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Box Forecasts Annual Sales Growth of Up to 17% in 2025

Box Forecasts Annual Sales Growth of Up to 17% in 2025

(Bloomberg) -- Box Inc. gave a forecast for annual revenue growth of as much as 17% in 2025 as the content management software provider works to drive higher sales and improve margins following a bitter proxy fight.

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Earlier this month, Box said sales would increase as much as 14% in the current fiscal year. The projections announced Wednesday suggest sustained growth through the next two fiscal years and top analysts’ estimates, according to data compiled by Bloomberg. In the same time frame, Box said operating margins will rise to as much as 28%, from 20% in the fiscal year ended Jan. 31. The company expects net retention rates to remain steady at 111% over the next three years, indicating that some existing customers plan to spend more on services from the vendor.

The estimates should serve as a sign to investors of the sustained health of Box’s business, according to co-founder and Chief Executive Officer Aaron Levie. The projections may also differentiate the Redwood City, California-based company from other software companies that grew significantly during the pandemic but are now struggling to maintain that momentum. While some vendors like DocuSign Inc. have stumbled in recent quarters, they are still posting much higher quarterly growth figures than Box.

“The tide has shifted away from the companies that were spending at all costs and investing every single dollar back into growth,” Levie said in an interview. “Investors at some point want to understand what’s your long-term economic model and what’s the durability of that model.”

Levie said an expansion of Box’s product line is leading to higher-priced contracts with new and existing customers. The company recently added electronic signature capabilities, a by-product of its $55 million acquisition of SignRequest, and plans to release additional services this year. Box is counting on the bundled approach to compete with rivals like Microsoft Corp. and Alphabet Inc.’s Google that can offer competing products as part of a larger package of services.

The improvements in the business follow a proxy battle with Starboard Value LP, which resulted in the appointment of two board members picked by the activist investor. Box is moving more of its core infrastructure from self-hosted data centers to the major public cloud providers. The switch, and improvements in its own software, underscore the expected margin expansion, Levie said.

“Over the long run, we’d like to be largely in the public cloud,” he said.

Box will launch a $150 million share repurchase plan for fiscal year 2023, the company said at its analyst day. Last quarter, Box spent $140 million to buy back 5.5 million shares.

The shares have declined less than 1% this year at Wednesday’s close, compared with much larger drops for many of its software peers and an 8.6% fall in the S&P 500 Index.

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©2022 Bloomberg L.P.

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