Box sets target on US government and Europe following 37% growth in Q1

Box co-founder and chief executive Aaron Levie briefing journalists and analysts in London this week

CEO Aaron Levie briefing journalists and analysts in London 

Box has reported healthy growth over the last quarter, increasing revenues 37% to $90.2 million, which the company has attributed to a more diversified portfolio. Public sector organizations and the European market are now in the crosshairs for future growth.

The US government is an area which has seemingly been prioritized by CEO Aaron Levie and the Box team moving forward, following the announcement Box for Government achieved FedRAMP certification from the Department of Defence. As the Department of Defence claims it has some of the highest degree of scrutiny around cloud platforms and technology, the team believe the certification will create a ripple effect throughout the US.

As a number of state and local government agencies lean on federal standards for guidance on what cloud technologies to adopt, the certification could lead to positive strides for the company. Levie highlighted the certification, as well as the partnership with IBM, has created a healthy sales pipeline for the team over recent months in the public sector segment.

The company added more than 5,000 customers to its ranks over the period, taking the total number to more than 62,000 businesses. Box now has 46 million users worldwide, of which 13% are now paying. Levie also highlighted work on its customer services processes has paid off over the quarter as customer churn rate is now below 3%.

“In Q1 we achieved record revenue of $90 million, up 37% year over year,” said Levie. “We also continue to gain operational efficiency and demonstrate leverage in our business model as we move towards our commitment to achieve positive free cash flow in the fourth quarter and in January 2017. Looking ahead underlying demand for Box remains very strong and our competitive position in the market has never been better. “

We created record sales pipeline in the quarter with several seven figure deals in the mix. This has been driven by the growing demand for a modern approach to enterprise content management, our differentiated product offerings and our maturing partnerships that are becoming an integral part of our go to market strategy.”

Box’s expansion strategy over recent months has been built upon the diversification of its product portfolio, but also its partner ecosystem. Firstly from a product perspective, the team launches Box Zones which enables organizations to dictate where data is stored around the world. This offering was brought about through the partnership with IBM.

Data residency is proving to be a sensitive area in recent months due to the confusion over data residency concerns following the decision of the Court of Justice of the European Union to strike down the Safe Harbour agreement, and the subsequent criticism its successor, EU-US Privacy Shield, has received. The Box Zones offering would appear to be the company’s means of negating the impact of data residency by removing the concern of transatlantic data transmission. The team claim the offering has not only gained traction with new customers, but also created a number of upselling opportunities for companies who have operations in regions where data protection rules are more stringent than the US.

Aside from Box Zones, the team has also launched a number of new offerings including its Governance product, KeySafe and the aforementioned Box for Government offering. Aside from creating new opportunities in the US, the product diversification has also been credited with growth in new regions, which is a key pillar for the Box expansion plans.

From a partner ecosystem perspective, the quarter saw a number of new announcements as well as positive wins out of longer standing relationships. Box announced a new partnership with Adobe in April, aiming to simplify working with digital documents in the cloud, though Levie was particularly focused on the relationship with Microsoft, which has yielded positive results throughout the quarter.

“And nowhere is our ecosystem strategy more relevant than our partnership with Microsoft which continues to yield significant dividends,” said Levie. “For the first time ever customers can now collaboratively edit their Office documents that are stored in Box or edit them on their iPad or iPhone. Adoption of Office 365 continues to be a key driver for new customers to invest in Box as well as allow existing customers to expand their usage of Box.”

Partnerships currently influence around 20% of Box’s revenues which aside from Microsoft also includes AT&T and IBM. The partnership with IBM has been particularly successful in the company’s drive towards Europe, where the option to store data in Big Blue’s German and Irish data centres is attractive, according to Levie.