Box, Inc. · NYSE:BOX
Box — Proxy Contest (August 2021)
67 slides from Box's proxy contest presentation, Aug 12, 2021
Slide 1: Successfully Executing Strategy to Drive Long-Term Value for All Stockholders
Successfully Executing Strategy to Drive Long - Term Value for All Stockholders August 12, 2021 Confidential l
Slide 2: Forward-looking Statements & Non-GAAP Financial Measures
2 Confidential l Forward - looking Statements & Non - GAAP Financial Measures This presentation contains forward - looking statements that involve risks, uncertainties, and assumptions, including statements r egarding Box’s expectations regarding the size of its market opportunity, sales productivit
Slide 3: Table of Contents
Table of Contents 3 Confidential l Executive Summary 4 An Introduction to Box 7 Successfully Evolving Our Business and Delivering Strong Operational Improvements and Results 10 KKR - Led Investment and Subsequent “Dutch Auction” Self - Tender in the Best Interest of All Stockholders 29 Strong, Indep
Slide 4: Executive Summary
Executive Summary
Slide 5: World-Class Board and Leadership Team with the Right Strategy to Drive Value
World - Class Board and Leadership Team with t he Right Strategy to Drive Value for Stockholders 5 Confidential l Successfully Evolving Our Business to Drive Operational Results Accelerating Growth and Driving Margin Improvement Board Has Implemented Significant Board and Governance Changes Added
Slide 6: World-Class Board and Leadership Team (Cont.)
Diverse skillsets and proven track records of helping public companies drive disciplined growth, profitability, and stockholder value Global go - to - market strategy and business operations experience through all business cycles Significant SaaS and enterprise software industry expertise as b
Slide 7: An Introduction to Box
box An Introduction to Box
Slide 8: Box Overview
Scan Classify Share Collaborate Automate Sign Publish Retain Extend Ingest Box Overview • Founded in 2005; Headquartered in Redwood City, CA • Leading Cloud Content Management platform that enables organizations to manage and share content from anywhere or any device • Addressing one of the largest
Slide 9: Category-Leading Cloud Content Management Platform
9 Category - Leading Cloud Content Management Platform Confidential l Differentiated Offering Competes Favorably Against Both Legacy and Cloud Vendors Note: Permission to use charts neither sought nor obtained. Emphasis added to identify Box.
Slide 10: Successfully Evolving Our Business and Delivering Strong Operational Improvements and Results
Successfully Evolving Our Business and Delivering Strong Operational Improvements and Results
Slide 11: The Box of Today is Not the Box of 2019
The Box of Today is Not the Box of 2019 Confidential l 11 • The majority of Starboard’s critiques of Box’s performance relates to periods prior to the March 2020 settlement agreement – Box’s Board and management team agreed that prior performance needed to be improved • This is why the Board entered
Slide 12: Recent Total Stockholder Returns Reflect Support for Our Strategy
49% 38% 64% 22% Box SaaS Peer Set Dropbox OpenText 80% 124% 54% 100% Box SaaS Peer Set Dropbox OpenText 110% 90% 89% 84% Box SaaS Peer Set Dropbox OpenText 40% (12%) 46% 17% Box SaaS Peer Set Dropbox OpenText While We are Not Satisfied with Our Long - Term Performance, Recent Total Stockholder Retur
Slide 13: Box's Recent Track Record of Consistently Beating Market Expectations
Revenue Performance vs. Consensus (%) (1) EPS Performance vs. Consensus (Cents) (1) Quarter In-Quarter Forward Quarter Guide In-Quarter Forward Quarter Guide Q3 FY20 1.4% Beat 0.4% Beat In-Line In-Line Q4 FY20 1.1% Beat 0.9% Beat $0.03 Beat $0.02 Beat Q1 FY21 0.9% Beat 0.7% Beat $0.05 Beat $0.05 Bea
Slide 14: Expansion of Valuation Multiple Since the Starboard Settlement
2.8x 4.4x 5.2x Starboard Settlement (3/24/2020) Post-KKR Transaction Announcement (4/9/2021) Current (8/11/2021) Expansion of Valuation Multiple Since the Starboard Settlement Enterprise Value / NTM Revenue 14 Confidential l (1) (2) (3) Notes: NTM revenue as reported by Refinitiv ; Capitalization ta
Slide 15: Analysts Overwhelmingly Agree Our Strategy and Execution are Producing Results
“Box saw success with large deals, closing a F1Q record 59 +$100k deals (+48% y/y ) vs . 40 a year ago as Suites remains a driving force with a record 49% attach rate on +$100k deals . More broadly Box is committed to the multi - product/upsell strategy, generating 59% of recurring revenue from cust
Slide 16: Box is Successfully Evolving its Business
Box is Successfully Evolving its Business Building a stronger foundation across product, customer, and GTM to deliver against stated targets Multi - year investments in product innovation, including Shield and Relay, resulting in award - winning , multi - product platform Solution selling succes
Slide 17: Reaping the Benefits of Investment in Product Innovation
Enterprise File Sync and Share Cloud Content Management Box Core Box KeySafe Box Platform Box Shield Box Governance Box GxP Validation Box Zones Box Relay FY05 FY16 FY17 FY18 FY19 FY20 FY21 Box Sign FY22 17 Executing on product roadmap to drive differentiation, adoption, expansion, and lifetime valu
Slide 18: Shift to Multi-Product Solution Selling is Paying Off
Shift to Multi - Product Solution Selling is Paying Off Consistent improvement in attach rates demonstrates platform’s enhanced strategic value Attach Rates for Box Suites (Multi - Product Pricing Plans) for $100K+ Deals (1) 10% 70%+ Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2
Slide 19: Prudent, Strategic M&A to Extend Platform Functionality
“ Furthermore, the addition of Box Sign (stemming from the recent SignRequest acquisition) should not only provide improved functionality to the core platform , but also create monetization opportunities for higher tier use - cases that require native e - signature capabilities.” Prudent, Strategic
Slide 20: Strong Customer Economics and Upsell
Customers adopting one or more add - on products exhibit ~20 point higher net retention , ~ 10 point higher gross margin, and ~7X higher average Annual Recurring Revenue than Core - only customers 20 Total Account Value & % of Total Core Only Core with 1 add - on Core with 2+ add - ons (matured from
Slide 21: Re-Accelerating Customer Momentum and Expansion
Re - Accelerating Customer Momentum and Expansion COVID’s impact on customer metrics only transitory as strength of underlying execution drives recent results Quarterly Net Retention Rate 105% 104% 104% 107% 106% 103% 102% 103% 106% (1) Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22
Slide 22: Increased Efficiency and Productivity in GTM Efforts
Sales productivity • Double digit improvement in Enterprise bookings per AE YoY • Increased account executive tenures drives higher productivity • Simplifying sales motion via Suites and repeatable use cases • Targeting investments in our most productive geographies and segments Sales & marketing le
Slide 23: Continued Strong Gains in Salesforce Productivity
Continued Strong Gains in Salesforce Productivity 23 Board and management have made significant investments to improve productivity and efficiency Confidential l 4 1H FY20 1H FY21 1H FY22 1H FY20 1H FY21 1H FY22 1H FY20 1H FY21 1H FY22 Average Productivity by Rep by Segments Enterprise Commercial To
Slide 24: Delivering Scaled Growth and Enhanced Profitability
Delivering Scaled Growth and Enhanced Profitability Significant progress on our balanced approach to growing the business profitably Quarterly Revenue ($ MM) (1) $148 ~$214 Q2 FY19 Q2 FY22E TTM Non - GAAP Operating Margin ($ MM) (2) ($40) Q2 FY19 Q2 FY22E 24 (7.3%) ~18.3% Confidential l 5 Notes: Box
Slide 25: Optimizing Costs to Accelerate Margin Expansion
Optimizing Costs to Accelerate Margin Expansion Disciplined efforts across the business to reduce underlying cost structure Workforce Strategy • Disciplined in headcount expenses • Leveraging lower cost regions to drive savings Gross Margin Improvements • Completed data center migration mid - FY21 t
Slide 26: Business Well Positioned to Support Growth Acceleration
13.6% 12.1% 12.6% 11.4% 10.6% 8.3% 10.3% 11.3% (1) Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22E Q3 FY22E Q4 FY22E Business Well Positioned to Support Growth Acceleration Success in rolling out multi - product strategy and streamlined GTM driving sustainable growth YoY% Quarterly
Slide 27: Strong Billings and RPO Growth Validate Strategy
Strong Billings and RPO Growth Validate Strategy Forward metrics signify increased revenue visibility and growth re - acceleration Notes: Box fiscal year ends January. 1. Reconciliations of billings to revenue, deferred revenue, and contract assets calculated in accordance with GAAP can be found in
Slide 28: Committed to Exceeding Growth and Profitability Targets
Revenue Growth + Free Cash Flow Margin ( 1) 28 ~ 25% 30% + 35% + 40% + 26.3% 32%+ FY21 FY22 FY23 FY24 Stated Target Actual Confidential l Notes: Box fiscal year ends January. 1. Free Cash Flow Margin is a Non - GAAP financial measure . A reconciliation to its nearest GAAP financial measure can be fo
Slide 29: KKR-Led Investment and Subsequent Dutch Auction Self-Tender
KKR - Led Investment and Subsequent “Dutch Auction” Self - Tender in the Best Interest of All Stockholders
Slide 30: KKR Investment Brings Significant Strategic Value to Box
KKR Investment Brings Significant Strategic Value to Box 30 Confidential l KKR is motivated to see stockholder returns exceed $27 John Park brings valuable experience as a seasoned board member of numerous leading enterprise software and SaaS companies John Park will serve as a director on the
Slide 31: Positive Analyst Reaction to KKR-Led Investment; Stock Price Increase
Positive Analyst Reaction to KKR - Led Investment; Stock Price Increase Since Announcement Note: Market data as of August 11, 2021. Emphasis added to research report excerpts. 31 Confidential l Analysts cite 1 - day s tock p rice d rop d riven by removal of M&A speculation January 15, 2021 Strategic
Slide 32: KKR-Led Investment Was Result of Robust Process
KKR - Led Investment Was Result of Robust Process Focused on Maximizing Value for Stockholders 32 Confidential l The 4 - member Strategy Committee of our Board – which included all three directors appointed to the Board pursuant to the March 2020 settlement agreement with Starboard – led a multi - m
Slide 33: Investment Provided Stockholder-Friendly Optionality
Investment Provided Stockholder - Friendly Optionality 33 Confidential l Satisfies Buyback Requested by Stockholders Equitable Treatment for All Stockholders • Provided the opportunity for stockholders to sell their stock at a materially higher price than the low twenties per share that Starboard in
Slide 34: Investment and Repurchases Designed to Be Dilution Neutral
KKR - Led Investment and Subsequent Repurchases Designed to Be Dilution Neutral t o Stockholders 34 Confidential l Box continues to repurchase shares with the proceeds from the KKR - led investment • Repurchases occurring below preferred conversion price of $27 ̶ 9.25MM shares repurchased at $25.75
Slide 35: Strong, Independent and Qualified Board to Oversee Strategy
Strong, Independent and Qualified Board to Oversee Strategy Taking Proactive Steps to Enhance Best - in - Class Corporate Governance
Slide 36: Significantly Refreshed and Diverse Board Valuing Stockholder Views
Significantly Refreshed and Diverse Board Valuing Stockholder Views 40% Of Our Directors Are Women 7 of 9 Independent Directors Have Joined Since 2018 5 / 3 Year Average / Median Director Tenure Settlement Agreement with Starboard Value 2017 2018 2019 2020 2021 Average Tenure (Years) (1) 8.0 7.9 8.2
Slide 37: Highly Qualified Board for SaaS and Enterprise Software Company
Highly Qualified Board for SaaS and Enterprise Software Company Focused on Growth and Profitability Sue Barsamian (Class III / 2018) • Former Sales and Marketing Officer of HPE Software at Hewlett Packard Enterprise • Former General Manager of Enterprise Cybersecurity Products at Hewlett Packard Ent
Slide 38: Box's Directors Have a History of Supporting Sales of Their Companies
Box’s Directors Have a History of Supporting Sales of Their Companies When Doing So Maximizes Stockholder Value 38 Confidential l $35.7 billion Kimberly Hammonds $12.4 billion (1) Dana Evan $7.7 billion Carl Bass ELOOLRQ -DFN/D]DU $6.5 billion Sue Barsamian $3.3 billion Kimberly Hammonds Sue
Slide 39: Commitment to High Standards of Corporate Governance
Commitment to High Standards of Corporate Governance Recent and Ongoing Enhancements Eliminated Dual Class Structure in 2018 Eliminated Supermajority Vote Requirement to Amend the Bylaws Updated Corporate Governance Guidelines $GRSWHG1(2'LUHFWRU6WRFN2ZQHUVKLS*XLGHOLQHV • 10 - member Board wit
Slide 40: Compensation Program Promotes Executive Alignment with Stockholder Interests
40 Confidential l Compensation Program Promotes Executive Alignment with Stockholder Interests CEO Compensation That is Fully Aligned with All Stockholders Provisions and Philosophy That Encourage Long - Term Value Creation x CEO has historically directed any equity awards that would have otherwise
Slide 41: Board and Compensation Committee Overseeing Compensation Program
Box’s Board and Reconstituted Compensation Committee a re Actively and Appropriately Overseeing Compensation Program Compensation program will continue to evolve taking into account stockholder feedback Starboard Topic Disclosure x The number of NEOs is determined by SEC rules and regulations x The
Slide 42: Compensation Committee Focused on Burn Rate
Box’s Board and Reconstituted Compensation Committee Have Been Keenly Focused on Burn Rate 42 Confidential l 7KHUHLVDGHOD\EHWZHHQUHGXFHGEXUQUDWHDQGUHGXFHGUHSRUWHGVWRFN EDVHGFRPSHQVDWLRQH[SHQVH • Since the beginning of 2020, the Box Board made substantial changes to personnel responsi
Slide 43: Starboard's Demands are Not in the Interest of All Stockholders
Starboard’s Demands are Not in the Interest of All Stockholders; Election of its Nominees Would be Destructive to Stockholder Value
Slide 44: Box Has Attempted to Work with Starboard Since Their Arrival
Box Has Attempted to Work with Starboard Since Their Arrival Confidential l • Prior to 2020, Box grew its revenue base but decelerating growth rates and negative operating margins weighed on the performa nce of the Company and its stock price. • Starboard contacted the Company in mid - 2019. The
Slide 45: Box Has Attempted to Work with Starboard (Cont.)
Box Has Attempted to Work with Starboard Since Their Arrival (Cont.) 45 Confidential l • In early 2021, the Board evaluated its strategic alternatives as the management team continued to execute the Company’s plan to improve the business. The Board formed a Strategy Committee that included Mr. Lazar
Slide 46: Starboard is Not Aligned with All Stockholders
6WDUERDUG LV 1RW$OLJQHGZLWK$OO6WRFNKROGHUV 46 Confidential l Ignoring Consistent Progress Abruptly Called for Sale Has Repeatedly Demanded Firing of CEO in Absence of Sale Criticized Value - Enhancing Investment • Starboard is ignoring consistent progress, has been close - minded to new inform
Slide 47: Box Already Executing Starboard's Recommendations for Operational Improvement
Box Has Already Identified and is Executing Starboard’s Newly Disclosed Recommendations for Operational Improvement 47 Confidential l The Operating Committee and management team conducted a thorough assessment in the summer of 2020 with the assistance of a top - tier consulting firm x Box has transf
Slide 48: Box Already Executing Starboard's Recommendations (Cont.)
Box Has Already Identified and is Executing Starboard’s Newly Disclosed Recommendations for Operational Improvement (Cont.) 48 &RQILGHQWLDOO x Box’s usage and data volumes have increased at accelerated rates and have driven significant cost improvements to our infrast ruc ture even as we are in the
Slide 49: Timeline of Box and Starboard Engagement
Note: Emphasis added. Box and Starboard settle for 3 board seats and formation of the Operating Committee Box reports fiscal first quarter 2021 results Box reports fiscal second quarter results Box reports fiscal third quarter results Following Box’s Q3 results, Starboard abruptly reverses course an
Slide 50: Starboard is Behaving Like an Investor Whose Interests are Not Aligned
Starboard i s Behaving Like an Investor Whose Interests are Not Aligned with Other Stockholders Confidential l December 8, 2020 Despite the prior support Mr. Feld communicated to the Company , Starboard reversed course and its new position was that the Company explore a sale of the entire Company or
Slide 51: Starboard Consistently Distorts the Facts
Starboard Consistently Distorts the Facts Myth: Starboard’s Narrative The Facts Starboard claims that they only settled with Box because the existing Board and management team insisted that the Company simply needed a bit more time to prove out its ability to accelerate growth and improve margins. T
Slide 52: Starboard Consistently Distorts the Facts (Cont.)
6WDUERDUG&RQVLVWHQWO\'LVWRUWVWKH)DFWV &RQW Myth: Starboard’s Narrative The Facts Starboard claims they will add back Aaron Levie to the Board in the event that one of their nominees is elected to replace him at the Annual Meeting. Starboard has insisted on firing our CEO in the absence of a sa
Slide 53: Box's Nominees Vastly Superior to Starboard's Slate
Box’s Nominees are Essential to Advancing Box’s Strategy and a re Vastly Superior to Starboard’s Slate Box Nominees Starboard Nominees 'DQD(YDQ Peter Leav Aaron Levie Deborah S. Conrad Peter A. Feld Xavier D. Williams SaaS and Enterprise Software Expertise x x x Public Company C - Suite Executive x
Slide 54: Starboard is Attempting to Replace Strong Directors with Underqualified Candidates
Starboard is Attempting to Replace Our Strong Directors with Underqualified Candidates Dana Evan, 61 x Former Chief Financial Officer of VeriSign x Former Venture Partner at Icon Ventures x Director of Domo, Inc., Farfetch Limited, Proofpoint , Inc., and Momentive Global Inc. (formerly SVMK Inc. or
Slide 55: Starboard Already Has Strong Representation on the Board
55 Confidential l Starboard Already Has Strong Representation on the Board and in Board Leadership Positions Notes: 1. NCG = Nominating and Corporate Governance. Starboard representation includes: Chair of the Board, chair of 2/4 standing committees, 2/4 seats on the Operating Committee and 3/4 seat
Slide 56: Conclusion
box Conclusion
Slide 57: World-Class Board and Leadership Team with the Right Strategy
World - Class Board and Leadership Team with t he Right Strategy to Drive Value for Stockholders 57 Confidential l Successfully Evolving Our Business to Drive Operational Results Accelerating Growth and Driving Margin Improvement Board Has Implemented Significant Board and Governance Changes Added
Slide 58: World-Class Board and Leadership Team (Cont.)
Diverse skillsets and proven track records of helping public companies drive disciplined growth, profitability, and stockholder value Global go - to - market strategy and business operations experience through all business cycles Significant SaaS and enterprise software industry expertise as b
Slide 59: Vote FOR ALL of Box's Director Nominees on the BLUE Proxy Card
59 Confidential l Vote “FOR ALL” of Box’s Highly Qualified Director Nominees on the BLUE Proxy Card Today
Slide 60: Appendix
box Appendix
Slide 61: GAAP Revenue to Billings Reconciliation
GAAP Revenue to Billings Reconciliation 61 Confidential l ($ in thousands) Q2FY20 Q3FY20 Q4FY20 Q1FY21 GAAP revenue $ 172,549 $ 177,156 $ 183,585 $ 183,561 Deferred revenue, end of period 330,834 325,647 423,849 368,349 Less: Deferred revenue, beginning of period ( 330,445 ) ( 330,834 ) ( 325,647) (
Slide 62: GAAP to Non-GAAP Reconciliation – Sales & Marketing
GAAP to Non - GAAP Reconciliation – Sales & Marketing 62 Confidential l ($ in thousands) FY18 As a % of revenue FY19 As a % of revenue FY20 As a % of revenue FY21 As a % of revenue GAAP sales and marketing $303,319 60% $312,210 51% $317,615 46% $275,742 36% Less: Stock - based compensation (31,742)
Slide 63: GAAP to Non-GAAP Reconciliation – Operating Margin
GAAP to Non - GAAP Reconciliation – Operating Margin 63 Confidential l ($ in thousands) Q3FY18* As a % of revenue Q4FY18* As a % of revenue Q1FY19** As a % of revenue GAAP operating margin ($42,559) (33%) ($32,487) (24%) ($35,860) (26%) Add: Stock - based compensation 25,523 20% 24,949 19% 26,613 19
Slide 64: GAAP to Non-GAAP Reconciliation – Operating Margin
GAAP to Non - GAAP Reconciliation – Operating Margin 64 Confidential l ($ in thousands) Q2FY20 As a % of revenue Q3FY20 As a % of revenue Q4FY20 As a % of revenue Q1FY21 As a % of revenue GAAP operating margin ($ 36,277 ) ( 21 %) ($ 39,233 ) ( 22 %) ($ 28,581 ) (15%) ($ 24,240 ) (13%) Add: Stock - b
Slide 65: GAAP to Non-GAAP Reconciliation – Operating Margin Q2 FY22E
GAAP to Non - GAAP Reconciliation – Operating Margin Q2 FY22E 65 Confidential l ($ in thousands) As a % of revenue GAAP operating margin (3%) Add: Stock - based compensation 20 % Add: Acquired intangible assets amortization 1% Add: Fees related to shareholder activism 2% Non - GAAP operating margin
Slide 66: GAAP to Non-GAAP Reconciliation – Operating Margin
GAAP to Non - GAAP Reconciliation – Operating Margin 66 Confidential l ($ in thousands) FY17 As a % of revenue FY18 As a % of revenue FY19 As a % of revenue FY20 As a % of revenue GAAP operating margin ($150 ,655 ) (38%) ($154,02 1 ) (30%) ($134,237) (22%) ($139,472) (20%) Add: Stock - based compens
Slide 67: GAAP to Non-GAAP Reconciliation – Free Cash Flow
GAAP to Non - GAAP Reconciliation – Free Cash Flow 67 Confidential l ($ in thousands) FY21 As a % of revenue GAAP net cash (used in) provided by operating activities $196,834 26% Less: Purchases of property and equipment, net of proceeds from sales (9,052 ) Less: Principal payments of finance lease