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Business Overview

Box, Inc. is a cloud content management platform that helps businesses, government agencies, and non-profit organizations manage data files and collaborate within workflows.

Summary

Box, Inc. released Fiscal first quarter 2021 earnings on May 27.

  • Revenue grew 13% vs. the first quarter of last year
  • Free cash flow increased from $13.4M to $39.8M over the year
  • Net loss narrowed from -$36.8M to -$25.6M
  • Notable new customers and expanded contracts during the quarter: National Bank of Canada, NASA, US Department of Agriculture, and Toyota Finance Corporation

Peloton Commentary

Box is one of a small number of companies in which we invest that is not yet profitable. However, Box has been generating positive (and growing) free cash flow which, for newer companies, is an important indicator of future profitability.

The company’s niche is the “enterprise” client: large organizations with hundreds or thousands of individual users. These customers are more demanding than individuals regarding security requirements and the need to work collaboratively. This is an attractive market, but also requires consistent innovation.

In March, Box announced that activist investor Starboard Value, LP had acquired a 7.7% stake in the common stock and as a result, would nominate 3 additional independent directors to the board. We think Starboard’s involvement is positive as it should provide Box with valuable, shareholder-focused strategic guidance.

For Box to continue its pace to profitability, the company must balance operating cost discipline against the needs to continue investing in research and development and marketing. To that end, we like management’s history of innovation and their welcoming of Starboard’s leadership.

Disclosures

Past performance is no guarantee of future results.  Peloton owns the common stock of Box, Inc. (BOX) for certain clients. For a complete list of Peloton equity holdings, please refer to our current 13F filing. Investing involves risk, including possible loss of principal.  Diversification may not protect against market risk or loss of principal.  The opinions expressed above should be construed as neither investment advice nor a solicitation to buy or sell securities.  Actual investor results may vary. Not FDIC Insured – No Bank Guarantee – May Lose Value