BOX INC

Note 1. Description of Business and Basis of Presentation

Description of Business

We were incorporated in the state of Washington in April 2005, and were reincorporated in the state of Delaware in March 2008. Box provides the leading Intelligent Content Management (ICM) platform that enables organizations of all sizes to securely manage cloud content while allowing easy, secure access and sharing of this content from anywhere, on any device.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, which include the accounts of Box and its wholly owned subsidiaries, have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) and applicable rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements.

In the opinion of our management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of our balance sheets, statements of operations, statements of comprehensive income, statements of convertible preferred stock and stockholders' deficit, and the statements of cash flows for the interim periods, but are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending January 31, 2026. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended January 31, 2025, which was filed with the SEC on March 10, 2025.

Certain prior period amounts reported in our condensed consolidated financial statements have been reclassified to conform to the current year presentation. Such reclassifications did not affect revenue, income from operations, or net income.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ from these estimates. Such estimates include, but are not limited to, the fair value of acquired intangible assets, the useful lives of intangible assets, the incremental borrowing rate we use to determine our lease liabilities, and the valuation allowance of deferred income tax assets. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Segments

Our Chief Executive Officer is our chief operating decision maker (CODM). Our CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, we have asingle reporting segment and operating unit structure. As part of the review, our CODM uses consolidated net income to measure segment profit or loss. Our CODM does not evaluate segment performance using asset or liability information. Since we operate as asingle reporting segment and operating unit structure, financial segment information, including profit or loss information and significant segment expenses, can be found in the condensed consolidated financial statements.

Certain Risks and Concentrations

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed deposit insurance coverage limits.

We sell to a broad range of customers. Our revenue is derived primarily from the United States across a multitude of industries. Accounts receivable are derived from the delivery of our services to customers primarily located in the United States. We accept and settle our accounts receivable using credit cards, electronic payments and checks. A majority of our lower dollar value invoices are settled by credit card on or near the date of the invoice. We do not require collateral from customers to secure accounts receivable. We believe collections of our accounts receivable are probable based on the size, industry diversification, financial condition and past transaction history of our customers. As of April 30, 2025 one reseller, who is also a customer, accounted for more than 10% of total accounts receivable and as of January 31, 2025, two resellers, who are also customers, each accounted for more than 10% of total accounts receivable. No single customer represented over 10% of our revenuefor the three months ended April 30, 2025 and 2024.

We serve our customers and users from public cloud hosting operated by third parties. In order to reduce the risk of down time of our subscription services, we have public cloud hosting services established in various locations in the United States and abroad and we have internal procedures to restore services in the event of disaster. Even with these procedures for disaster recovery in place, our cloud services could be significantly interrupted during the implementation of the procedures to restore services.

Geographic Locations

For the three months ended April 30, 2025 and 2024, revenue attributable to customers in the United States was 63% and 64%, respectively, and revenue attributable to customers in Japan was 24% and 22%, respectively.

As of April 30, 2025 and January 31, 2025, substantially all of our property and equipment was located in the United States.

Summary of Significant Accounting Policies

Derivative Instruments and Hedging

We use derivatives such as foreign currency forward contracts to protect our business against the impact of fluctuations in foreign exchange rates on future cash flows and earnings. These derivatives are designated as cash flow hedges. Gains or losses from derivatives designated as cash flow hedges are initially deferred to other comprehensive income (loss), net and are subsequently recognized in revenue in the same period the hedged item impacts earnings. The maturities of these forward contracts are generally no more than 24 months.

We also use derivatives to economically hedge gains and losses from remeasurement of monetary assets and liabilities denominated in non-functional currencies. These derivatives generally have maturities of 12 months or less. Gains or losses from derivatives not designated as cash flow hedges are recognized immediately in other income (expense), net in the condensed consolidated statements of operations.

The fair value of all of our derivatives are classified in the condensed consolidated balance sheets in other current assets and accounts payable, accrued expenses and other current liabilities for derivatives maturing within 12 months after the balance sheet date and other long-term assets and other long-term liabilities for derivatives maturing beyond 12 months after the balance sheet date. Cash flow arising from maturities of derivatives both designated as cash flow hedges and functioning as economic hedges are classified as operating activities in the condensed consolidated statements of cash flows.

We have executed master netting agreements with the respective counterparties of the foreign currency forward contracts, subject to applicable requirements, and are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. These derivatives are not subject to any credit contingent features negotiated with the respective counterparties. We are not required to pledge nor are we entitled to receive cash collateral related to these contracts. As of April 30, 2025, the potential effects of these rights of setoff associated with our foreign currency forward contracts were not material.

Workforce Reorganization

During fiscal year 2026, we conducted a workforce reorganization effort to better align our resources with our strategic priorities. This resulted in charges of approximately $7.1 million in the first quarter of fiscal year 2026, primarily consisting of severance and termination benefits, continuation of employee health benefits, and other personnel related costs.

There have been no other material changes to our significant accounting policies and estimates during the three months ended April 30, 2025 from those disclosed in our Form 10-K for the year ended January 31, 2025.

Recently Adopted and Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Disaggregation of Income Statement Expenses, which requires disclosure of disaggregated information about the types of expenses (including employee compensation, depreciation, and amortization) in commonly presented expense captions in the statement of operations. For interim and annual reporting periods, entities will be required to provide this information in tabular format in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of the new standard on our condensed consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires greater disaggregation of tax information in rate reconciliation and income taxes paid by jurisdiction. This ASU is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the impact of the new standard on our condensed consolidated financial statement disclosures.

Note 2. Revenue

Deferred Revenue

Deferred revenue was $574.1 million and $608.6 million as of April 30, 2025 and January 31, 2025, respectively. During the three months ended April 30, 2025 and 2024, we recognized $229.0 million and $226.1 million of revenue that was included in the deferred revenue balance as of January 31,2025 and 2024, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of April 30, 2025, we had remaining performance obligations from contracts with customers of $1.5 billion. We expect to recognize revenue on approximately 55% and 25% of these remaining performance obligations over the next 12 and 24 months, respectively, with the balance recognized thereafter.

Note 3. Fair Value of Financial Instruments

Fair Value Measurements of Assets and Liabilities Measured at Fair Value on a Recurring Basis

We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We define fair value as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

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Level 1—Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

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Level 2—Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

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Level 3—Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation. There wereno level 3 financial assets or liabilities for the periods presented.

Financial assets and liabilities subject to the fair value disclosure requirements were as follows (in thousands):

As of January 31, 2025, forward contracts in total assets and total liabilities were not material.

There were no material differences between the estimated fair value and amortized cost of our cash equivalents and short-term investments.

As of April 30, 2025, contractual maturities of our cash equivalents and short-term investments were as follows (in thousands):

As of April 30, 2025, we do not consider any portion of the unrealized losses to be credit losses.

Fair Value Measurements of Other Financial Instruments

In September 2024, we issued $460.0 million aggregate principal amount of 1.50% convertible senior notes due September 15, 2029 (the “2029 Convertible Notes”). In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026 (the “2026 Convertible Notes” and together with the 2029 Convertible Notes, the “Convertible Notes”). Using the proceeds from the issuance of the 2029 Convertible Notes, we entered into separate and privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $140.0 million aggregate principal amount of the 2026

Convertible Notes, which were completed simultaneously with the new convertible debt offering. The estimated fair values of the Convertible Notes, which we have classified as Level 2 financial instruments, were determined using observable market prices. As of April 30, 2025, the estimated fair value of the 2029 Convertible Notes and 2026 Convertible Notes was $452.2 million and $251.2 million, respectively, and as of January 31, 2025, the estimated fair value of the 2029 Convertible Notes and 2026 Convertible Notes was $458.1 million and $260.2 million, respectively.

Note 4. Derivative Instruments

The notional amounts of our outstanding foreign currency forward contracts were as follows (in thousands):

Pre-tax losses associated with foreign currency forward contracts were as follows (in thousands):

Pre-tax gains (losses) associated with foreign currency forward contracts were not material for the three months ended April 30, 2024.

As of April 30, 2025, the amount we expect to reclassify out of accumulated other comprehensive loss into earnings within the next twelve months is not material.

Note 5. Leases

We have entered into various non-cancellable operating lease agreements for certain of our offices and data centers with lease periods expiring primarily between fiscal years 2026 and 2034. Certain of these arrangements have free or escalating rent payment provisions and optional renewal or termination clauses. Our operating leases typically include variable lease payments, which are primarily comprised of common area maintenance and utility charges for our offices and power and network connections for our data centers, that are determined based on actual consumption. Our operating lease agreements do not contain any residual value guarantees, covenants, or other restrictions.

We sublease certain floors of our Redwood City and London offices. Our current subleases have total lease terms ranging from 24 to 39 months that will expire at various dates by fiscal year 2029.

The components of lease cost, which were included in operating expenses in our condensed consolidated statements of operations, were as follows (in thousands):

As of April 30, 2025, maturities of our operating lease liabilities, which do not include short-term leases and variable lease payments, are as follows (in thousands):

(1)

Non-cancellable sublease proceeds for the remainder of the year ending January 31, 2026 and the years ending January 31, 2027, 2028, and 2029 of $2.2 million, $2.4 million, $2.2 million, and $0.6 million, respectively, are not included in the table above.

As of April 30, 2025, we hadtwo operating leases for office spaces that have not yet commenced. The operating leases have aggregated undiscounted future payments of $29.1 million and lease terms ofnine years. The operating leases are estimated to commence during fiscal years 2026 and 2027.

Note 6. Commitments and Contingencies

Letters of Credit

As of April 30, 2025 and January 31, 2025, we had letters of credit in the aggregate amount of $11.2 million in connection with our operating leases and voluntary disability insurance (VDI) program, which were primarily issued under the available sublimit for the issuance of letters of credit in conjunction with a secured credit agreement as disclosed in Note 7.

Purchase Obligations

Our purchase obligations relate primarily to public cloud hosting services and IT software and support services costs and have terms ranging fromtwo toeight years. As of April 30, 2025, future minimum payments under non-cancellable contractual purchases, which were not recognized on our condensed consolidated balance sheet, are as follows, shown in accordance with the payment due date (in thousands):

Legal Matters

From time to time, we are subject to litigation and claims that arise in the ordinary course of business. We investigate litigation and claims as they arise and accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. Although the results of litigation and claims cannot be predicted with certainty, we believe there was not at least a reasonable possibility that we had incurred a material loss with respect to such loss contingencies as of April 30, 2025.

Note 7. Debt

Convertible Senior Notes

2029 Convertible Notes

In September 2024, we issued $460.0 million aggregate principal amount of 1.50% convertible senior notes due September 15, 2029. The 2029 Convertible Notes are senior unsecured obligations and bear interest at a rate of 1.50% per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025. Each $1,000 principal amount of the 2029 Convertible Notes will be convertible into 23.0102 shares of our Class A common stock, which is equivalent to a conversion price of approximately $43.46 per share, subject to adjustment upon the occurrence of specified events.

There have been no changes to the conversion or redemption terms of the 2029 Convertible Notes during the three months ended April 30, 2025 from those disclosed in Item 8. Financial Statements and Supplementary Data in our Form 10-K for the year ended January 31, 2025.

2026 Convertible Notes

In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026. In September 2024, using proceeds from the issuance of the 2029 Convertible Notes, we entered into separate and privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $140.0 million aggregate principal amount of the 2026 Convertible Notes. The 2026 Convertible Notes are senior unsecured obligations and do not bear regular interest. Each $1,000 principal amount of the 2026 Convertible Notes will be convertible into 38.7962 shares of our Class A common stock, which is equivalent to a conversion price of approximately $25.78 per share.

There have been no changes to the conversion or redemption terms of the 2026 Convertible Notes during the three months ended April 30, 2025 from those disclosed in Item 8. Financial Statements and Supplementary Data in our Form 10-K for the year ended January 31, 2025.

As of April 30, 2025, the conditions allowing holders of the Convertible Notes to convert were not met.

The net carrying amount of the Convertible Notes consisted of the following (in thousands):

Issuance costs are being amortized to interest expense over the term of the Convertible Notes using the effective interest rate method. The effective interest rate used to amortize the issuance costs of the 2029 Convertible Notes and 2026 Convertible Notes is 2.06% and 0.56%, respectively. Interest expense recognized related to the 2029 Convertible Notes and 2026 Convertible Notes for the three months ended April 30, 2025 was $2.6 million and forthe three months ended April 30, 2024 was not material.

Capped Calls

In connection with the pricing of the 2029 Convertible Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2029 Capped Calls”). The 2029 Capped Calls each have a strike price of approximately $43.46 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2029 Convertible Notes. The 2029 Capped Calls have initial cap prices of $66.86 per share, subject to certain adjustments. The 2029 Capped Calls cover, subject to anti-dilution adjustments, approximately 10.6 million shares of our Class A common stock. The cost of $52.5 million incurred in connection with the 2029 Capped Calls was recorded as a reduction to additional paid-in capital.

In connection with the pricing of the 2026 Convertible Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2026 Capped Calls” and together with the 2029 Capped Calls, the “Capped Calls”). The 2026 Capped Calls each have a strike price of approximately $25.80 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2026 Convertible Notes. The 2026 Capped Calls have initial cap prices of $35.58 per share, subject to certain adjustments. The 2026 Capped Calls cover, subject to anti-dilution adjustments, approximately 13.4 million shares of our Class A common stock. The cost of $27.8 million incurred in connection with the 2026 Capped Calls was recorded as a reduction to additional paid-in capital. In September 2024, in connection with the repurchase of the 2026 Convertible Notes, we entered into agreements to unwind a portion of the 2026 Capped Calls and received approximately $30.3 million, which was recorded as an increase to additional paid-in capital. Apart from the partial unwind agreements, there have been no changes to the condition of the 2026 Capped Calls.

The Capped Calls are generally intended to reduce or offset the potential dilution to our common stock upon any conversion of the Convertible Notes (or, in the event a conversion of the Convertible Notes is settled in cash, to offset our cash payment obligation) with such reduction or offset, as the case may be, subject to a cap based on the cap price. The Capped Calls are separate transactions, and not part of the terms of the Convertible Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ deficit and are not accounted for as derivatives.

Line of Credit

On June 30, 2023, we entered into an amended and restated secured credit agreement (the “June 2023 Facility”) and on December 19, 2024, we entered into Amendment No. 1 to the June 2023 Facility to provide for a $75.0 million revolving loan facility with a $45.0 million sublimit for the issuance of letters of credit. There have been no changes to the terms and conditions of the June 2023 Facility during the three months ended April 30, 2025 from those disclosed in Item 8. Financial Statements and Supplementary Data in our Form 10-K for the year ended January 31, 2025.

As of April 30, 2025, we hadno debt outstanding on the June 2023 Facility and were in compliance with all financial covenants.

Note 8. Redeemable Convertible Preferred Stock and Stockholders’ Deficit

Series A Convertible Preferred Stock

On April 7, 2021, we entered into an investment agreement with a group of investors led by KKR & Co. Inc. (collectively “KKR”) relating to the issuance and sale of 500,000 shares of our Series A Convertible Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $500 million, or $1,000 per share.

There have been no changes to the terms and conditions of the Series A Preferred Stock during the three months ended April 30, 2025 from those disclosed in Item 8. Financial Statements and Supplementary Data in our Form 10-K for the year ended January 31, 2025.

During the three months ended April 30, 2025, we paid cash dividends to our Series A Preferred Stockholders in the amount of $3.8 million and as of April 30, 2025, we had accrued dividends of $1.2 million on the Series A Preferred Stock. Accrued dividends are recorded against additional paid-in capital due to Box being in an accumulated deficit position.

Share Repurchase Plan

Our Board of Directors has authorized a share repurchase plan to opportunistically repurchase shares of our outstanding Class A common stock in open market transactions and on March 4, 2025, we announced that our Board of Directors authorized the repurchase of an additional $150 million shares of our Class A common stock. We periodically enter into pre-set trading plans adopted in accordance with Rule 10b5-1 to effect repurchases under our share repurchase plan.

During the three months ended April 30, 2025, we repurchased 1.6 million shares at a weighted average price of$31.28 per share for a total amount of $49.6 million. During the three months ended April 30, 2024, we repurchased 1.4 million shares at a weighted average price of $27.10 per share for a total amount of $37.2 million. As of April 30, 2025,$152.4 million remained available for additional repurchases.

Note 9. Stock-Based Compensation

Employee Equity Plans

We currently havetwo employee equity plans that have been adopted by our Board of Directors. These plans, the 2015 Equity Incentive Plan (as amended or otherwise modified, the“2015 Plan”) and the 2015 Employee Stock Purchase Plan (the “2015 ESPP”), are described in more detail in Item 8. Financial Statements and Supplementary Data in our Form 10-K for the year ended January 31, 2025. As of April 30, 2025,3,363,102 shares and 2,059,623 shares were reserved for future issuance under the 2015 Plan and the 2015 ESPP, respectively.

Stock Options

The following table summarizes the stock option activity under the equity incentive plans and related information:

Restricted Stock Units

The following table summarizes the restricted stock unit activity, inclusive of performance-based and market-based restricted stock units, under the equity incentive plans and related information:

As of April 30, 2025, there was $482.1 million of unrecognized stock-based compensation expense related to outstanding restricted stock units, inclusive of performance-based and market-based restricted stock units, granted to employees that is expected to be recognized over a weighted-average period of 2.88 years.

Executive Bonus Plan

We use performance-based incentives for certain employees, including our named executive officers, to achieve our annual financial and operational objectives, while making progress towards our longer-term strategic and growth goals (the “Executive Bonus Plan”). Based on a review of our actual achievement of the pre-established corporate financial objectives and additional inputs from our Compensation Committee, the Executive Bonus Plan for fiscal year 2025 was determined, settled and paid out in the first quarter of fiscal year 2026 in the form of cash and fully vested restricted stock units. During the first quarter of fiscal year 2026, our Compensation Committee also adopted and approved the performance criteria and targets for the Executive Bonus Plan for fiscal year 2026, which is expected to be paid out in the form of cash and fully vested restricted stock units in the first quarter of fiscal year 2027.

During the three months ended April 30, 2025, we recognized stock-based compensation expense related to Executive Bonus Plans in the amount of $4.5 million. The unrecognized compensation expense related to the ungranted and unvested Executive Bonus Plan for fiscal year 2026 is $12.4 million, based on the expected performance against the pre-established corporate financial objectives as of April 30, 2025, which is expected to be recognized over a remaining weighted-average period of less than one year.

2015 ESPP

As of April 30, 2025, there was $5.6 million of unrecognized stock-based compensation expense related to the 2015 ESPP that is expected to be recognized over a weighted-average period of 1.19 years.

Stock-Based Compensation

The following table summarizes the components of stock-based compensation expense recognized in the condensed consolidated statements of operations (in thousands):

Note 10. Net Income per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders (in thousands, except per share amounts):

The dilutive effect was computed using the if-converted method for convertible instruments and the treasury stock method for all other potential common shares.

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income per share attributable to common stockholders for the periods presented because the impact of including them would have been antidilutive (in thousands):

Note 11. Income Taxes

We are subject to income taxes in the U.S. and the foreign jurisdictions in which we operate. The provision for income taxes was $5.0 million and $4.6 millionfor the three months ended April 30, 2025 and 2024, respectively. Our provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period.

For the three months ended April 30, 2025, the difference between the U.S. statutory rate and our effective tax rate was primarily due to U.S. tax on foreign earnings, non-deductible stock-based compensation expenditures, state income taxes, and differing foreign tax rates.

For the three months ended April 30, 2024, the difference between the U.S. statutory rate and our effective tax rate was primarily due to the valuation allowance on our U.S. deferred tax assets, state income taxes, driven by the capitalization of research and development expenditures, and differing foreign tax rates.

We evaluate tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years.

We file tax returns in the U.S. for federal, California, and other states. All tax years remain open to examination for both federal and state purposes as a result of our net operating loss and credit carryforwards. We file tax returns in the United Kingdom (U.K.) and other foreign jurisdictions in which we operate. Tax years ending on January 31,2021 and onwards remain open to examination for the U.K. Certain tax years remain open to examination under the statute of limitations of the respective countries in which our other foreign subsidiaries are located.