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Box’s buzz is long gone but the stock is trading near a record high

Box CEO Aaron Levie speaking at BoxWorks in 2018


In this weekly series, CNBC takes a look at the companies that made the inaugural Disruptor 50 list 10 years later.

At 37, Aaron Levie has held the same position for nearly half his life. He is the CEO of collaboration software provider Box, a company he started as a sophomore at the University of Southern California.

A far cry from its days as a nascent dormitory startup, Box now employs more than 2,100 people and generates nearly $900 million in annual revenue. Levie, despite his relative youth, is a grizzled veteran of cloud software, an industry that consisted of Salesforce and little else when Box was getting started.

Levie is also a seasoned veteran when it comes to Wall Street drama, and he has the scars to prove it.

In the decade since Box made CNBC’s first-ever Disruptor 50 list, the company has relied on a delayed IPO to resize its economy, a long period of stock underperformance and l Last year had to deal with a heated battle with activist investor Starboard Value, which demanded the company find a buyer or oust its CEO.

Levie kept his job, and an independent box ultimately won its proxy fight with Starboard. Finally, investors seem to like what they see.

The company recently surpassed its highest stock price since 2018, and Box has proven to be a safe haven during the tech market downturn to start 2022. Of the 76 companies in the Bessemer Venture Partners Cloud Index, Box is fourth – best performer and one of the seven members who are so far this year.

“It’s a strange claim to fame,” Levie said in a recent interview. “I literally went to the other side of this thing, which is having a healthy balance between growth and profit is actually a very good thing.”

Box’s outperformance this year


Box shares have climbed more than 5% this year through Wednesday’s close, while the Nasdaq has fallen more than 11% in that period. The stock rallied on March 17, after Box released a forecast on its analyst day that called for fiscal 2025 revenue growth of 15% to 17%, alongside an operating margin. from 25% to 28%.

JMP analysts said in a report that the updated guidance “reflects the company’s strong execution, leadership in a large market and prospects for continued financial improvement.”

Even with recent momentum, it’s not where Levie thought it would be, given the hype surrounding his company 10 years ago, when it was a scorching Silicon Valley start-up. Its market cap today is just under $4 billion, up from around $1.7 billion when it went public in 2015. Venture capitalists have valued the company at $2 billion. in 2013, the year Inc. Magazine put Levie on the cover as Entrepreneur of the Year.

Compare that to some of the top names that joined Box on the first Disruptor 50 list. Airbnb is worth $106 billion, Shopify is worth $83 billion, Square (now Block) is worth $75 billion, and Atlassian is worth $73 billion. Also on the list that year was Box rival Dropbox, which has struggled since going public in 2018 and now has a market cap of less than $9 billion.

“Categorically, we think we’re undervalued,” Levie said. To prove it, the company repurchased shares and, on its analyst day, increased its buyback plan by $150 million over the next year.

Box co-founders Aaron Levie (C) and Dylan Smith (2nd R) celebrate their company’s IPO on the floor of the New York Stock Exchange, January 23, 2015.

Brendan McDermid | Reuters

“That’s our message,” Levie said. “We think the stocks are very attractive to us” and that “we have a substantial advantage going forward.”

Some of this upside comes from revenue growth, which is finally accelerating. Revenue for the fiscal year that ended in January increased by 13%, compared to 11% the previous year. Prior to that, growth had slowed for eight straight years as improved collaboration and file storage tools were built into low-cost productivity suites from Google and Microsoft.

To achieve 17% growth in three years, Box is counting on a strategic shift that consists of providing more things to its customers.

When Microsoft was a punching bag

In Box’s early days, the company played the upstart role by shooting directly at Microsoft, which was then an easy target. The software giant hadn’t gone all-in on the cloud yet, and its SharePoint product was a clunky collaboration tool that didn’t work on the range of mobile devices consumers were adopting.

Box’s app allowed users to easily store and share documents in the cloud and access them from anywhere. It was fun while venture capitalists subsidized growth. But competition was everywhere, leaving Box without pricing power.

When Box’s IPO prospectus arrived in March 2014, investors saw signs of a flawed business model. Operating costs in the last quarter were almost twice as high as revenues. So Box delayed its offer, raised $150 million in private funding, and 10 months later hit the market with its finances pointing in a more sustainable direction.

Over the next few years, Box invested heavily to transition from product to platform. Instead of selling collaboration software, it now offers what it calls the content cloud — a full suite of services for storing and sharing documents, managing workflow, securing files, and integrating third-party tools. In early 2021, Box spent $55 million on startup SignRequest, adding e-signature technology to its cloud.

“Ten years ago, all we talked about was collaboration,” Levie said. Now, he said, the company is “building a full suite as opposed to a single capability that was driving all the growth.”

Of more than 100,000 customers, Box says 120 spend at least $1 million a year. Within its customer base, the company sees a “7x user expansion opportunity” as its products become relevant to more people in the workplace, according to its analyst day presentation.

In the world of software as a service, or SaaS, investors have heard many companies tout the “land and expand” model, selling to a small team of developers or marketers and then using that footprint to gain adoption. wider within an organization.

Box has made it work with collaboration, but there’s still a long way to go to prove that its platform can be a key part of the enterprise stack of the future. Although the stock has outperformed lately, it still trades at around four times forward earnings, putting it in the bottom fifth of the BVP cloud index.

The good news for Levie is that activists are on his back and metrics are improving where it matters most: Free cash flow jumped 41% in 2022 to $170.2 million.

“I would tell all founders to focus more on cash flow,” Levie said.

With two small children at home, Levie doesn’t have much time left to mentor young entrepreneurs trying to navigate the current market turmoil. But he learned some things by going through the kinds of battles that many tech entrepreneurs have so far avoided.

And if he has any wise advice, it’s this:

“Silicon Valley has its ups and downs,” Levie said. Always look at the long-term economy and “how you’re going to generate cash flow in the future,” he added, “because that future might come sooner than you think.”

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