EUR 850.00 For Business Accounts Only

Morningstar | Longer Sales Cycle Results in Lowered Top-Line Fiscal 2020 Guidance for Box

Box is an enterprise-grade cloud content management solution with 64 million users (19% paying) as of January 2019 and with deployments approaching 100,000 employees. Box employs a top-down sales approach, with sales people selling directly into a CIO and has achieved success with large organizations, counting 70% of Fortune 500 companies as customers. Large customers make up a very sticky/significant portion of Box’s revenue with roughly 60% of revenue coming from customers with over 1,000 employees. While Box boasts low churn rates (~4% churn is likely even lower with Fortune 500 customers), this sales approach is traditionally expensive, and we are unsure the marketing spend is paying dividends and will allow Box to carve out an economic moat.Box has attempted to move beyond the commodity cloud storage business and become a major content collaboration and enterprise content management platform (ECM) as more enterprises shift their content to the cloud. However, we are concerned about the competitive landscape as Box squares off against well-capitalized companies like Microsoft and Alphabet and to a lesser extent Dropbox.CCP products support workflow improvements, integration with outside applications (Slack, Adobe), file syncing, ability to collaborate with colleagues on the same document at the same time, and specifically in Box’s case, enterprise grade governance capabilities for highly regulated verticals like healthcare and financial services. In the move toward ECM, Box is pushing to organize and store all content for a company. This will enable Box to expand into areas like workflow automation, record maintenance, and advanced search.While Box’s product has resonated with large enterprises, we have concerns about its future growth prospects as management decided to remove the timeframe (previously fiscal 2022) when it hopes to achieve its goal of $1 billion in revenue. In particular we are concerned that lagging salespeople productivity (less than one $100,000-plus average contract value closed per year), a fraying relationship with key strategic partner IBM, and increased competition from Microsoft will not allow Box to re-accelerate revenue growth.