032 480,687 Operating expenses: Research and development (1) 218,523 201,262 199,750 Sales and marketing (1) 298,635 275,742 317,615 General and administrative (1) 135,316 106,670 102,794 Total operating expenses 652,474 583,674 620,159 Loss from operations (27,626 ) (37,642 ) (139,472 ) Interest and other expense, net (9,838 ) (4,584 ) (3,466 ) Loss before provision for income taxes (37,464 ) (42,226 ) (142,938 ) Provision for income taxes 3,995 1,207 1,410 Net loss (41,459 ) (43,433 ) (144,348 ) Dividend on series A convertible preferred stock (10,911 ) — — Accretion of series A convertible preferred stock (1,508 ) — — Net loss attributable to common stockholders $ (53,878 ) $ (43,433 ) $ (144,348 ) (1) Includes stock-based compensation expense as follows: Year Ended January 31, 2022 2021 2020 Cost of revenue $ 20,093 $ 18,936 $ 16,769 Research and development 68,063 61,145 62,565 Sales and marketing 52,547 42,015 38,030 General and administrative 38,271 32,196 28,624 Total stock-based compensation $ 178,974 $ 154,292 $ 145,988 54 Year Ended January 31, 2022 2021 2020 Percentage of Revenue: Revenue 100 % 100 % 100 % Cost of revenue (1) 29 29 31 Gross profit 71 71 69 Operating expenses: Research and development (1) 25 26 29 Sales and marketing (1) 34 36 45 General and administrative (1) 15 14 15 Total operating expenses 74 76 89 Loss from operations (3 ) (5 ) (20 ) Interest and other expense, net (1 ) (1 ) (1 ) Loss before provision for income taxes (4 ) (6 ) (21 ) Provision for income taxes (1 ) — — Net loss (5 ) % (6 ) % (21 ) % (1) Includes stock-based compensation expense as follows: Year Ended January 31, 2022 2021 2020 Cost of revenue 2 % 3 % 2 % Research and development 8 8 9 Sales and marketing 6 5 6 General and administrative 4 4 4 Total stock-based compensation 20 % 20 % 21 % A discussion regarding our financial condition and results of operations for the year ended January 31, 2022 compared to the year ended January 31, 2021 is presented below.
Biggest changeResults of Operations The following tables set forth our results of operations for the periods presented (in thousands and as a percentage of our revenue): Year Ended January 31, 2023 2022 2021 Consolidated Statements of Operations Data: Revenue $ 990,874 $ 874,332 $ 770,770 Cost of revenue (1) 252,556 249,484 224,738 Gross profit 738,318 624,848 546,032 Operating expenses: Research and development (1) 243,529 218,523 201,262 Sales and marketing (1) 331,400 298,635 275,742 General and administrative (1) 126,549 135,316 106,670 Total operating expenses 701,478 652,474 583,674 Income (loss) from operations 36,840 (27,626 ) (37,642 ) Interest and other expense, net (2,433 ) (9,838 ) (4,584 ) Income (loss) before provision for income taxes 34,407 (37,464 ) (42,226 ) Provision for income taxes 7,624 3,995 1,207 Net income (loss) 26,783 (41,459 ) (43,433 ) Accretion and dividend on series A convertible preferred stock (17,110 ) (12,419 ) — Undistributed earnings attributable to preferred stockholders (1,106 ) — — Net income (loss) attributable to common stockholders $ 8,567 $ (53,878 ) $ (43,433 ) (1) Includes stock-based compensation expense as follows: Year Ended January 31, 2023 2022 2021 Cost of revenue $ 17,816 $ 20,093 $ 18,936 Research and development 68,900 68,063 61,145 Sales and marketing 58,448 52,547 42,015 General and administrative 40,468 38,271 32,196 Total stock-based compensation $ 185,632 $ 178,974 $ 154,292 55 Comparison of the Years Ended January 31, 2023 and 2022 Revenue Year Ended January 31, 2023 2022 $ Change % Change (dollars in thousands) Revenue $ 990,874 $ 874,332 $ 116,542 13 % The $116.5 million increase in revenue was primarily driven by seat growth in existing customers and higher attach rates of our multi-product Suites offerings, particularly Enterprise Plus.
As a result, we have experienced, and may continue to experience, increased customer churn and delayed sales cycles, as well as customers and prospective customers reducing budgets related to services that we offer. Despite these adverse impacts, the COVID-19 pandemic has fundamentally changed how organizations get work done, with many businesses shifting to remote and hybrid remote work environments.
As a result, we have experienced, and may continue to experience, increased customer churn and delayed sales cycles, as well as customers and prospective customers reducing budgets related to services that we offer. Despite these adverse impacts, the COVID-19 pandemic has fundamentally changed how organizations get work done, with many businesses shifting to remote and hybrid work environments.
While Box believes RPO is a leading indicator of revenue as it represents sales activity not yet recognized in revenue, it is not necessarily indicative of future revenue growth as it is influenced by several factors, including seasonality of contract renewal timing, average contract terms and foreign currency exchange rates .
While Box believes RPO is a leading indicator of revenue as it represents sales activity not yet recognized in revenue, it is not necessarily indicative of future revenue growth as it is influenced by several factors, including seasonality, contract renewal timing, average contract terms and foreign currency exchange rates.
A reconciliation of free cash flow to net cash provided by operating activities, its nearest GAAP equivalent, is presented in the non-GAAP Financial Measures section at the end of Item 7 of this Annual Report on Form 10-K.
A reconciliation of non-GAAP free cash flow to net cash provided by operating activities, its nearest GAAP equivalent, is presented in the non-GAAP Financial Measures section at the end of Item 7 of this Annual Report on Form 10-K.
General and administrative expense consists primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, recruiting, information systems, security, compliance, fees for external professional services and cloud-based enterprise systems, as well as allocated overhead.
General and administrative expense consists primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, recruiting, information systems, enterprise security, compliance, fees for external professional services and cloud-based enterprise systems, as well as allocated overhead.
Provision for Income Taxes Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and state income taxes in the United States and, as applicable, changes in our deferred taxes and related valuation allowance positions, uncertain tax positions, and taxes associated with jurisdictional transfers of intellectual property.
Provision for Income Taxes Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and state income taxes in the United States and, as applicable, changes in our deferred taxes and related valuation allowance positions and uncertain tax positions, and taxes associated with jurisdictional transfers of intellectual property.
Organizations typically purchase our solution in the following ways: (i) employees in one or more small groups within the organization may individually purchase our service; (ii) organizations may purchase IT-sponsored, enterprise-level agreements with deployments for specific, targeted use cases ranging from tens to thousands of user seats; (iii) organizations may purchase IT- sponsored, enterprise-level agreements where the number of user seats sold is intended to accommodate and enable nearly all information workers within the organization in whatever use cases they desire to adopt over the term of the subscription; and (iv) organizations may purchase our Box Platform service to create custom business applications for their internal use and extended ecosystem of customers, suppliers and partners.
Organizations typically purchase our solution in the following ways: (i) employees in one or more small groups within the organization may individually purchase our service; (ii) organizations may purchase IT-sponsored, enterprise-level agreements with deployments for specific, targeted use cases ranging from tens to thousands of user seats; (iii) organizations may purchase IT- sponsored, enterprise-level agreements (ELAs) where the number of user seats sold is intended to accommodate and enable nearly all information workers within the organization in whatever use cases they desire to adopt over the term of the subscription; and (iv) organizations may purchase our Box Platform service to create custom business applications for their internal use and extended ecosystem of customers, suppliers and partners.
As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense. 62 Business Combinations We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.
As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense. Business Combinations We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.
To the extent our actual forfeiture rate is different from our estimate, stock-based compensation expense is adjusted accordingly. We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis.
To the extent our actual forfeiture rate is different from our estimate, stock-based compensation expense is adjusted accordingly. 62 We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis.
While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is 63 a static expense, one that is not typically affected by operations during any particular period.
While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
Management believes it is useful to exclude SBC in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies.
Management believes it is useful to exclude SBC in order to better understand the long-term performance of our core business and to facilitate 63 comparison of our results to those of peer companies.
As of January 31, 2022, we had over 100,000 paying organizations, and our solution was offered in 25 languages. We define paying organizations as separate and distinct buying entities, such as a company, an educational or government institution, or a distinct business unit of a large corporation, that have entered into a subscription agreement with us to utilize our services.
As of January 31, 2023, we had over 100,000 paying organizations, and our solution was offered in 25 languages. We define paying organizations as separate and distinct buying entities, such as a company, an educational or government institution, or a distinct business unit of a large corporation, that have entered into a subscription agreement with us to utilize our services.
We consider free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business and strengthening the​ balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures.
We consider non-GAAP free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business and strengthening the​ balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures.
We consider free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business and strengthening ​the​ balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures.
We consider non-GAAP free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business and strengthening ​the​ balance sheet; but it is not intended to represent the residual cash flow available for discretionary expenditures.
Free Cash Flow We define free cash flow as cash flows from​ operating activities less purchases of property and equipment, principal payments of finance lease liabilities, capitalized internally developed software costs, and other items that did not or are not expected to require cash settlement and that management considers to be outside ​of our core business.
Non-GAAP Free Cash Flow We define non-GAAP free cash flow as cash flows from​ operating activities less purchases of property and equipment, principal payments of finance lease liabilities, capitalized internally developed software costs, and other items that did not or are not expected to require cash settlement and that management considers to be outside ​of our core business.
Pursuant to the terms of the amendment, the maturity date of borrowings under the November 2017 Facility is July 26, 2024, the revolving commitment is $65.0 million, and it provides for a sublimit for the issuance of letters of credit of $45.0 million. As of January 31, 2022, debt outstanding under the November 2017 Facility was $30.0 million.
Pursuant to the terms of the amendment, the maturity date of borrowings under the November 2017 Facility is July 26, 2024, the revolving commitment is $65.0 million, and it provides for a sublimit for the issuance of letters of credit of $45.0 million. As of January 31, 2023, debt outstanding under the November 2017 Facility was $30.0 million.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. The estimates and assumptions included in our critical accounting policies have not changed during the year ended January 31, 2022 from those disclosed during the year ended January 31, 2021.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. The estimates and assumptions included in our critical accounting policies have not changed during the year ended January 31, 2023 from those disclosed during the year ended January 31, 2022.
In connection with the pricing of the Notes, we entered into privately negotiated capped call transactions with certain counterparties (the "Capped Calls"). The Capped Calls each have a strike price of approximately $25.80 and initial cap prices of $35.58 per share, subject to certain adjustments.
In connection with the pricing of the Notes, we entered into privately negotiated Capped Calls with certain counterparties. The Capped Calls each have a strike price of approximately $25.80 and initial cap prices of $35.58 per share, subject to certain adjustments.
We specifically identify other adjusting items in our reconciliation of GAAP to non-GAAP net income (loss). These items include expenses related to certain litigation and the amortization of the issuance costs associated with our Notes, which are amortized as interest expense, because they are considered by management to be special items outside our core operating results.
We specifically identify other​ adjusting ​items in ​our reconciliation of GAAP to non-GAAP net income (loss) attributable to common stockholders. These items include expenses related to certain litigation and the amortization of the issuance costs associated with our Notes, which are amortized as interest expense, because they are considered by management to be special items outside our core operating results.
Accordingly, due to our subscription model, we recognize revenue for our subscription and premier services ratably over the term of the contract. 47 Our objective is to build an enduring business that creates sustainable revenue and earnings growth over the long term.
Accordingly, due to our subscription model, we recognize revenue for our subscription services ratably over the term of the contract. Our objective is to build an enduring business that creates sustainable revenue and earnings growth over the long term.
External professional services fees are primarily comprised of outside legal, accounting, audit and outsourcing services. 53 Interest and Other Expense, Net Interest and other expense, net consists of interest expense, interest income, gains and losses from foreign currency transactions, and other income and expense.
External professional services fees are primarily comprised of outside legal, accounting, audit and outsourcing services. 54 Interest and Other Expense, Net Interest and other expense, net consists of interest expense, interest income, gains and losses from foreign currency transactions, and other income and expense.
Contractual Obligations and Commitments Our principal commitments consist of (i) obligations under operating leases for office spaces and data centers, (ii) obligations under finance leases for servers and related equipment for our data center operations, (iii) purchase obligations not recognized on the consolidated balance sheet as of January 31, 2022, which relate primarily to infrastructure services and IT software and support services, and (iv) debt, including obligations under both our November 2017 Facility and Notes.
Contractual Obligations and Commitments Our principal commitments consist of (i) obligations under operating leases for office spaces and data centers, (ii) obligations under finance leases for servers and related equipment for our data center operations, (iii) purchase obligations not recognized on the condensed consolidated balance sheet as of January 31, 2023, which relate primarily to public cloud infrastructure services and IT software and support services, and (iv) debt, including obligations under both our November 2017 Facility and Notes.
We expect our sales and marketing expenses to increase in dollars but decrease as a percentage of revenue over time as our existing customer base grows and a relatively higher percentage of our revenue is attributable to renewals versus new or expanding Box deployments and as we continue to focus on improving sales productivity and simplifying our product offerings.
We expect our sales and marketing expenses to increase in absolute dollars but decrease as a percentage of revenue over time as our existing customer base grows and a relatively higher percentage of our revenue is attributable to renewals versus new or expanding Box deployments and as we continue to focus on improving sales productivity.
Overview Box is the Content Cloud: one secure, cloud-native platform for managing the entire content journey. Content – from blueprints to wireframes, videos to documents, proprietary formats to PDFs – is the source of an organization’s unique value.
Overview Box is the Content Cloud: a single secure, cloud-native platform for managing the entire content journey. Content – from blueprints to wireframes, videos to documents, proprietary formats to PDFs – is the source of an organization’s unique value.
A discussion regarding our financial condition and results of operations for the year ended January 31, 2021 compared to the year ended January 31, 2020 can be found under Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 19, 2021, which is available on the SEC’s website at www.sec.gov .
A discussion regarding our financial condition and results of operations for the year ended January 31, 2022 compared to the year ended January 31, 2021 can be found under Part II, Item 7 of our Annual Report on Form 10-K for the year ended January 31, 2022, filed with the SEC on March 16, 2022, which is available on the SEC’s website at www.sec.gov .
Components of Results of Operations Revenue We derive our revenue primarily from three sources: (1) subscription revenue, which is comprised of subscription fees from customers who have access to our content cloud platform including routine customer support; (2) revenue from customers purchasing our premier services package; and (3) revenue from professional services such as implementing best practice use cases, project management and implementation consulting services. 52 To date, practically all of our revenue has been derived from subscription and premier services.
Components of Results of Operations Revenue We derive our revenue primarily from three sources: (1) subscription revenue, which is comprised of subscription fees from customers who have access to our content cloud platform including routine customer support; (2) revenue from customers purchasing our premier services package; and (3) revenue from professional services such as implementing best practice use cases, project management and implementation consulting services.
The assumptions used in our option pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. These assumptions are estimated as follows: • Fair Value of Common Stock .
These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. These assumptions are estimated as follows: • Fair Value of Common Stock .
Cost of revenue as a percentage of revenue remained flat year-over-year. We expect our cost of revenue to increase in dollars but decrease as a percentage of revenue over time as we continue to optimize data center efficiencies and invest in public cloud infrastructure.
Over time, we expect our cost of revenue to increase in absolute dollars but decrease as a percentage of revenue as we continue to optimize data center efficiencies and invest in public cloud infrastructure.
Our cloud content management platform enables our customers, including 67% of the Fortune 500, to securely manage the entire content lifecycle, from the moment a file is created or ingested to when it’s shared, edited, published, approved, signed, classified, and retained.
The Box Content Cloud enables our customers, including 69% of the Fortune 500, to securely manage the entire content lifecycle, from the moment a file is created or ingested to when it’s shared, edited, published, approved, signed, classified, and retained.
Cost of Revenue Our cost of revenue consists primarily of costs related to providing our subscription services to our paying customers, including employee compensation and related expenses for data center operations, customer support and professional services personnel, payments to outside technology service providers, depreciation of servers and equipment, security services and other tools, as well as amortization expense associated with acquired technology and capitalized internally developed software.
Cost of Revenue Our cost of revenue consists primarily of costs related to providing our subscription services to our paying customers, including employee compensation and related expenses for data center operations, customer support and professional services personnel, public cloud infrastructure costs, depreciation of servers and equipment, security services and other tools, as well as amortization expense associated with acquired technology and capitalized internally developed software.
Our platform integrates with more than 1,500 leading enterprise business applications, and is compatible with multiple application environments, operating systems and devices, ensuring that workers can securely access their critical business content whenever and wherever they need it.
Our platform integrates with more than 1,500 leading enterprise business applications, supports hundreds of file formats and media types, and is compatible with multiple application environments, operating systems and devices, ensuring that workers can securely access their critical business content whenever and wherever they need it.
A calculation of billings starting with revenue, the most directly comparable GAAP financial measure, is presented below (in thousands): Year Ended January 31, 2022 2021 2020 GAAP revenue $ 874,332 $ 770,770 $ 696,264 Deferred revenue, end of period 534,242 465,613 423,849 Less: deferred revenue, beginning of period (465,613 ) (423,849 ) (375,041 ) Contract assets, beginning of period 25 — 3 Less: contract assets, end of period (1,111 ) (25 ) — Billings $ 941,875 $ 812,509 $ 745,075 51 Free Cash Flow We define free cash flow as cash flows from​ operating activities less purchases of property and equipment, principal payments of finance lease liabilities, capitalized internal-use software costs, and other items that did not or are not expected to require cash settlement and that management considers to be outside ​of our core business.
A calculation of billings starting with revenue, the most directly comparable GAAP financial measure, is presented below (in thousands): Year Ended January 31, 2023 2022 2021 GAAP revenue $ 990,874 $ 874,332 $ 770,770 Deferred revenue, end of period 566,630 534,242 465,613 Less: deferred revenue, beginning of period (534,242 ) (465,613 ) (423,849 ) Contract assets, beginning of period 1,111 25 — Less: contract assets, end of period (1,900 ) (1,111 ) (25 ) Billings $ 1,022,473 $ 941,875 $ 812,509 52 Non-GAAP Free Cash Flow We define non-GAAP free cash flow as cash flows from operating activities less purchases of property and equipment, principal payments of finance lease liabilities, capitalized internal-use software costs, and other items that did not or are not expected to require cash settlement and that management considers to be outside of our core business.
The Box Content Cloud accelerates business processes, improves employee productivity, enables secure remote work, and protects an organization’s most valuable data. Our platform enables a broad set of high-value business use cases across enterprises, hundreds of file formats and media types, and user experiences.
The Box Content Cloud accelerates business processes, improves employee productivity, enables secure hybrid work, and protects an organization’s most valuable data. Our platform enables a broad set of high-value business use cases across enterprises and user experiences.
Our research and development efforts are focused on scaling our platform, building an ecosystem of best-of-breed applications and platforms, infrastructure, adding enterprise grade features, functionality and enhancements such as workflow automation, intelligent content management capabilities, and advanced security to enhance the ease of use of our cloud content management services.
Our research and development efforts are focused on scaling our platform, building an ecosystem of best-of-breed applications and platforms, infrastructure, adding enterprise grade features, functionality and enhancements such as workflow automation, intelligent content management capabilities, advanced security, e-signature capability, and a native visual collaboration and whiteboarding tool to enhance the ease of use of our cloud content management services.
We believe our existing cash and cash equivalents, together with our finance leases and credit facilities, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.
We believe our existing cash, cash equivalents and short-term investments, together with our credit facilities, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months and beyond.
We do not consider billings to be a non-GAAP financial measure because it is calculated using exclusively revenue, deferred revenue, and contract assets, all of which are financial measures calculated in accordance with GAAP. Billings during the year ended January 31, 2022 were $941.9 million, an increase of 16% from the year ended January 31, 2021.
We do not consider billings to be a non-GAAP financial measure because it is calculated using exclusively revenue, deferred revenue, and contract assets, all of which are financial measures calculated in accordance with GAAP. Billings for the year ended January 31, 2023 were $1.022 billion, an increase of 9% from the year ended January 31, 2022.
For example, we provide Box Shield, our advanced security offering that helps customers reduce the risk of accidental content leakage and protect their business from insider threats and account compromise; Box KeySafe, a solution that builds on top of Box’s strong encryption and security capabilities to give customers greater control over the encryption keys used to secure the file contents that are stored with Box; Box Governance, which gives customers a better way to comply with regulatory policies, satisfy e-discovery requests and effectively manage sensitive business information throughout its lifecycle; Box Relay, which allows our end users to easily build, manage and track their own workflows; Box Sign, which enables customers to securely send documents for electronic signature directly from Box; Box Platform, which further enables customers and partners to build enterprise apps using our open APIs and developer tools; and Box Zones, which gives global customers the ability to store their content locally in certain regions.
We also currently provide the following offerings: Box Sign, which enables customers to securely send documents for electronic signature directly from Box; Box Shield, our advanced security offering that helps customers reduce the risk of accidental content leakage and protect their business from insider threats and account compromise, as well as threat detection, response, and recovery for potential malware incidents, including ransomware; Box Relay, which allows our end users to easily build, manage and track their own workflows; Box Zones, which gives global customers the ability to store their content locally in certain regions; Box KeySafe, a solution that builds on top of Box’s strong encryption and security capabilities to give customers greater control over the encryption keys used to secure the file contents that are stored with Box; Box Platform, which further enables customers and partners to build enterprise apps using our open APIs and developer tools; Box Governance, which gives customers a better way to comply with regulatory policies, help satisfy e-discovery requests and effectively manage sensitive business information throughout its lifecycle; and Box Notes, our native content authoring tool which enables users to seamlessly share and collaborate in real time.
General and administrative expense as a percentage of revenue increased 100 basis points year-over-year. We expect our general and administrative expense to slowly increase in dollars but to decrease as a percentage of revenue over time as we benefit from greater operational efficiency.
We expect our general and administrative expense to increase in absolute dollars but to decrease as a percentage of revenue over time as we benefit from greater operational efficiency.
Current Period Highlights For the years ended January 31, 2022 and 2021, our revenue was $874.3 million and $770.8 million, respectively, representing year-over-year growth of 13%. As of January 31, 2021, our remaining performance obligations were $1.1 billion, representing a 19% increase from our remaining performance obligations of $896.9 million as of January 31, 2021.
Current Period Highlights For the years ended January 31, 2023 and 2022, our revenue was $990.9 million and $874.3 million, respectively, representing year-over-year growth of 13%. As of January 31, 2023, our remaining performance obligations were $1.245 billion, representing a 16% increase from our remaining performance obligations of $1.071 billion as of January 31, 2022.
On November 27, 2017, we entered into a secured credit agreement (as amended or otherwise modified from time to time, the "November 2017 Facility"). On July 26, 2021, we entered into Amendment No. 4 to the November 2017 Facility.
On November 27, 2017, we entered into a secured credit agreement (as amended or otherwise modified from time to time, the "November 2017 Facility").
We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue as we satisfy a performance obligation 60 Subscription and Premier Services Revenues We recognize revenue as we satisfy our performance obligation.
The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for those services. 60 We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue as we satisfy a performance obligation Subscription and Premier Services Revenues We recognize revenue as we satisfy our performance obligations.
For the year ended January 31, 2022, our net cash provided by operating activities was $234.8 million, compared to our net cash provided by operating activities of $196.8 million for the year ended January 31, 2021.
Net cash provided by operating activities for the year ended January 31, 2023 was $298.0 million compared to net cash provided by operating activities of $234.8 million for the year ended January 31, 2022.
While we expect certain expenses that were reduced due to COVID-19 to increase over time, we currently do not expect to return to pre-COVID-19 levels, even after we return to an office-based environment.
While we expect certain expenses that were reduced due to COVID-19 to increase over time, we currently do not expect to return to pre-COVID-19 levels, even as we return to a hybrid workforce which partially includes an office-based environment.
We recognize the fair value of stock options and restricted stock units as an expense, net of estimated forfeitures, on a straight-line basis over the requisite service period.
We recognize the fair value of stock options and restricted stock units as an expense, net of estimated forfeitures, on a straight-line basis over the requisite service period. We recognize the fair value of purchase rights granted under our 2015 ESPP as an expense on a straight-line basis over the offering period.
We typically invoice our customers at the beginning of the term, in multi-year, annual, quarterly or monthly installments. Our subscription and premier services contracts are typically non-cancellable and do not contain refund-type provisions.
Accordingly, due to our subscription model, we recognize revenue for our subscription and premier services ratably over the contract term. We typically invoice our customers at the beginning of the term, in multi-year, annual, quarterly or monthly installments. Our subscription and premier services contracts are typically non-cancellable and do not contain refund-type provisions.
Box monitors RPO to manage the business and evaluate performance. 50 RPO as of January 31, 2022 was $1.1 billion, an increase of 19% from January 31, 2021.
Box monitors RPO to manage the business and evaluate performance. 51 RPO as of January 31, 2023 was $1.245 billion, an increase of 16% from January 31, 2022.
We have made an irrevocable election to settle the principal portion of the Notes only in cash. Accordingly, upon conversion, we will pay the principal in cash and we will pay or deliver, as the case may be, the conversion premium in cash, shares of common stock or a combination of cash and shares of common stock, at our election.
Accordingly, upon conversion, we will pay the principal in cash and we will pay or deliver, as the case may be, the conversion premium in cash, shares of common stock or a combination of cash and shares of common stock, at our election.
Our future capital requirements will depend on many factors including our growth rate, subscription renewal activity, billing frequency, data center expansions, the timing and extent of spending to support development efforts, the expansion of international activities, the introduction of new and enhanced service offerings, and the continuing market acceptance of our services.
Our long-term capital requirements will depend on many factors including our growth rate, subscription renewal activity, billing frequency, public cloud obligations, repayment or refinancing of our debt obligations, the timing and extent of spending to support development efforts, the expansion of international activities, the introduction of new and enhanced service offerings, and the continuing market acceptance of our services.
We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view our non-GAAP financial measures in conjunction with the most comparable GAAP financial measures. 64 Our reconciliation of the non-GAAP financial measures for years ended January 31, 2022, 2021 and 2020 are as follows (in thousands, except per share data and percentages): Year Ended January 31, 2022 2021 2020 GAAP operating loss $ (27,626 ) $ (37,642 ) $ (139,472 ) Stock-based compensation 178,974 154,292 145,988 Acquired intangible assets amortization 5,148 — — Acquisition-related expenses 1,282 790 — Fees related to shareholder activism 15,644 1,402 1,154 Restructuring activities — — 1,651 Non-GAAP operating income $ 173,422 $ 118,842 $ 9,321 GAAP operating margin (3 ) % (5 ) % (20 ) % Stock-based compensation 20 20 21 Acquired intangible assets amortization 1 — — Acquisition-related expenses — — — Fees related to shareholder activism 2 — — Restructuring activities — — — Non-GAAP operating margin 20 % 15 % 1 % GAAP net loss attributable to common stockholders $ (53,878 ) $ (43,433 ) $ (144,348 ) Stock-based compensation 178,974 154,292 145,988 Acquired intangible assets amortization 5,148 — — Acquisition-related expenses 2,349 790 — Fees related to shareholder activism 15,644 1,402 1,154 Restructuring activities — — 1,651 Amortization of debt discount and issuance costs 1,878 647 — Undistributed earnings attributable to preferred stockholders (12,034 ) — — Non-GAAP net income attributable to common stockholders $ 138,081 $ 113,698 $ 4,445 GAAP net loss per share attributable to common stockholders, basic and diluted $ (0.35 ) $ (0.28 ) $ (0.98 ) Stock-based compensation 1.15 0.99 0.99 Acquired intangible assets amortization 0.03 — — Acquisition-related expenses 0.02 0.01 — Fees related to shareholder activism 0.10 0.01 0.01 Restructuring activities — — 0.01 Amortization of debt discount and issuance costs 0.01 — — Undistributed earnings attributable to preferred stockholders (0.08 ) — — Non-GAAP net income per share attributable to common stockholders, basic $ 0.88 $ 0.73 $ 0.03 Non-GAAP net income per share attributable to common stockholders, diluted $ 0.85 $ 0.70 $ 0.03 Weighted-average shares used to compute GAAP net loss per share attributable to common stockholders, basic and diluted 155,598 155,849 147,762 Weighted-average shares used to compute non-GAAP net income per share attributable to common stockholders Basic 155,598 155,849 147,762 Diluted 163,337 162,310 153,755 GAAP net cash provided by operating activities $ 234,818 $ 196,834 $ 44,713 Purchases of property and equipment, net of proceeds from sales (4,702 ) (9,052 ) (5,444 ) Principal payments of finance lease liabilities (50,391 ) (60,020 ) (38,542 ) Capitalized internal-use software costs (9,486 ) (7,438 ) (7,957 ) Non-GAAP free cash flow $ 170,239 $ 120,324 $ (7,230 ) GAAP net cash used in investing activities $ (239,368 ) $ (16,383 ) $ (13,296 ) GAAP net cash (used in) provided by financing activities $ (172,861 ) $ 218,677 $ (53,416 ) 65
We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view our non-GAAP financial measures in conjunction with the most comparable GAAP financial measures. 64 Our reconciliation of the GAAP to non-GAAP financial measures for years ended January 31, 2023, 2022 and 2021 are as follows (in thousands, except per share data and percentages): Year Ended January 31, 2023 2022 2021 GAAP operating income (loss) $ 36,840 $ (27,626 ) $ (37,642 ) Stock-based compensation 185,632 178,974 154,292 Acquired intangible assets amortization 5,808 5,148 — Acquisition-related expenses 53 1,282 790 Fees related to shareholder activism (77 ) 15,644 1,402 Expenses related to litigation 722 — — Non-GAAP operating income $ 228,978 $ 173,422 $ 118,842 GAAP operating margin 3.7 % (3.2 ) % (4.9 ) % Stock-based compensation 18.7 20.5 20.0 Acquired intangible assets amortization 0.6 0.6 — Acquisition-related expenses — 0.1 0.1 Fees related to shareholder activism — 1.8 0.2 Expenses related to litigation 0.1 — — Non-GAAP operating margin 23.0 % 19.8 % 15.4 % GAAP net income (loss) attributable to common stockholders $ 8,567 $ (53,878 ) $ (43,433 ) Stock-based compensation 185,632 178,974 154,292 Acquired intangible assets amortization 5,808 5,148 — Acquisition-related expenses 53 2,349 790 Fees related to shareholder activism (77 ) 15,644 1,402 Expenses related to litigation 722 — — Amortization of debt discount and issuance costs 1,888 1,878 647 Undistributed earnings attributable to preferred stockholders (22,187 ) (12,034 ) — Non-GAAP net income attributable to common stockholders $ 180,406 $ 138,081 $ 113,698 GAAP net income (loss) per share attributable to common stockholders, basic and diluted $ 0.06 $ (0.35 ) $ (0.28 ) Stock-based compensation 1.29 1.15 0.99 Acquired intangible assets amortization 0.04 0.03 — Acquisition-related expenses — 0.02 0.01 Fees related to shareholder activism — 0.10 0.01 Expenses related to litigation 0.01 — — Amortization of debt discount and issuance costs 0.01 0.01 — Undistributed earnings attributable to preferred stockholders (0.15 ) (0.08 ) — Non-GAAP net income per share attributable to common stockholders, basic $ 1.26 $ 0.88 $ 0.73 Non-GAAP net income per share attributable to common stockholders, diluted $ 1.20 $ 0.85 $ 0.70 Weighted-average shares used to compute net income (loss) per share attributable to common stockholders Basic 143,592 155,598 155,849 Diluted 150,192 163,337 162,310 GAAP net cash provided by operating activities $ 297,982 $ 234,818 $ 196,834 Purchases of property and equipment, net of sale proceeds (4,433 ) (4,702 ) (9,052 ) Principal payments of finance lease liabilities (40,353 ) (50,391 ) (60,020 ) Capitalized internal-use software costs (14,751 ) (9,486 ) (7,438 ) Non-GAAP free cash flow $ 238,445 $ 170,239 $ 120,324 GAAP net cash provided by (used in) investing activities $ 120,600 $ (239,368 ) $ (16,383 ) GAAP net cash (used in) provided by financing activities $ (396,495 ) $ (172,861 ) $ 218,677 65
A reconciliation of free cash flow to net cash provided by operating activities, its nearest GAAP equivalent, is presented below. The presentation of free cash flow is also not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.
The presentation of non-GAAP free cash flow is also not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.
We use these non-GAAP financial measures and our key metrics for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures and key metrics provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative of our recurring core business operating results.
We believe that these non-GAAP financial measures and key metrics provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative of our recurring core business operating results.
Stock-Based Compensation We measure and recognize compensation expense for all stock-based awards granted to our employees and other service providers, including stock options, restricted stock units, restricted stock and purchase rights granted under our 2015 Equity Incentive Plan (2015 Plan) and 2015 Employee Stock Purchase Plan (2015 ESPP), based on the estimated fair value of the award on the grant date.
Amortization expense is included in sales and marketing expenses on the consolidated statements of operations. 61 Stock-Based Compensation We measure and recognize compensation expense for all stock-based awards granted to our employees and other service providers, including stock options, restricted stock units, restricted stock and purchase rights granted under our 2015 Equity Incentive Plan (the “2015 Plan”) and 2015 Employee Stock Purchase Plan (the “2015 ESPP”), based on the estimated fair value of the award on the grant date.
We make significant investments in acquiring new customers and believe that we will be able to achieve a positive return on these investments by retaining customers, cross-selling our add-on products and expanding the size of our deployments within our customer base over time. In connection with the acquisition of new customers, we incur and recognize 49 significant upfront costs.
Our Business Model Our business model focuses on maximizing the lifetime value of a customer relationship. We make significant investments in acquiring new customers and believe that we will be able to achieve a positive return on these investments by retaining customers, cross-selling our add-on products and expanding the size of our deployments within our customer base over time.
For the year ended January 31, 2022, our operating loss was $27.6 million, and our operating margin was negative 3%, compared to our operating loss of $37.6 million and our operating margin of negative 5% for the year ended January 31, 2021.
For the year ended January 31, 2023, our operating income was $36.8 million and our operating margin was 3.7%, compared to our operating loss of $27.6 million and our operating margin of negative 3.2% for the year ended January 31, 2022.
These costs include sales and marketing costs associated with acquiring new customers, such as sales commission expenses, a portion of which are deferred and then amortized over a period of benefit, and marketing costs, which are expensed as incurred. We recognize revenue as we satisfy our performance obligations to customers.
In connection with the acquisition of new customers, we incur and recognize significant upfront costs. These costs include sales and marketing costs associated with acquiring new customers, such as sales commission expenses, a portion of which are deferred and then amortized over a period of benefit, and marketing costs, which are expensed as incurred.
Cash provided by operating activities during the year ended January 31, 2022 were further adjusted by net cash outflows of $29.7 million provided by changes in our operating assets and liabilities.
Cash provided by operating activities during the year ended January 31, 2023 was further adjusted by net cash outflows of $36.3 million due to changes in our operating assets and liabilities.
Financing Activities Cash used in financing activities of $172.9 million for the year ended January 31, 2022 was primarily driven by $561.6 million in repurchases of our common stock, $57.4 million of employee payroll taxes paid related to net 58 share settlement of restricted stock, $50.4 million of principal payments of finance lease liabilities, and $9.6 million of dividend payments to preferred stockholders.
Financing Activities Cash used in financing activities of $396.5 million for the year ended January 31, 2023 was primarily driven by $274.2 million in repurchases of our common stock, $93.9 million of employee payroll taxes paid related to net share settlement of stock awards, $40.4 million of principal payments of finance lease liabilities, and $15.1 million of dividend payments to preferred stockholders.
For the years ended January 31, 2022, 2021, and 2020, our cash flows were as follows (in thousands): Year Ended January 31, 2022 2021 2020 Net cash provided by operating activities $ 234,818 $ 196,834 $ 44,713 Net cash used in investing activities (239,368 ) (16,383 ) (13,296 ) Net cash (used in) provided by financing activities (172,861 ) 218,677 (53,416 ) Operating Activities For the year ended January 31, 2022, cash provided by operating activities was $234.8 million.
Cash Flows For the years ended January 31, 2023, 2022, and 2021, our cash flows were as follows (in thousands): Year Ended January 31, 2023 2022 2021 Net cash provided by operating activities $ 297,982 $ 234,818 $ 196,834 Net cash provided by (used in) investing activities 120,600 (239,368 ) (16,383 ) Net cash (used in) provided by financing activities (396,495 ) (172,861 ) 218,677 58 Operating Activities For the year ended January 31, 2023, cash provided by operating activities was $298.0 million.
We calculate our net retention rate as of a period end by starting with the Total ARR from customers as of 12 months prior to such period end (Prior Period Total ARR). We then calculate Total ARR from these same customers as of the current period end (Current Period Total ARR).
We then calculate Total ARR from these same customers as of the current period end (Current Period Total ARR). Finally, we divide the Current Period Total ARR by the Prior Period Total ARR to arrive at our net retention rate.
Non-GAAP Financial Measures Regulation S-K Item 10(e), “Use of Non-GAAP Financial Measures in Commission Filings,” defines and prescribes the conditions for use of non-GAAP financial information.
Non-GAAP Financial Measures Regulation S-K Item 10(e), “Use of Non-GAAP Financial Measures in Commission Filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measure of non-GAAP free cash flow (as defined above) meets the definition of a non-GAAP financial measure.
The increase in billings was primarily driven by expansion within existing customers as they broadened their deployment of our product offerings, the addition of new customers, and the timing of customer-driven renewals.
The increase in RPO was primarily driven by expansion within existing customers as they broadened their deployment of our product offerings through the conversion to multi-product Suites, due to extended customer contract durations. The increase in RPO was also driven by the addition of new customers and the timing of customer-driven renewals.
Our net retention rate was 111%, 102%, and 104% as of January 31, 2022, 2021 and 2020, respectively. Our net retention rates were primarily attributable to seat growth in existing customers and strong attach rates of add-on products and our bundled Enterprise Plus plan.
Our net retention rates were primarily attributable to seat growth in existing customers and strong attach rates of add-on products and our bundled Enterprise Plus plan.
We define non-GAAP net income (loss) per share as non-GAAP net income (loss) divided by the weighted-average outstanding shares. Similarly, the same adjusting items specified in our reconciliation of GAAP to non-GAAP net income (loss) are also excluded from the calculation of non-GAAP net income (loss) per share.
Similarly, the same adjusting items specified in our reconciliation of GAAP to non-GAAP net income (loss) attributable to common stockholders are also excluded from the calculation of non-GAAP net income (loss) per share attributable to common stockholders.
The primary factors affecting our operating cash flows during this period were our net loss of $41.5 million, favorably offset by non-cash charges of $179.0 million for stock-based compensation, $78.2 million for depreciation and amortization of our property and equipment and capitalized software, and $45.9 million for amortization of deferred commissions.
The primary factors affecting our operating cash flows during this period were our net income of $26.8 million, non-cash charges of $185.6 million for stock-based compensation, $66.0 million for depreciation and amortization of our property and equipment and capitalized software, and $53.5 million for amortization of deferred commissions.
Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period. Amortization expense is included in sales and marketing expenses on the consolidated statements of operations.
Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period.
This was partially offset by $485.1 million from the issuance of Series A Convertible Preferred Stock, net of issuance costs and $25.4 million from issuances of common stock under our employee equity plans. Debt In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026.
This was partially offset by $32.2 million from issuances of common stock under our employee equity plans. Debt In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026. The Notes are senior unsecured obligations and do not bear regular interest.
For more information regarding our obligations for leases, purchase agreements, and debt, refer to Notes 6, 9, and 10, respectively, in Part II, Item 8 of this Annual Report on Form 10-K.
For more information regarding our obligations for leases, purchase agreements, and debt, refer to Notes 6, 9, and 10, respectively, in Part II, Item 8 of this Annual Report on Form 10-K. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
Accordingly, due to our subscription model, we recognize revenue for our subscription services ratably over the term of the contract. We experience a range of profitability with our customers depending in large part upon their current stage. We generally incur higher sales and marketing expenses for new customers and existing customers who are still in an expanding stage.
We recognize revenue as we satisfy our performance obligations to customers. Accordingly, due to our subscription model, we recognize revenue for our subscription services ratably over the term of the contract. We experience a range of profitability with our customers depending in large part upon their current stage.
Off-Balance Sheet Arrangements Through January 31, 2022, we did not have any relationships with unconsolidated entities that have, or are reasonably likely to have, a material effect on our financial statements. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
Off-Balance Sheet Arrangements Through January 31, 2023, we did not have any relationships with unconsolidated entities that have, or are reasonably likely to have, a material effect on our financial statements.
The Notes are senior unsecured obligations and do not bear regular interest. Each $1,000 principal amount of the Notes is convertible into 38.7962 shares of our Class A common stock, which is equivalent to a conversion price of approximately $25.78 per share, subject to adjustment upon the occurrence of specified events.
Each $1,000 principal amount of the Notes is convertible into 38.7962 shares of our Class A common stock, which is equivalent to a conversion price of approximately $25.78 per share, subject to adjustment upon the occurrence of specified events. We have made an irrevocable election to settle the principal portion of the Notes only in cash.
The primary drivers for the changes in operating assets and liabilities include a $59.2 million increase in deferred commissions resulting from capitalization of incremental commissions paid to our sales force, a $47.4 million decrease in operating lease liabilities, a $27.2 million increase in accounts receivable that was primarily due to higher sales and timing of our cash collections, and a $16.1 million increase in prepaid expenses and other assets.
The primary drivers for the changes in operating assets and liabilities include a $55.0 million increase in deferred commissions resulting from capitalization of incremental commissions paid to our sales force, a $44.6 million decrease in operating lease liabilities primarily due to recurring lease payments, an $8.9 million increase in accounts receivable primarily due to timing of our cash collections, and a $5.7 million increase in other assets.
In addition, we continue to innovate by expanding our core services and offerings with a focus on frictionless security and compliance, seamless internal and external collaboration and workflow, and integration with best-of-breed applications.
In addition, we continue to innovate by expanding our core services and offerings with a focus on frictionless security and compliance, seamless internal and external collaboration and workflow, and integration with best-of-breed applications. For example, we expect to release Box Canvas (currently in public beta), our natively integrated, interactive virtual whiteboarding tool, early this year in all Box plans.
Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.
Our definitions will likely differ from the definitions used by other companies, including peer companies, and therefore comparability may be limited. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.
Subscription and premier services revenue are driven primarily by the number of customers, the number of seats sold to each customer and the price of our services. We recognize revenue as we satisfy our performance obligation. Accordingly, due to our subscription model, we recognize revenue for our subscription and premier services ratably over the contract term.
To date, practically all of our revenue has been derived from subscription and premier services. Subscription and premier services revenue are driven primarily by the number of customers, the number of seats sold to each customer and the price of our services. 53 We recognize revenue as we satisfy our performance obligations.
In addition, we have shifted substantially all of our customer and marketing events in the United States to virtual-only experiences. Although the COVID-19 pandemic has not had a material adverse impact on our financial results for our fiscal year 2022, the pandemic has negatively impacted some of our customers and prospects.
Although the COVID-19 pandemic did not have a material adverse impact on our financial results for our fiscal year 2023, the pandemic has negatively impacted some of our customers and prospects.
There are no expenses related to litigation excluded from non-GAAP operating income (loss) in any of the periods presented. Non-GAAP net income (loss) and net income (loss) per share We define non-GAAP net income (loss) as net loss excluding expenses related to stock-based compensation, acquired intangible assets amortization and as applicable, other special items.
Non-GAAP net income (loss) attributable to common stockholders and non-GAAP net income (loss) per share attributable to common stockholders We define non-GAAP net income (loss) attributable to common stockholders as net income (loss) attributable to common stockholders excluding expenses related to stock-based compensation, acquired intangible assets amortization, undistributed earnings attributable to preferred stockholders and as applicable, other special items.
Recent Financing Activities Series A Convertible Preferred Stock On April 7, 2021, we entered into an investment agreement (the "Investment Agreement") with certain investment funds managed or advised by KKR (collectively "KKR") relating to the issuance and sale of 500,000 shares of our Series A Convertible Preferred Stock, par value of $0.0001 per share, for an aggregate purchase price of $500 million, or $1,000 per share (the "Issuance").
Refer to Note 10 in Part II, Item 8 of this Annual Report on Form 10-K for detailed descriptions of the Notes and the November 2017 Facility. 59 Series A Convertible Preferred Stock On April 7, 2021, we entered into an Investment Agreement with KKR and certain other investors relating to the issuance and sale of 500,000 shares of our Series A Convertible Preferred Stock, par value of $0.0001 per share, for an aggregate purchase price of $500 million, or $1,000 per share (the “Issuance”).
Investing Activities Cash used in investing activities of $239.4 million for the year ended January 31, 2022 was primarily driven by $170.0 million in purchases of short-term investments, $59.4 million in cash paid for acquisitions, net of cash acquired, $5.8 million of capitalized internally developed software costs, and $4.7 million of fixed asset purchases.
Investing Activities Cash provided by investing activities of $120.6 million for the year ended January 31, 2023 was primarily driven by $240.0 million in maturities of short-term investments, partially offset by $102.1 million in purchases of short-term investments, $12.1 million of capitalized internally developed software costs, and $4.4 million of fixed asset purchases.
We have historically invested our cash and cash equivalents in overnight deposits, certificates of deposit, money market funds, and short term, investment-grade corporate debt, marketable securities and asset backed securities.
We have historically invested our cash and cash equivalents in overnight deposits, certificates of deposit, money market funds, U.S. treasury securities and commercial paper.
We typically invoice our customers at the beginning of the term, in multi-year, annual, quarterly or monthly installments. We recognize revenue as we satisfy our performance obligations.
The majority of our customers subscribe to our service through one-year contracts, although we also offer our services for terms ranging from one month to three years or more. We typically invoice our customers at the beginning of the term, in multi-year, annual, quarterly or monthly installments. We recognize revenue as we satisfy our performance obligations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−2 removed1 unchanged
Biggest changeA portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates. Our international subsidiaries maintain certain asset and liability balances that are denominated in foreign currencies.
Biggest changeAdditionally, our international subsidiaries maintain certain asset and liability balances as well as operating expenses that are denominated in foreign currencies other than the functional currency and as a result, may cause us to recognize transaction gains and losses in our statement of operations impacting our operating expenses which are recognized in interest and other expense, net on our condensed consolidated statements of operations.
Effective September 5, 2019, we entered into a swap agreement with Wells Fargo Bank, National Association (Swap Agreement), in order to minimize our interest rate risk exposure due to the volatility of LIBOR.
Effective September 5, 2019, we entered into a swap agreement with Wells Fargo Bank, National Association (the "Swap Agreement"), in order to minimize our interest rate risk exposure due to the volatility of LIBOR.
As of January 31, 2022, we had total debt outstanding with a carrying amount of $30.0 million which approximates fair value. The revolving loans accrue interest at the London Interbank Offered Rate (LIBOR) (based on one, three, or six-month interest periods) plus a margin ranging from 1.15% to 1.65%.
As of January 31, 2023, we had total debt outstanding with a carrying amount of $30.0 million which approximates fair value. The revolving loans accrue interest at the London Interbank Offered Rate ("LIBOR") (based on one, three, or six-month interest periods) plus a margin ranging from 1.15% to 1.65%.
Under the Swap Agreement, we have hedged a portion of the variable interest payments of our debt by effectively fixing our interest payments over the five year term of the agreement. As of January 31, 2022, our interest rate swap had a notional value of $30.0 million.
Under the Swap Agreement, we have hedged a portion of the variable interest payments of our debt by effectively fixing our interest payments over the five year term of the agreement. As of January 31, 2023, our interest rate swap had a notional value of $30.0 million.
For the years ended January 31, 2022 and 2020, we incurred foreign exchange losses of $3.7 million and $1.1 million, respectively. For the year ended January 31, 2021, we incurred foreign exchange gains of $2.5 million. 66
For the years ended January 31, 2023 and 2022, we incurred $3.4 million and $3.7 million, respectively, in foreign currency exchange losses. For the year ended January 31, 2021, we incurred foreign currency exchange gains of $2.5 million.
Item 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We had cash and cash equivalents, restricted cash, and short-term investments of $586.9 million as of January 31, 2022. Our cash and cash equivalents and short-term investments primarily consist of overnight deposits, money market funds, and certificates of deposit.
Item 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We had cash and cash equivalents, restricted cash, and short-term investments of $461.8 million as of January 31, 2023. Our cash and cash equivalents and short-term investments primarily consist of overnight cash deposits, money market funds, and U.S. treasury securities.
To date we have managed our foreign currency risk by maintaining offsetting assets and liabilities and minimizing non-U.S. dollar cash balances and have not entered into derivatives or hedging transactions as our exposure to foreign currency exchange rates has not been material to our historical operating results; however, we may do so in the future if our exposure to foreign currency should become more significant.
To date we have managed our foreign currency risk by maintaining offsetting assets and liabilities and minimizing non-U.S. dollar cash balances and have not entered into derivatives or hedging transactions; however, we may do so in the future. 66
A hypothetical change in interest rates of 100 basis points after January 31, 2022 would not have a material impact on the combined net fair value of our outstanding debt and Swap Agreement. Foreign Currency Risk Our sales contracts are denominated predominantly in U.S. dollars.
A hypothetical change in interest rates of 100 basis points after January 31, 2023 would not have a material impact on the combined net fair value of our outstanding debt and Swap Agreement. Foreign Currency Risk Approximately one-third of our revenue is represented by customer contracts denominated in foreign currencies, which include the Japanese Yen, Euro, and British Pound.
Additionally, fluctuations in foreign currency exchange rates can result in fluctuations in our total assets, liabilities, and cash flows and may cause us to recognize transaction gains and losses in our statement of operations impacting our revenue and operating expenses.
As our foreign operations continue to grow, specifically in Japan, we have increasing exposure to fluctuations in foreign currency exchange rates. These fluctuations can result in fluctuations in our total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign subsidiaries upon translation of these amounts into U.S. dollars.
Removed
We support sales contracts denominated in 11 foreign currencies, and consequently, our customer billings denominated in foreign currencies are subject to foreign currency exchange risk. Specifically, given our growth in Japan, we have increasing exposure to changes in the Japanese Yen.
Added
For the year ended January 31, 2023, total revenue was negatively impacted by approximately 390 basis points, compared to the corresponding prior period. For the year ended January 31, 2023, total cost of revenue and operating expenses were favorably impacted by approximately 130 basis points, compared to the corresponding prior period.
Removed
Five of the 11 currencies are only offered at this time through our online sales experience and are required to be settled by credit cards; accordingly, our foreign currency exposure on these transactions is limited only to ordinary credit card settlement timeframes.

Other BOX 10-K year-over-year comparisons