Research

Billionaire Chamath Palapitiya Said BOX Equity will be 10x in 10 Years from AI-Driven 25% Revenue CAGR

View above about Issue: BOX Equity Price

And so we get to our 2018 pick for Ira Sohn, which is Box. So why Box? For a bunch of reasons. The first and foremost is that they sit on top of an enormous amount of [artificial intelligence] R&D that these internet giants [Amazon and Google] are already doing . . . And they do three very simple basic applications with all of this infrastructure that has been built for them. They give companies the ability to add intelligence to imagery, to audio, and to video . . . When you layer this AI-led digital transformation, what we think is going to happen, is very similar to the last decade, we’re going to see, on average, 20-25% compounding in their revenue, we’re going to see an expansion of all of these verticals, we’re going to see an expansion of ARPU driving value-added services, and we think we’re going to see even a modest multiple expansion over the next 5 to 10 years, and when that happens, what you see is a business that can be extremely valuable. Box can be a 10x in 10 years.
Research

6% Shareholder Starboard Value Said BOX Equity can Offer Good Returns if Management Gives Up on 25% Revenue CAGR

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The issue comes when you’re promising more growth than you’re achieving and you’re not able to pivot and balance that profitability and instead, as you may see in Box, you instead continue to spend more and more dollars chasing that growth. Those companies that are reaching that level really need to also understand how to balance profitability.
Analysis

We See About 1/3 Odds of > 5x Return on BOX Equity in 5 Years and 1/3 Odds of Losing Money, for a 5x Mean Return

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Even after its recent rise, Box stock seems to reflect cautious expectations about the sustainability of its differentiation even for its current paying users, not to mention for its non-paying registered users or any other prospective users. We think the odds are higher that value-added features will make Box sticky at least for its current paying users and enable it to not only retain them but continue to increase prices. We see good mean return and upside vs. downside odds. If you are reading on a smartphone, flipping to landscape orientation may help.
Analysis

For Investors Seeking to Avoid the 1/3 Odds of Loss on Box Common, a Term Loan Plus Warrants May Provide a Better Way to Play Scenarios for Enterprise Value

View above about Issue: MOIC on Box securities owned by PCI

Below, we see percentiles for future return on a hypothetical $200M investment by a Private Credit Investor in a $200M term loan with 20% coverage in warrants struck at 150% of the current equity value. This upside & downside might suit some investors even better than the common equity's upside & downside. If you are reading on a smartphone, flipping to landscape orientation may help with this chart.
Analysis

A Private Credit Investor's 2x Mean Return is Influenced by the Odds for Box's Future Enterprise Value & Cash Balance

View above about Issue: MOIC on Box securities owned by PCI

Box equity value is driven largely by the company's enterprise value, which also influences other securities issued by Box. Because we produce odds of many enterprise values at multiple future horizons, we can assess the trade-offs between anything in the capital structure. Below, the lines show 100 cases for a hypothetical $200M term loan plus warrants issued to a Private Credit Investor ("PCI") for a $200M investment, the rainbows show their 10th, 25th, 50th, 75th, and 90th percentiles, and the dotted line shows their mean. Drag across some lines to zero in on some cases. For example, drag the lines that are only in the rainbow to eliminate the outlier top 10% & bottom 10% of cases. And hover over any case for enterprise value in the bottom panel to see investors' outlook at that horizon, which influences enterprise value at that horizon. If you are reading on a smartphone, flipping to landscape orientation may help.
Analysis

Future Enterprise Value is Driven Especially by Future Multiple, and We See 25% Odds it is > 50% Above Dropbox's Current Multiple in 2 Years and 10% Odds it is > 50% Below

View above about Issue: BOX Equity Price

Odds of returns on BOX Equity through any horizon depend on odds of exit multiples at that horizon, which depend on expectations at that horizon for Growth, Profitability & Scale. We estimate odds for those expectations by Quantifying Stories in Scenarios. In the chart below, click some multiples to see the expectations that can drive them. If you are reading on a smartphone, flipping to landscape orientation may help.
Analysis

Future Cash Balance Depends on Differentiation Influencing Peak Share & Pricing, and We See More Cases for Upside to Differentiation than Downside

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Odds for future cash flows depend on odds for differentiation and its impact on peak economics for different target markets. By Quantifying Stories in Scenarios for those, we produce not just a base case and an update & downside anchored closely to it, but a wide range of 100 cases with odds that reflect our research. In the table below, drag the dot to explore what can drive different cases for long-term cash flow. If reading on a smartphone, flipping to landscape may help.
Analysis

We Frame Our Key Judgments Across Several Levels of Differentiation, Across Several Markets for Which Investors May Change their Expectations for Box's Differentiation Over Time

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We drive many cases for cash flows and valuation not by maintaining many copies of a spreadsheet and manipulating many inputs manually but by connecting an integrated financial statement model, with appropriate cash flow treatment of growth & decline, to a concise depiction of the main drivers of the fundamental story and how those drivers may be related. Check out a summary of those drivers in the table below, and then check out some of our research attached to some of those key drivers in the posts that follow.
Research

Box has Moved from One of Many Places to Upload Documents to a Provider of Suites that Customers may Design their Workflows Around

View above about Issue: Odds that Box is One of a Few Alternatives for its Current Paying Customers

Over the past few years, we've methodically been building the category-defining cloud content management platform focused on three key differentiators, frictionless security and compliance, seamless external and internal collaboration and workflow, and worldclass integrations and API's that extend the value of Box into any application. In today's new work environment, this product strategy is incredibly relevant. And in Q1, we delivered several new innovations. We announced new automated malware detection capabilities and controls in Box Shield. Box Shield is our fastest growing add-on product in the Company's history, and we have plans to continue to enhance and expand its capabilities to drive even further adoption . . . Earlier this month, we also introduced the All-New Box experience to increase productivity and enhance team collaboration. The All-New Box experience includes an updated simplified design and much faster performance, Box collections, which provides the ability to organize files and folders around topics and workstreams that are important to the user and annotations, which will allow users to leave free form markups and text comments directly in Box when previewing more than 100 different file types.
Research

Box is Having Success Increasing Price / Seat via Upselling More of its Suite of Products

View above about Issue: Peak monthly price per sub for Current Paying Customers if Box is One of a Few Alternatives for them

We delivered strong subscription revenue driven by high customer expansion rates in Q1, particularly with our larger enterprise customers. These larger companies are accelerating their adoption of remote work solutions and tend to have more pronounced needs for Box's differentiated security, workflow automation and integration capabilities as they digitize how work is being done across their increasingly distributed workforces.
Research

There is Still Huge Opportunity for Existing Box Subs to Pay More by Adding More of its Suite

View above about Issue: Peak monthly price per sub for Current Paying Customers if Box is One of a Few Alternatives for them

And when we look at our customers, who have adopted at least one of our add-on products, they collectively now represent about 54% of our recurring revenue, and that's up from about 45% a year ago.
Research

Real-Time, Box is Seeing Current Paying Users Engage with More Paying Features for not only Storage but also Workflow

View above about Issue: Peak monthly price per sub for Current Paying Customers if Box is One of a Few Alternatives for them

There is sort of this moment be in February, transitioning to middle of March where you can see that collaboration is going up in a range of industries, public sector, life sciences, healthcare and marketing and advertising, tech companies and then usage of things like integrations with Zoom and Webex and Slack and other tools. So that shift in more collaboration, more sharing more external collaboration of data is persisted throughout the quarter. We think this is a great opportunity to drive greater adoption within our customer base right now.
Research

Subscriber lifetime estimates for Box are justified within the SaaS industry

View above about Issue: Current Paying Users' Subscription Lifetime in Months if Box is One of a Few Alternatives for Them

As contract sizes increase, gross dollar churn consistently trends downwards (presumably related to longer term contracts). For SaaS companies with media contract sizes of over $5,000, the median annual churn will be ~10%. A 10% churn rate implies a 120 month subscriber life, justifying the 120 day figure cited. The ranges for these SAAS companies could easily fall as high as ~20% (justifying the 60 month sub life) or as low as ~5% (justifying a 240 month life).
Research

Subscriber Lifetimes may be Higher Still since Box Saw Contract Durations Actually Increase during the COVID-19 Freeze

View above about Issue: Current Paying Users' Subscription Lifetime in Months if Box is One of a Few Alternatives for Them

One note I make in terms of the churn side of things and just the overall dynamics is alined with that our contract duration hasn't been impacted in this environment as we continue to be a critical part of our IT -- our customers' IT strategies. So we've actually seen the average contract duration, length of those commitments improving a bit over time. And that's on average about 18 months across our customer base. Our larger enterprise customers are much more likely design multi-year commitments with many of our smaller customer signing one-year deals. But I just wanted to differentiate between the payment duration impact and the contract duration lack of impact.
Research

Box's value proposition for its 70.6M registered users may be second only to the one for its 13.6M paying users

View above about Issue: Prospective subs by market segment and org Box, Inc. and for customer Broader market

At January 2020, Box had 70.6M registered users and 13.6M paying users.
Research

The Sudden Shift to WFH May Improve Box's Value Proposition for its Non-Paying Users as More of their Employers Now Focus on Remote Workflows

View above about Issue: Odds that Box is One of a Few Alternatives for Current Registered Users

The opportunities for flexible work, global and virtual teams, and re-imagined business processes have always been a key element in our vision. While there is an undoubtedly significant economic disruption in many sectors right now, there is also an unmistakable sense that this is an opportunity to accelerate digital transformation. Organizations are now beginning to re-factor how they operate for the 21st century, eliminating paper-based processes, automating manual workflows, and creating new digital customer experiences.
Research

Box may Multiply its Paying Users Just by Converting Non-Paying Registered Users within Companies that already have Paying Users

View above about Issue: Peak market share of Current Registered Users if Box is One of a Few Alternatives for Them

We -- as we shared with investors in the past, we have a tremendous opportunity to expand Box throughout our customer base. In most large organizations, we're still in some cases only penetrated in 10% or 15% to 20% of the employee population that's available. So -- especially in this move to remote work or work from anywhere strategy, enterprises need the ability that use technology across their organization.
Research

Box Expects More Efficient Sales from Shift from in-Person to On-Video

View above about Issue: Customer Acquisition Cost for Current Registered Users if Box is One of a Few Alternatives for Them

Yeah. I was just going to say, we're very excited about that transition to more virtual selling, that ability to get more and more customers on video right away. I mean, it used to be that if we wanted to go -- have a conversation with a Fortune 500 company, that might be punted by two, three, four weeks out, you have to travel, we have get the team together, and we're having those meetings get scheduled within a day or two of the initial kick-off. So that's one dimension . . . And on a go-forward basis, for all the reasons that we mentioned around our ability to successfully drive these deals and momentum in a different environment, we don't anticipate travel and events expenses returning to 100% of their pre-COVID levels.