Box had a bumpy ride to the public markets, taking nearly 10 months after filing its prospectus before finally celebrating its IPO earlier this year.
Even after going public, the company experienced a share count mishap by analysts in its first earnings report, that caused its stock to plunge more than 17%. The press hasn’t been particularly friendly either, with its outsized sales and marketing cost and its bleeding losses representing a perennial point of criticism in tech circles.
Yet, looking back at his first year as the head of a public company, its 30-year old CEO Aaron Levie says he’s enjoying every moment, and that it’s all part of a growth process for his $1.7 billion business.
“We’ve definitely got thrown a lot of punches over the past year,” Levie told Business Insider. “It’s had its trickiness here and there, but for us, it’s been a great experience.”
Levie points out the biggest advantage to being a public company, especially in the enterprise tech space he’s in, is the ability to be transparent and clear about his business with potential customers. Despite claims by “unicorn” startups that say life is easier as a private company, because you don’t have to deal with the public scrutiny, Levie argues that when you’re dealing with big enterprise customers, it’s better to have that validation as a public company.
“If you’re the CIO of GE or IBM, you want to ensure that you’re betting on a company that’s going to be around for the long-run, and understand its financials,” Levie said. “For us, being public is a dramatic accelerant to answering and addressing all of those kind of questions and concerns.”
All part of the grind
Indeed, Box has been able to sign up some of the largest companies lately, including General Electric, Coca Cola, and Eli Lily, while adding Amgen, Southwest Airlines and Nest Labs in the previous quarter alone. Its recent partnership deal with IBM will only help it get into larger accounts that it said on Wednesday has led to over 100 potential deals in the pipeline.
Still, Wall Street has not been kind to the company, with its share price slumping over the past 5 months, essentially wiping out all of the IPO gains it saw early on.
And the hits keep coming.
Box reported solid quarterly results on Wednesday, beating its revenue forecast and boosting its full year revenue guidance. Yet its shares dipped about 1.8% in after hours, hovering around its $14 IPO stock price.
Levie says that’s all part of the grind of being a public company, in which you have to deal with the daily and quarterly volatility, that at times, has nothing to do with the underlying health of the core business.
“In the public market, there’s going to be a lot of reasons for that that have nothing to do with the realities of the company, but more to do with the trading dynamics of your specific stock or your specific sector,” he said.
Levie acknowledged the company’s widening losses may be one of the reasons for some investor bearishness. Box’s non-GAAP operating loss grew to $37.9 million in the third quarter from last year’s $34.2 million, although relative to the total revenue, the amount shrunk to 48% of total revenue from 60%, respectively.
“We are investing aggressively to grow the business as rapidly as possible,” Levie added. “Some investors are going to look at our losses and say we don’t understand how that business gets profitable.”
The long game
For what it’s worth, Box’s billings, which includes both revenue and change in deferred revenue, also jumped 38% to $89.4 million in the third quarter. The company reiterated its forecast to be cash flow positive by the last quarter of next fiscal year.
“Some don’t understand why we’re making the investments we are, but many others do, and that’s what you deal with as a public company, and that’s why you see these fluctuations,” he said.
On top of that, Levie stressed that being public makes it easy for employees to trade their equity in the market, whereas private companies are at risk of losing their perceived value, as has been the case for some of the “unicorn” startups lately.
But regardless, Levie says it’s still very early in the game, and Box is going after a big opportunity. The move to cloud software in the enterprise is only beginning, and especially in the content management space it’s in, there hasn’t been a clear market leader like Salesforce in the CRM space or Workday in the HR market.
“We believe that there is a once in a lifetime move from on-premise technology to the cloud,” Levie said. “So for us, we’re very much worried about the next decade as opposed to the next week.”