Box (BOX) Outlines Significant Progress and Reiterates Commitment to Stockholder Value Creation; Responds to Starboard’s Statement

Box, Inc. (NYSE: BOX) today issued the following statement in response to Starboard Value LP (“Starboard”):

The Box Board of Directors does not believe the changes to the Board proposed by Starboard are warranted or in the best interests of all stockholders. The Box Board has been consistently responsive to feedback from all of its stockholders, including suggestions from Starboard, and open-minded toward all value enhancing opportunities. Furthermore, Starboard’s statements do not accurately depict the progress Box has made. Specifically, Box has taken decisive action to:

• Deliver profitable growth, with 11% revenue growth, non-GAAP operating margin of over 15% in fiscal 2021, a 1,400 basis point margin increase over the prior year, and a $127 million increase in free cash flow in fiscal 2021;
• Implement a series of proactive corporate governance enhancements, including the addition of six independent directors since 2018, who have significant public company experience serving as directors and C-suite executives of multi-billion dollar publicly traded SaaS and enterprise software companies; and
• Conduct a comprehensive review of a wide range of strategic options to enhance stockholder value, resulting in a $500 million investment to be led by KKR and the addition of John Park, KKR’s Head of Americas Technology Private Equity, to the Board, providing the perspective of a significant stockholder.

The Box Board has been unified and unwavering in its commitment to acting in the best interests of all stockholders.

Successfully Evolving the Business for Long-Term Success and Value Creation

Box is in the strongest financial position of its history, serving more than 100,000 customers around the world while continuing to build on its well-established leadership position. The company is on track to deliver the vision of the Content Cloud, reflecting significant innovation, a strengthened partner ecosystem, and an expanded product portfolio. Box also has a clearly defined plan to accelerate revenue growth while driving further margin improvement.

Box’s results clearly demonstrate that the strategy is working. In fiscal 2021, substantial progress was made across all facets of the business, including:

• Revenue growth rate plus free cash flow margin of over 26%, exceeding stated target of 25%, and nearly double the results from fiscal 2020;
• Revenue of $771 million, an 11% increase year-over-year;
• RPO of $897 million, up 17% year-over-year;
• Non-GAAP operating margin of over 15%, a 1,400 basis point margin increase over the prior year; and
• A $127 million increase in free cash flow in fiscal 2021.

This strong performance has contributed to Box’s share price increasing 17% year-to-date.

Box has also made significant product enhancements in security and compliance, collaboration and workflow, in order to advance its vision of one platform for secure content management. The company’s commitment to rapid product innovation and disciplined M&A has been critical to extending and broadening its platform to accelerate customer adoption, expansion and lifetime value.

With a more efficient and productive go-to-market strategy, and customer momentum underway, Box is primed to capture a $55-billion market opportunity. The company has set long-term financial targets, and the Board and management remain confident in Box’s ability to grow revenue between 12% to 16% and achieve operating margins of between 23% to 27% by fiscal 2024.

Refreshed and Highly Qualified Board to Lead Box Forward

The Box Board is composed of independent, diverse and highly experienced directors, all of whom have served in C-suite positions at multi-billion dollar publicly traded software, technology, or financial services companies. Together, the Box Board has the expertise to guide the successful execution of Box’s growth strategy. The directors take their responsibility to provide close oversight of the company’s operations and hold leadership accountable seriously, as demonstrated by the recent comprehensive review of strategic options. Furthermore, Box’s directors whose terms are up for re-election at the Annual Meeting – Dana Evan, Peter Leav and Aaron Levie – have the superior skillsets required to support the company’s profitable growth plan, including a track record of multi-billion dollar value creation at SaaS-based companies, both as operators and as board members.

• Dana Evan, former Chief Financial Officer of VeriSign and 2019 National Association of Corporate Directors’ ‘Director of the Year’, has a powerful track record of maximizing stockholder value in her director roles, including, among others, in her role as Lead Independent Director of Proofpoint, which recently announced an agreement to be acquired for $12.3 billion, and as a director at Omniture which was acquired by Adobe. Ms. Evan has significant experience investing in and serving on Boards of SaaS-based technology and internet companies, including Domo, Farfetch, and Survey Monkey.
• Peter Leav, Chief Executive Officer of McAfee and former Chief Executive Officer of BMC, acquired for $8.5 billion, and Polycom, acquired for $2.0 billion, brings valuable experience in global go-to-market strategy and operations, having successfully scaled and led multiple multi-billion dollar SaaS and enterprise software businesses.
• Aaron Levie, Box’s Co-Founder and CEO, a pioneer of the content management industry for the cloud era, continues to execute a clear vision for Box’s strategy, product, and purpose. Mr. Levie is the driving force behind essential customer and partner relationships across the Fortune 500 and is the direct sponsor of key partners including Microsoft, Google, IBM, Salesforce, Adobe, Zoom and Slack, among many others. Under his leadership, Box has reached over 100,000 customers globally, developed a disruptive and highly differentiated product, built a robust partnership ecosystem, and is successfully executing a clearly defined strategy to drive profitable growth.

The Board has been reconstituted since 2018. Six independent directors have been added, including three that were appointed in conjunction with the company’s March 2020 agreement with Starboard. Furthermore, Box has made substantial corporate governance changes including separating the Chair and CEO roles by naming Bethany Mayer, whose appointment to the Board was approved by Starboard, as the independent Chair of the Board and Chair of the Compensation Committee. Box also appointed Jack Lazar, another director whose appointment was approved by Starboard, as Chair of the Audit Committee. Additionally, upon completion of the recently announced KKR-led transaction, John Park will join the Board, allowing the company and stockholders to benefit from his proven track record of driving growth, and his substantial experience in advising and supporting software and other technology companies with a focus on the cloud.

Board’s Comprehensive Review of Value-Enhancing Strategic Options

Demonstrating the Board’s commitment to enhancing stockholder value, the Board formed a Strategy Committee of four independent directors, including the three directors who were appointed in 2020 in conjunction with the agreement with Starboard. This Committee, with the support of financial and legal advisors, undertook a multi-month comprehensive review of a wide range of strategic options to determine the best possible path forward for Box and its stockholders.

As a result of this review, in April 2021, the Board unanimously agreed that the KKR-led transaction and a share repurchase through a “Dutch auction” self-tender for up to $500 million of Box’s common stock is in the best interests of the company’s stockholders. Box’s Board concluded that this transaction and partnership with KKR, along with the repurchase of shares, will best position the company to deliver value to Box stockholders in both the near- and long-term. The transaction provides the ability for stockholders to elect to either monetize their investment or participate in any upside potential with KKR as a committed partner that believes in the growth strategy that the Box Board and management team are executing.

Responsive to Stockholder Feedback

The Board continues to be open to feedback from all of its stockholders, including Starboard, to drive long-term value. The Board and management have made significant progress in the past year, including incorporating suggestions from Starboard and other stockholders. For example, two of the new independent directors added to the Box Board in the last year were approved by Starboard, and one of these directors has been appointed as Chair of the Board, and the other has been appointed as Chair of the Audit Committee. Furthermore, many of the actions undertaken by the company in the past year have been overseen by one of two newly formed committees, the Operating Committee and the Strategy Committee, both of whose members include directors that were approved by Starboard and who unanimously support the actions the company has taken.

The Box Board has been unified and unwavering in its commitment to acting in the best interests of all stockholders and will continue to do so.

Advisors

Morgan Stanley & Co. LLC is serving as financial advisor to Box. Wilson Sonsini Goodrich & Rosati, P.C. and Sidley Austin LLP are serving as legal advisors to Box.

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