Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~YES~~ Yes☒ NO No☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ~~YES~~ Yes☒ NO No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definition of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~YES~~ Yes☐ NO No☒

As of ~~November 30, 2017,~~May 28, 2021, the number of shares of the registrant’s Class A common stock outstanding was ~~120,976,520 and the number of shares of the registrant’s Class B common stock outstanding~~ ~~was 15,165,697.~~

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

	October 31,			January 31,				April 30,			January 31,
	2017			2017				2021			2021
	(unaudited)							(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	172,857		$	177,391			$	561,459		$	595,082
Accounts receivable, net of allowance of $1,909 and $3,346		95,868			120,113
Short-term investments									50,000			—
Accounts receivable									112,253			228,309
Prepaid expenses and other current assets		13,915			10,826				26,371			16,785
Deferred commissions		13,331			13,771				39,514			39,110
Total current assets		295,971			322,101				789,597			879,286
Property and equipment, net		118,278			117,176				146,100			160,148
Intangible assets, net		63			543
Operating lease right-of-use assets, net									183,401			194,253
Goodwill		16,293			16,293				75,597			18,740
Restricted cash		26,543			26,781
Deferred commissions, non-current									63,487			66,481
Other long-term assets		9,621			10,780				51,949			32,774
Total assets	$	466,769		$	493,674			$	1,310,131		$	1,351,682
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,334		$	6,658
Accounts payable, accrued expenses and other current liabilities								$	34,904		$	32,128
Accrued compensation and benefits		22,098			30,415				20,761			39,123
Accrued expenses and other current liabilities		18,074			17,713
Capital lease obligations		18,071			13,748
Finance lease liabilities									47,110			49,888
Operating lease liabilities									43,881			47,771
Deferred revenue		225,194			228,656				406,049			443,929
Deferred rent		2,147			751
Total current liabilities		296,918			297,941				552,705			612,839
Debt, non-current		40,000			40,000
Capital lease obligations, non-current		26,667			21,697
Debt, net, non-current									366,061			297,614
Finance lease liabilities, non-current									49,877			60,351
Operating lease liabilities, non-current									182,348			192,531
Deferred revenue, non-current		27,812			13,328				17,200			21,684
Deferred rent, non-current		45,943			44,207
Other long-term liabilities		3,129			1,769				17,127			15,598
Total liabilities		440,469			418,942				1,185,318			1,200,617
Commitments and contingencies (Note 6)
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, par value $0.0001 per share; 100,000 shares authorized, no shares issued and outstanding as of October 31 (unaudited) and January 31, 2017		—			—
Class A common stock, par value $0.0001 per share; 1,000,000 shares authorized; 118,867 shares (unaudited) and 67,831 shares issued and outstanding as of October 31 and January 31, 2017, respectively		8			7
Class B common stock, par value $0.0001 per share; 200,000 shares authorized; 17,223 shares (unaudited) and 62,780 shares issued and outstanding as of October 31 and January 31, 2017, respectively		5			6
Class A common stock, par value $0.0001 per share; 1,000,000 shares authorized; 162,762 shares (unaudited) and 159,851 shares issued and outstanding as of April 30 and January 31, 2021, respectively							��		16			16
Additional paid-in capital		1,033,917			960,144				1,462,038			1,474,843
Treasury stock		(1,177	)		(1,177	)			(1,177	)		(1,177	)
Accumulated other comprehensive loss		(30	)		(120	)			(371	)		(938	)
Accumulated deficit		(1,006,423	)		(884,128	)			(1,335,693	)		(1,321,679	)
Total stockholders’ equity		26,300			74,732				124,813			151,065
Total liabilities and stockholders’ equity	$	466,769		$	493,674			$	1,310,131		$	1,351,682

	Three Months Ended						Nine Months Ended						Three Months Ended
	October 31,						October 31,						April 30,
	2017			2016			2017			2016			2021			2020
Revenue	$	129,304		$	102,811		$	369,467		$	288,679		$	202,441		$	183,561
Cost of revenue		34,471			27,115			99,972			82,576			60,947			53,995
Gross profit		94,833			75,696			269,495			206,103			141,494			129,566
Operating expenses:
Research and development		34,812			29,652			102,388			84,824			50,859			53,114
Sales and marketing		81,670			66,796			225,604			186,454			69,811			72,750
General and administrative		20,910			16,999			63,037			49,087			31,087			27,942
Total operating expenses		137,392			113,447			391,029			320,365			151,757			153,806
Loss from operations		(42,559	)		(37,751	)		(121,534	)		(114,262	)		(10,263	)		(24,240	)
Interest expense, net		(287	)		(222	)		(802	)		(587	)
Other income (expense), net		277			(22	)		560			609
Interest and other expense, net														(3,999	)		(1,103	)
Loss before provision for income taxes		(42,569	)		(37,995	)		(121,776	)		(114,240	)		(14,262	)		(25,343	)
Provision for income taxes		355			238			519			670			311			207
Net loss	$	(42,924	)	$	(38,233	)	$	(122,295	)	$	(114,910	)	$	(14,573	)	$	(25,550	)
Net loss per common share, basic and diluted	$	(0.32	)	$	(0.30	)	$	(0.92	)	$	(0.91	)
Net loss per share, basic and diluted													$	(0.09	)	$	(0.17	)
Weighted-average shares used to compute net loss per share, basic and diluted		134,636			128,275			133,044			126,712			161,733			151,943

	Three Months Ended April 30, 2021
	Class A Common Stock				Additional Paid-In			Treasury			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital			Stock			Loss			Deficit			Equity
Balance as of January 31, 2021		159,851	$	16	$	1,474,843		$	(1,177	)	$	(938	)	$	(1,321,679	)	$	151,065
Cumulative adjustment due to adoption of ASU 2020-06		—		—		(68,576	)		—			—			559			(68,017	)
Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes		2,911		—		(1,878	)		—			—			—			(1,878	)
Stock consideration in connection with fiscal 2022 acquisition		—		—		10,000			—			—			—			10,000
Stock-based compensation related to stock awards		—		—		47,649			—			—			—			47,649
Other comprehensive loss		—		—		—			—			567			—			567
Net loss		—		—		—			—			—			(14,573	)		(14,573	)
Balance as of April 30, 2021		162,762	$	16	$	1,462,038		$	(1,177	)	$	(371	)	$	(1,335,693	)	$	124,813

Three Months Ended

Nine Months Ended

October 31,

October 31,

2017

2016

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss
$
(42,924
)

$
(38,233
)

$
(122,295
)

$
(114,910
)
Adjustments to reconcile net loss to net cash used in operating
   activities:

Depreciation and amortization

9,913

8,710

29,250

31,515

Stock-based compensation expense

25,523

19,917

72,536

55,070

Amortization of deferred commissions

5,393

4,251

15,751

13,627

Other

(124
)

13

(83
)

96

Changes in operating assets and liabilities:

Accounts receivable, net

12,023

(10,825
)

24,245

13,547

Deferred commissions

(4,616
)

(3,667
)

(13,235
)

(10,073
)
Prepaid expenses, restricted cash and other assets

2,746

1,670

(2,959
)

4,107

Accounts payable

(2,592
)

2,353

4,469

2,069

Accrued expenses and other liabilities

(4,828
)

(1,036
)

(8,721
)

(20,250
)
Deferred rent

1,413

424

3,132

3,078

Deferred revenue

12,167

9,594

11,022

6,185

Net cash provided by (used in) operating activities

14,094

(6,829
)

13,112

(15,939
)
CASH FLOWS FROM INVESTING ACTIVITIES:

Sales of marketable securities

—

—

—

240

Maturities of marketable securities

—

—

—

7,057

Purchases of property and equipment

(3,003
)

(1,892
)

(4,800
)

(13,639
)
Proceeds from sale of property and equipment

2

8

31

84

Net cash used in investing activities

(3,001
)

(1,884
)

(4,769
)

(6,258
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of borrowing costs

—

—

—

(93
)
Proceeds from exercise of stock options, net of repurchases of
   early exercised stock options

4,002

3,388

9,415

7,603

Proceeds from issuances of common stock under employee
   stock purchase plan

8,640

6,710

17,521

15,726

Employee payroll taxes paid related to net share settlement of
   restricted stock units

(11,284
)

(4,726
)

(26,219
)

(13,594
)
Acquisition related contingent consideration

—

—

(991
)

—

Payments of capital lease obligations

(4,781
)

(2,178
)

(12,693
)

(5,439
)
Net cash (used in) provided by financing activities

(3,423
)

3,194

(12,967
)

4,203

Effect of exchange rate changes on cash and cash equivalents

(88
)

(12
)

90

53

Net increase (decrease) in cash and cash equivalents

7,582

(5,531
)

(4,534
)

(17,941
)
Cash and cash equivalents, beginning of period

165,275

173,331

177,391

185,741

Cash and cash equivalents, end of period
$
172,857

$
167,800

$
172,857

$
167,800

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:

Cash paid for interest, net of amounts capitalized
$
527

$
50

$
1,416

$
838

Cash paid for income taxes, net of tax refunds

425

95

1,158

211

SUPPLEMENTAL DISCLOSURE OF NONCASH
   INVESTING AND FINANCING ACTIVITIES:

Change in accrued equipment purchases
$
1,714

$
3,647

$
2,604

$
(11,377
)
Purchases of property and equipment under capital lease

6,194

8,390

21,875

18,300

Change in unpaid tax related to capital lease

160

522

595

952

Vesting of early exercised stock options and restricted stock units

—

—

—

11

Issuance of common stock in connection with acquisitions and
   purchases of intangible assets

—

1,011

—

1,011

Timing of settlement of stock options exercise

520

—

520

—

	Three Months Ended
	April 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(14,573	)	$	(25,550	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		19,380			17,946
Stock-based compensation expense		41,790			40,043
Amortization of deferred commissions		10,517			8,159
Other		443			74
Changes in operating assets and liabilities:
Accounts receivable, net		116,835			110,367
Deferred commissions		(7,927	)		(7,695	)
Operating lease right-of-use assets, net		10,852			9,713
Prepaid expenses and other assets		(8,816	)		(4,925	)
Accounts payable, accrued expenses and other liabilities		(11,906	)		(19,713	)
Operating lease liabilities		(13,927	)		(11,002	)
Deferred revenue		(47,896	)		(55,500	)
Net cash provided by operating activities		94,772			61,917
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investment		(50,000	)		—
Purchases of property and equipment, net of proceeds from sales		(1,145	)		(1,407	)
Capitalized internal-use software costs		(1,178	)		(3,291	)
Acquisitions, net of cash acquired		(56,642	)		—
Proceeds from the sale of a strategic equity investment		—			107
Net cash used in investing activities		(108,965	)		(4,591	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Convertible debt issuance costs		(471	)		—
Proceeds from borrowings, net of borrowing costs		—			30,000
Proceeds from exercise of stock options		1,356			965
Proceeds from issuances of common stock under employee stock purchase plan		12,510			11,906
Employee payroll taxes paid related to net share settlement of restricted stock units		(15,684	)		(10,212	)
Principal payments of finance lease liabilities		(13,262	)		(17,356	)
Capitalized internal-use software costs		(3,297	)		—
Net cash (used in) provided by financing activities		(18,848	)		15,303
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(211	)		200
Net (decrease) increase in cash, cash equivalents, and restricted cash		(33,252	)		72,829
Cash, cash equivalents, and restricted cash, beginning of period		595,511			195,586
Cash, cash equivalents, and restricted cash, end of period	$	562,259		$	268,415
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Increase in finance lease liabilities	$	1,107		$	14,825
Stock consideration in connection with fiscal 2022 acquisition		10,000			—
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH INFORMATION:
Cash and cash equivalents, beginning of period	$	595,082		$	195,586
Restricted cash, beginning of period		429			—
Cash, cash equivalents, and restricted cash, beginning of period	$	595,511		$	195,586
Cash and cash equivalents, end of period	$	561,459		$	267,973
Restricted cash, end of period		800			442
Cash, cash equivalents, and restricted cash, end of period	$	562,259		$	268,415

We were incorporated in the state of Washington in April 2005, and were reincorporated in the state of Delaware in March 2008. We changed our name from Box.Net, Inc. to Box, Inc. in November 2011. Box provides a leading cloud content management 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.

The accompanying condensed consolidated balance sheet as of ~~October 31, 2017~~April 30, 2021 and the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss, the condensed consolidated statements of stockholders’ equity, and the condensed consolidated statements of cash flows for the three ~~and nine~~ months ended ~~October 31, 2017~~April 30, 2021 and ~~2016,~~2020, respectively, are unaudited. The condensed consolidated balance sheet data as of January 31, ~~2017~~2021 was derived from the audited consolidated financial statements that are included in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017~~2021 (the ~~“Form 10-K”)~~Form 10-K), which was filed with the Securities and Exchange Commission (the ~~“SEC”)~~SEC) on March ~~24, 2017.~~19, 2021. The accompanying statements should be read in conjunction with the audited consolidated financial statements and related notes contained in our Form 10-K. Other than items discussed under Use of Estimates and Recently Adopted Accounting Pronouncements,there have been no other material changes to our critical accounting policies and estimates during the ~~nine~~three months ended ~~October 31, 2017~~ April 30, 2021 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ~~(“U.S. GAAP”)~~(GAAP) for interim financial information. Accordingly, they do not include all of the financial information and footnotes required by ~~U.S.~~ GAAP for complete financial statements. In the opinion of our management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in the Form 10-K and include all adjustments necessary for the fair presentation of our balance sheet as of ~~October 31, 2017,~~April 30, 2021, and our results of operations, including our comprehensive loss, our stockholders’ equity, and our cash flows for the three ~~and nine~~ months ended ~~October 31, 2017~~April 30, 2021 and ~~2016.~~2020. All adjustments are of a normal recurring nature. The results for the three ~~and nine~~ months ended ~~October 31, 2017~~April 30, 2021 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending January 31, ~~2018.~~2022.

Certain prior ~~year balances~~period amounts reported in our condensed consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation. Such reclassifications did not affect total revenues, operating income, or net income.

The preparation of condensed consolidated financial statements in conformity with ~~U.S.~~ 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 determination of the allowance for accounts receivable, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, ~~best~~timing and costs associated with our asset retirement obligations, the nature and timing of satisfaction of performance obligations, estimate of standalone selling price allocation included in ~~multiple-deliverable revenue arrangements,~~ contracts with multiple performance obligations, the estimated expected benefit period for deferred commissions, the estimated useful life of capitalized internal-use software costs, observable price changes of non-marketable equity securities, fair value of derivative instruments, the incremental borrowing rate we use to determine our lease liabilities, fair values of stock-based awards, legal contingencies, the valuation of deferred income tax assets, and ~~the provision for income taxes, including related reserves,~~unrecognized tax benefits, among others. 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.

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

We sell to a broad range of ~~customers, including resellers.~~customers. Our revenue is derived ~~substantially~~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 maintain an allowance for doubtful accounts ~~receivable~~ based upon the expected collectability, which takes into consideration specific customer creditworthiness and current economic trends. We believe collections of our accounts receivable are ~~reasonably assured~~probable based on the size, industry diversification, financial condition and past transaction history of our customers. As of ~~October 31, 2017, one customer, which was a reseller, accounted for more than 10% of total accounts receivable. As of~~April 30, 2021 and January 31, ~~2017, two customers,~~2021, one reseller, which ~~were both resellers,~~is also a customer, accounted for more than 10% of total accounts receivable. No single customer ~~including resellers,~~ represented over 10% of our revenue for the three ~~and nine~~ months ended ~~October 31, 2017~~April 30, 2021 and ~~2016.~~2020.

We serve our customers and users from ~~datacenter~~data center facilities operated by third parties. In order to reduce the risk of down time of our ~~enterprise cloud content~~subscription services, we have established ~~datacenters~~data centers and third-party cloud computing and hosting providers in various locations in the United States and abroad. We have internal procedures to restore services in the event of disaster at any one of our current ~~datacenter~~data center facilities. 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.

For the three ~~and nine~~ months ended ~~October 31, 2017,~~April 30, 2021 and 2020, revenue attributable to customers in the United States was 69% and ~~customers outside the United States was 79% and 21%~~73%, respectively. For the three ~~and nine~~ months ended ~~October 31, 2016,~~April 30, 2021 and 2020, revenue attributable to customers in ~~the United States~~Japan was 17% and ~~customers outside the United States was 83% and 17%~~13%, respectively. ~~No other country outside of the United States comprised 10% or greater of our revenue for any of the periods presented.~~

Substantially all of our net assets are located in the United States. As of ~~October 31, 2017~~April 30, 2021 and January 31, ~~2017,~~2021, property and equipment located in the United States was ~~98.7% and 99.7%, respectively.~~approximately 96%.

In ~~November 2016,~~December 2019, the Financial Accounting Standards Board ~~(FASB)~~(FASB) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting ~~Standards Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash~~for Income Taxes. ASU ~~2016-18 requires entities~~2019-12 simplifies the accounting for income taxes by removing certain exceptions to ~~show~~ the ~~changes~~general principles in ~~cash, cash equivalents,~~Topic 740 and ~~restricted cash in~~by improving consistent application of other areas of Topic 740. We adopted the statement of cash flows. Entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. As of October 31, 2017 and January 31, 2017, we had $26.5 million and $26.8 million in restricted cash, respectively. Restricted cash consists of certificates of deposits related to our leases. The new standard, is effective ~~for us beginning~~ February 1, ~~2018, with early adoption permitted. The new standard should be applied using a retrospective transition method to each period presented. We expect~~2021, and the adoption ~~of ASU 2016-18 will~~did not have a material impact on our consolidated ~~statement of cash flows and related disclosures due to the release of $26.0 million in restricted cash disclosed under Note 12.~~financial statements.

In ~~June 2016,~~August 2020, the FASB issued ASU ~~2016-13,~~ ~~Financial Instruments- Credit Losses~~2020-06 (ASU 2020-06), Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this update were implemented by the FASB to reduce the number of accounting models for convertible debt instruments. Under ASU ~~2016-13 replaces~~2020-06, the ~~incurred loss impairment methodology in current U.S. GAAP~~embedded conversion features are no longer separated from the host contract for convertible instruments with ~~a methodology~~conversion features that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade receivables, loans, and other financial instruments, we will beare not required to ~~use~~be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a ~~forward-looking expected loss model rather than~~convertible debt instrument is accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. There is no longer a debt discount representing the ~~incurred loss model~~difference between the carrying value, excluding issuance costs, and the principal of the convertible debt instrument and, as a result, there is no longer interest expense from the amortization of the debt discount over the term of the convertible debt instrument. The amendments in this update also require the if-converted method to be applied for ~~recognizing credit losses which reflects losses that are probable. The~~all convertible instruments when calculating diluted earnings per share. We early adopted the new standard, is effective ~~for us beginning~~ February 1, 2020 with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of the provisions of this new standard on our consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. ASU 2016-02 requires lessees to put most leases on their balance sheet while recognizing expense in a manner similar to existing accounting. The new accounting guidance is effective for us beginning February 1, 2019 with early adoption permitted. We will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact of the provisions of this new standard on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 regarding ASC Topic 606, Revenue from Contracts with Customers. The standard provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also provides guidance on the recognition of sales commission costs related to obtaining customer contracts. In addition, the FASB issued subsequent ASUs, which serve to clarify certain aspects of ASU 2014-09. The standard will be effective for us beginning February 1, 2018; we have elected not to adopt the standard earlier. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). We currently anticipate adopting the standard2021, using the modified retrospective ~~method,~~

which will result in a cumulative effect adjustment. We have established a cross-functional team to implement the new standard with respect to the recognition of revenue from contracts with customers. We have identified,method. The comparative periods presented and ~~are~~disclosed in the ~~process~~year of ~~implementing, appropriate changes to our business processes, systems and controls to support recognition and disclosure under the new standard.~~

Based on our ongoing evaluation, we expect this ASU will impact our capitalization and amortization of sales commissions, the timing of our revenue recognition for certain sales contracts, and their related disclosures. We expect a change to the period over which we amortize sales commissions in order to align them to an expected benefit period of five years. We also expect a change to the scope of capitalized sales commissionsadoption are based on ~~the definition~~legacy guidance.

Adoption Impact of ~~incremental costs of obtaining a contract. While we have not finalized the assessment~~ASU 2020-06 on the ~~new commissions policy,~~Opening Balance Sheet as of February 1, 2021

In connection with the adoption of ASU 2020-06, we ~~believe the new commissions policy will~~recognized a $0.6 million decrease of accumulated deficit, a $68.6 million decrease of additional paid-in capital, and a $68.0 million increase of debt, net, noncurrent. The adoption of ASU 2020-06 did not have a material ~~impact~~effect on ~~our~~ ~~consolidated financial statements, resulting in~~ lower commissions expense over at least the first twelve-month period post adoption. In addition, we expect a change in the timing of revenue recognition for certain sales contracts due primarily to the removal of the current limitation on contingent revenue. We have not yet determined whether the potential impact on revenue will be material to our consolidated financial statements and related disclosures as future sales contracts up to the date of our adoption still may impact our assessment. We continue to assess the potential impact of this ASU on our consolidated financial statements and related disclosures and, as such, our preliminary conclusions remain subject to change.

~~In January 2017, FASB issued ASU 2017-04,~~ ~~Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment.~~ ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test. Under current guidance, Step 2 of the goodwill impairment test requires entities to calculate the implied fair value of goodwill in the same manner as the amount of goodwill recognized in a business combination by assigning the fair value of a reporting unit to all of the assets and liabilities of the reporting unit. The carrying value in excess of the implied fair value is recognized as goodwill impairment. Under the new standard, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value. The new standard is effective for us beginning February 1, 2020, with early adoption permitted.

We elected to early adopt ASU 2107-04 during the second quarter of fiscal year 2018. The adoption of this ASU had no impact on our condensed consolidated financial statements. We expect that adoption of this ASU will simplify the evaluation and recording of goodwill impairment charges, if any.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payment~~. ASU 2016-15 provides guidance on the classification of eight cash flow issues in order to reduce diversity in practice. As required by ASU 2016-15, contingent consideration payments made soon after a business combination should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities. The new standard is effective for us beginning February 1, 2018 with early adoption permitted.

We elected to early adopt ASU 2016-15 during the second quarter of fiscal year 2018. The new standard requires application using a retrospective transition method. We have evaluated the impact on a quantitative and qualitative basis and concluded it was not material to any of prior periods presented.

~~In April 2016, the FASB issued ASU 2016-09,~~ ~~Compensation- Stock Compensation: Improvements to Employee Share-Based Payment Accounting~~. ASU 2016-09 changes the accounting for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement. In addition, cash flows related to excess tax benefits will be presented as an operating activity on the cash flow statement. The standard also allows entities to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the cash flow statement, and provides an accounting policy election to account for forfeitures as they occur.

~~We adopted ASU 2016-09 during the first quarter of fiscal year 2018. As required by the standard, excess tax benefits recognized on stock-based compensation expense were prospectively reflected in~~ our condensed consolidated statements of ~~income as a component~~operations and cash flows.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the ~~provision for income taxes rather than~~Effects of Reference Rate Reform on Financial Reporting. Reference rate reform refers to the ~~condensed consolidated balance sheet~~global transition away from certain reference rates, such as the London Interbank Offered Rate (LIBOR), and to the introduction of new reference rates that are based on a ~~paid-in capital. Included in our net operating loss~~larger and research and development tax credit carryforwards are approximately $25.2 million of excess tax benefits from employee stock option exercises, for which we have not realized a deferred tax asset since it is fully offset by a valuation allowance, resulting in no impact to our condensed consolidated financial statements including any cumulative effect to accumulated deficit from previously unrecognized excess tax benefits. Our policy has been to classify cash flows related to excess tax benefits asmore liquid

~~part~~population of ~~operating activities~~observable transactions. ASU 2020-04 provides temporary optional expedients and ~~cash payments made on employee’s behalf~~exceptions for ~~withheld shares~~applying GAAP to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued as ~~part~~a result of ~~financing activities, and thus, the adoption of~~reference rate reform. The amendments in this ~~standard had no effect~~ASU were effective upon issuance do not have a material impact on our condensed consolidated ~~statements~~financial statements.

Other than items discussed under Use of Estimates and Recently Adopted Accounting Pronouncements, there have been no material changes to our critical accounting policies during the three months ended April 30, 2021 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended January 31, 2021.

Contract assets, which are presented within accounts receivable, were not material as of April 30, 2021 and January 31, 2021.

Deferred revenue was $423.2 million and $465.6 million as of April 30, 2021 and January 31, 2021, respectively. During the three months ended April 30, 2021 and 2020, we ~~did not elect an accounting policy change~~recognized $167.4 million and $154.4 million of revenuethat was included in the deferred revenue balance as of January 31, 2021 and 2020, respectively.

Transaction Price Allocated to ~~record forfeitures as they occur and thus will continue~~the Remaining Performance Obligations

As of April 30, 2021, we had remaining performance obligations for subscription contracts of $864.8 million. We expect to ~~estimate~~recognize revenue on 62% of these remaining performance obligations over the ~~number~~next 12 months, with the substantial majority of ~~forfeitures~~the remaining balance expected to ~~occur. Other amendments in the guidance did not impact our condensed consolidated financial statements.~~be recognized within 24 months.

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. 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. 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:

~~We measure restricted cash at~~of the Notes is determined using observable market prices. The fair value onof the Notes, which we have classified as a ~~recurring basis. We classify this asset within Level 1 or~~ Level 2 because they are valued using either quoted market prices for identical assets or inputs other than quoted prices that are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. We had restricted cash in the form of certificates of deposits of $26.5instrument, was $375.3 million and ~~$26.8~~$348.4 million as of ~~October 31, 2017~~April 30, 2021 and January 31, ~~2017, respectively, classified within Level 2.~~

~~On November 29, 2017, in connection with our entry into a new secured credit agreement with Wells Fargo Bank, National Association (November 2017 Facility)~~2021, we utilized an available sublimit for the issuance of $26.0 million in letters of credit and released the restrictions on the corresponding certificates of deposits. Accordingly, we released $26.0 million from restricted cash to cash and cash equivalents. Refer to Note 12 for additional details. respectively.

Allowance for doubtful accounts, which is presented within accounts receivable, was $3.0 million and $2.7 million as of April 30, 2021 and January 31, 2021, respectively.

Prepaid expenses and other current assets consisted of the following (in thousands):

As of ~~October 31, 2017,~~April 30, 2021, the gross carrying amount of property and equipment included $65.3 million of servers and $6.8 million of construction in progress acquired under capital leases, and the accumulated depreciation of property and equipment acquired under these capital leases was $23.6 million. As of January 31, 2017, the gross carrying amount of property and equipment included $43.2$258.6 million of servers and related equipment and $5.6 million of construction in progress acquired under ~~capital~~finance leases, and the accumulated depreciation of property and equipment acquired under these ~~capital~~finance leases was ~~$10.4~~$165.5 million. As of January 31, 2021, the gross carrying amount of property and equipment included $256.0 million of servers and related equipment and $7.1 million of construction in progress acquired under finance leases, and the accumulated depreciation of property and equipment acquired under these finance leases was $152.5 million.

Depreciation expense related to property and equipment was ~~$9.9~~$16.2 million and ~~$8.2~~$16.4 million for the three months ended ~~October 31, 2017~~April 30, 2021 and ~~2016, respectively, and $28.8 million and $28.6 million for the nine months ended October 31, 2017 and 2016,~~2020, respectively. Included in these amounts ~~was~~were depreciation expense for servers and related equipment acquired under ~~capital~~finance leases in the amount of ~~$4.9 million and $2.0~~$13.1 million, for the ~~three months ended October 31, 2017 and 2016, respectively, and $13.3 million and $5.0 million for the nine months ended October 31, 2017 and 2016,~~same periods respectively. Construction in progress primarily consists of servers and networking equipment and storage infrastructure being provisioned in our ~~datacenter facilities as well as leasehold improvements due to facilities investments.~~ ~~In addition, the amounts of interest~~data center facilities. Interest capitalized to property and equipment ~~were~~was not material for the periods presented.

Operating lease right-of-use assets, net consisted of the following (in thousands):

We have entered into various non-cancellable operating lease agreements for certain of our offices and ~~nine~~data centers with lease periods expiring primarily between fiscal years 2022 and 2029. 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 have also entered into various finance lease arrangements to obtain servers and related equipment for our data center operations. These agreements are primarily for four years and certain of these arrangements have optional renewal or termination clauses. The leases are secured by the underlying leased servers and related equipment.

We sublease certain floors of our Redwood City, San Francisco, and London offices. Our current subleases have total lease terms ranging from 11 to 96 months ~~ended October 31, 2017~~that will expire at various dates by fiscal year 2025.

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, 2021, maturities of our operating and ~~2016.~~ finance lease liabilities, which do not include short-term leases and variable lease payments, are as follows (in thousands):

We establish assets and liabilities for the present value of estimated future costs to return certain of our leased facilities to their original condition. Such assets are depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs. The present value of our estimated asset retirement obligation for our headquarters facility, which is recorded in other long-term liabilities, was $3.1 million as of April 30, 2021 and January 31, 2021. The accretion expense, which was included in operating expenses in our condensed consolidated statements of operations, was not material for all periods presented.

~~Wagon Analytics, Inc.~~The purchase price allocation is preliminary. The Company continues to collect information with regard to its estimates and assumptions, including potential liabilities and contingencies. The Company will record adjustments to the fair value of the net assets acquired and goodwill within the twelve months measurement period, if necessary.

On ~~August 30, 2016,~~February 8, 2021, we ~~entered~~ ~~into~~completed the acquisition of SignRequest B.V. (SignRequest), an ~~agreement~~e-signature provider, for total aggregate consideration of $54.3 million comprised of a combination of cash and shares of our Class A common stock. Box acquired SignRequest to ~~license certain~~develop Box Sign, an e-signature capability that will be developed on Sign-Request’s technology and ~~hire certain employees from Wagon Analytics, Inc., a privately-held data analysis company, for a~~natively integrated into Box.

The consideration paid was $44.3 million of cash and 550,366 shares of our Class A common stock valued at $10.0 million.

Under the acquisition method of accounting, the total ~~purchase price of $2.0 million. This agreement has been accounted for as a business combination. The entire~~final purchase price was allocated to SignRequest’s net tangible and intangible assets based upon their estimated fair values as of the acquisition date. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill. Of the total purchase price, $43.4 million was allocated to goodwill, $14.9 million to the acquired developed technology, $2.5 million to deferred tax liability and the remainder to net liabilities assumed which were not material. The goodwill recognized was primarily attributed to increased synergies that are expected to be achieved from the integration of the acquired developed technology into the Box service. Goodwill is ~~attributable~~non-deductible for tax purposes.

On February 16, 2021, we purchased certain assets and assumed certain liabilities of, and hired certain employees from, Cloud FastPath, a cloud-based content migration solution, for total consideration of $14.8 million paid in cash. We entered into this agreement with Cloud FastPath to ~~future growth~~supplement and ~~potential enhancement opportunities~~enhance Box Shuttle, our full-service content migration program.

The fair value of the consideration transferred on the date of purchase totaled $14.8 million, which consisted of cash consideration of $12.4 million and $2.4 million which has been held back for ~~our analytics platform~~.fifteen months from the date of purchase to secure the indemnification obligations of the Seller.

Under the acquisition method of accounting, the total final purchase price was allocated to Cloud FastPath’s net tangible and intangible assets based on their estimated fair values as of the date of purchase. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill. Of the total purchase price, $13.2 million was allocated to goodwill, $5.8 million to the acquired developed technology, $4.8 million to deferred revenue and the remainder to net assets assumed which were not material. The goodwill recognized was primarily attributed to increased synergies that are expected to be achieved from the integration of the acquired developed technology into the Box service. Goodwill is deductible for ~~U.S. income~~ tax purposes. ~~Transaction costs related to this business combination were not material.~~

Results of operations for ~~this business combination~~these acquisitions have been included in our condensed consolidated statements of operations since the acquisition ~~date~~dates and were not material. Pro forma results of operations for ~~this business combination~~these acquisitions have not been presented because they were also not material to the consolidated results of operations.

~~There was no goodwill activity~~ ~~for the three and nine months ended October 31, 2017.~~

Goodwill activity for the three months ended April 30, 2021 is reflected in the following table (in thousands):

We did 0t record any goodwill impairment during the three months ended April 30, 2021. There were 0 additions or impairment to goodwill during the three months ended April 30, 2020.

~~Intangible~~Acquired intangible assets are amortized on a straight-line basis over the useful life. Acquired intangible assets amortization ~~expense~~ was ~~not material for the three months ended October 31, 2017 and was $0.5~~$0.9 million for the three months ended ~~October 31, 2016. For~~April 30, 2021. We did 0t record any acquired intangible assets amortization during the ~~nine~~three months ended ~~October 31, 2017 and 2016, intangible amortization expense was $0.5 million and $2.9 million, respectively.~~April 30, 2020. Amortization of acquired developed technology is included in cost of revenue ~~and amortization for trade names is included in general and administrative expenses~~ in the condensed consolidated statements of operations.

As of ~~October 31, 2017,~~April 30, 2021, expected amortization expense for acquired intangible assets was ~~not material.~~as follows (in thousands):

As of ~~October 31, 2017~~April 30, 2021 and January 31, ~~2017,~~2021, we had letters of credit in the aggregate amount of ~~$26.5~~$27.0 million ~~and $26.8 million, respectively,~~ in connection with our operating leases and ~~capital leases. Letters of credit in connection with our facility leases are collateralized by certificates of deposits. Refer to Note 2 for additional details.~~

~~On November 29, 2017, in connection with our entry into~~voluntary disability insurance (VDI) program, which were primarily issued under the ~~November 2017 Facility, we utilized an~~ available sublimit for the issuance of ~~$26.0 million in~~ letters of credit ~~and released the restrictions on the corresponding certificates of deposits. Refer to~~in conjunction with a secured credit agreement as disclosed in Note ~~12 for additional details.~~ 9.

We have entered into various non-cancellable operating lease agreements for certain of our offices and datacenters with lease periods expiring primarily between fiscal years 2018 and 2029. Certain of these arrangements have free or escalating rent payment provisions and optional renewal clauses. We are also committed to pay a portion of the actual operating expenses under certain of these lease agreements. These operating expenses are included in the table below.

We also entered into various capital lease arrangements to obtain servers for our operations. These agreements are typically for three to four years. The leases are secured by the underlying leased servers.

~~As of October 31, 2017, future minimum lease payments under non-cancellable capital and operating leases are as follows (in thousands):~~

We sublease certain floors of our headquarters and one floor of our office in San Francisco. These subleases have terms ranging from 19 to 49 months that will expire between fiscal 2018 and 2021. Non-cancellable sublease proceeds for the years ending January 31, 2018, 2019, 2020 and 2021 of $1.8 million, $5.8 million, $1.9 million and $1.8 million, respectively, are included in the table above.

We establish assets and liabilities for the present value of estimated future costs to return certain of our leased facilities to their original condition. Such assets are depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs. We did not have material asset retirement obligations as of October 31, 2017 and January 31, 2017. In addition, sufficient information did not exist as of October 31, 2017 to reasonably estimate the fair value of asset retirement obligations for the leases on our Tokyo and London offices.

We recognize rent expense under our operating leases on a straight-line basis. Rent expense totaled $8.1 million and $4.7 million, net of sublease income of $1.9 million and $1.8 million for the three months ended October 31, 2017 and 2016, respectively, and rent expense totaled $20.3 million and $13.3 million, net of sublease income of $5.6 million and $5.0 million for the nine months ended October 31, 2017 and 2016, respectively.

As of ~~October 31, 2017,~~April 30, 2021, future payments under non-cancellable contractual purchases, which were not recognized on our condensed consolidated balance sheet and relate primarily to ~~datacenter operations~~infrastructure services and ~~sales~~IT software and ~~marketing activities,~~support services costs, are as follows, shown in accordance with the payment due date (in thousands):

~~In June 2013, Open Text S.A. (Open Text) filed a lawsuit against us in the U.S. District Court, Eastern District~~Our contracts for infrastructure services and IT software, which have terms ranging from 2 to 8 years, support our long-term goals of Virginia, alleging that our core cloud software and Box Edit application infringed 12 patents of Open Text. This case was subsequently transferred to the U.S. District Court for the Northern District of California and, in February 2015, went to trial. In February 2015, the jury returned a verdict in which it awarded damages in favor of Open Text in a lump sum and fully paid-up royalty in the amount of $4.9 million. Both parties appealed certain aspects of the trial. While we continued to defend the lawsuit vigorously and continued to believe we had valid defense to Open Text’s claims, we considered the issuance of the verdict a recognized subsequent event that provided additional evidence about conditions which existed as of January 31, 2015. Accordingly, as of January 31, 2015, we accrued $4.9 million in relation to the jury award and recorded an expense in the amount of $3.9 million for the year ended January 31, 2015,

in relation to the portion of the jury award attributable to prior periods. The portion of the jury award attributable to future periods was recorded as an asset as of January 31, 2015. This asset was amortized over an estimated useful life of 14 months, and the amortization expense was $0.9 million for the year ended January 31, 2016. In addition, we deemed Open Text’s claim for interest on the jury award amount to be probable and estimable for the first time in July 2015. As such, we accrued additional expenses in the aggregate amount of $0.7 million during the year ended January 31, 2016, in relation to the interest on the jury award amount.

On March 31, 2016, we entered into a Confidential Settlement and Release Agreement with Open Text (the “Settlement Agreement”), which fully settled the lawsuit and resulted in a full dismissal of the case against the Company. In connection with such settlement, we paid $3.75 million in total to Open Text, and our obligation to pay the jury award amount of approximately $4.9 million and all pre- and post-judgment interest was terminated. The parties agreed to drop all appeals pending in connection with the litigation and each agreed to certain standard mutual releases related to the subject matter of the suit. We recorded the settlement payment of $3.75 million, reversed previous related accruals and interest of $5.6 million, and recorded $0.1 million in recurring amortization for the asset, resulting in net income of $1.7 million in our condensed consolidated statement of operations for the three months ended April 30, 2016.

improving gross margin. In addition to the ~~litigation discussed~~purchase obligations included above, ~~from~~as of April 30, 2021, we recognized a total of $9.2 million related to non-cancellable contractual purchases, which were included in accounts payable, accrued expenses and other current liabilities, and other long-term liabilities on the condensed consolidated balance sheet. $3.5 million, $3.8 million, and $1.9 million is due to be paid in the remainder of the fiscal year ending January 31, 2022 and the fiscal years ending January 31, 2023 and 2024, respectively.

From time to time, we are ~~a party to litigation and~~ subject to claims that arise in the ordinary course of ~~business.~~business, including matters we initiate to defend ourselves or our users by determining the scope, enforceability, and validity of third-party proprietary rights or to establish our proprietary rights. We investigate these 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 ~~October 31, 2017.~~April 30, 2021. Additionally, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors, regardless of the outcome of such litigation.

We include service level commitments to our customers warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that we fail to meet those levels. In addition, our customer contracts often include (i) specific obligations that we maintain the availability of the customer’s data through our service and that we secure customer content against unauthorized access or loss, and (ii) indemnity provisions whereby we indemnify our customers for third-party claims asserted against them that result from our failure to maintain the availability of their content or securing the same from unauthorized access or loss. To date, we have not incurred any material costs as a result of such commitments.

Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any material liabilities related to such obligations in the condensed consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.

In December 2015, we entered into a revolving credit facility (December 2015 Facility) with a lender in the amount of up to $40.0 million maturing in December 2017. The December 2015 Facility was denominated in U.S. dollars and, depending on certain conditions, each borrowing was subject to a floating interest rate equal to either the prime rate plus a spread of 0.25% to 2.75% or a reserve adjusted LIBOR rate (based on one, three or six-month interest periods) plus a spread of 1.25% to 3.75%. Although no minimum deposit was required for the December 2015 Facility, we were eligible for the lowest interest rate if we maintained at least $40 million in deposits with the lender. In addition, there was an annual fee of 0.2% on the total commitment amount. We drew $40.0 million at 1.82% (six month LIBOR plus 1.25%). Borrowings under the December 2015 Facility were collateralized by substantially all of our assets in the United States. The December 2015 Facility also contained various covenants, including covenants related to the delivery of financial and other information, the maintenance of quarterly financial covenants, as well as customary limitations on dispositions, mergers or consolidations and other corporate activities. As of October 31, 2017, we were in compliance with all financial covenants. ~~In February 2017, we amended the December 2015 Facility to extend the maturity date to December 2018. Interest expense, net of capitalized interest costs, for the periods presented is not material.~~

In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026. The Notes are senior unsecured obligations and do not bear regular interest. Each $1,000 principal amount of the Notes will initially be convertible into 38.7665 shares of our Class A common stock, which is equivalent to an initial conversion price of approximately $25.80 per share, subject to adjustment upon the occurrence of specified events.

The Notes are convertible at the option of the holders of the Notes at any time prior to the close of business on the business day immediately preceding October 15, 2025, only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on April 30, 2021 (and only during such fiscal quarter), if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5-business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate for the Notes on each such trading day; (3) if we call the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.

On or after October 15, 2025, holders of the Notes may convert all or any portion of their Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Effective February 5, 2021, we have made an irrevocable election to settle the principal portion of the Notes only in cash. Accordingly, upon conversion, we will pay the principal portion in cash and we will pay or deliver, as the case may be, the conversion premium in cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election.

We may not redeem the Notes prior to January 20, 2024. We may redeem for cash all or any portion of the Notes, at our option, on or after January 20, 2024, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid special interest to, but excluding the redemption date.

Upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) prior to the maturity date, subject to certain conditions, holders of the Notes may require us to repurchase all or a portion of the Notes for cash at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid special interest to, but excluding, the fundamental change repurchase date.

As of April 30, 2021, the conditions allowing holders of the Notes to convert were not met.

Issuance costs are being amortized to interest expense over the term of the Notes using the effective interest rate method. The effective interest rate used to amortize the issuance costs was 0.56%. For the three months ended April 30, 2021, the interest expense recognized related to the Notes was $0.5 million.

In connection with the pricing of the Notes, we entered into privately negotiated capped call transactions with certain counterparties (Capped Calls). The Capped Calls each have an initial strike price of approximately $25.80 per share, subject to certain adjustments, which correspond to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $35.58 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 13.4 million shares

On November 27, 2017, we ~~terminated the December 2015 Facility and~~ entered into a secured credit agreement (as amended or otherwise modified from time to time, the November 2017 ~~Facility.~~ ~~Refer~~Facility). The maturity date of borrowings under the November 2017 Facility is July 12, 2022, the revolving commitment is $100.0 million, and it provides for a sublimit for the issuance of letters of credit of $45.0 million. The November 2017 Facility limits the amount of finance leases and debt that we can incur to ~~Note 12~~$200.0 million, and allows for ~~additional details.~~the issuance of debt constituting convertible debt securities of $350.0 million so long as the total leverage ratio does not exceed 6.00 to 1.00. The revolving loans accrue interest at a prime rate plus a margin of 0.25% or, at our option, a LIBOR rate (based on one, three or six-month interest periods) plus a margin of 1.00%. Borrowings under the November 2017 Facility are collateralized by substantially all of our assets. The November 2017 Facility requires us to comply with a maximum leverage ratio and a minimum liquidity requirement. Additionally, the November 2017 Facility contains customary affirmative and negative covenants.

As of April 30, 2021, we had total debt outstanding with a carrying amount of $30.0 million and we were in compliance with all financial covenants.

In association with our November 2017 Facility, we are required to make variable rate interest payments based on a contractually specified interest rate index (e.g., LIBOR). The variable rate interest payments create interest rate risk as interest payments will fluctuate based on changes in the contractually specified interest rate index over the life of the loan. To minimize our risk exposure due to the volatility of the interest rate index, we entered into an interest rate swap agreement with Wells Fargo Bank, National Association, effective as of September 5, 2019 (Swap Agreement). This agreement, which is designated as a cash flow hedge, has a maturity of five years. Under the Swap Agreement, we have hedged a portion of the variable interest payments by effectively fixing our interest payments over the term of the agreement. As of April 30, 2021, our interest rate swap had a notional value of $30.0 million.

In January 2015, our board of directors adopted the 2015 Equity Incentive Plan (2015 Plan), which became effective prior to the completion of our initial public offering (IPO). A total of 12,200,000 shares of Class A common stock was initially reserved for issuance pursuant to future awards under the 2015 Plan. On the first day of each fiscal year, shares available for issuance are increased based on the provisions of the 2015 Plan. Any shares subject to outstanding awards under our 2006 Equity Incentive Plan (2006 Plan) or 2011 Equity Incentive Plan (2011 Plan) that are cancelled or repurchased subsequent to the 2015 Plan’s effective date are returned to the pool of shares reserved for issuance under the 2015 Plan. Awards granted under the 2015 Plan may be (i) incentive stock options, (ii) nonstatutory stock options, (iii) restricted stock units, (iv) restricted stock awards or (v) stock appreciation rights, as determined by our board of directors at the time of grant. ~~Twenty-five percent of each grant of stock options and~~Generally, our restricted stock units ~~generally~~vest over four years and, (a) for employee new hire restricted stock unit grants, NaN percent vest one year from the vesting commencement date and continue to vest ~~(a) in the case of options,~~ 1/48^th16th per ~~month thereafter, and~~quarter thereafter; or (b) ~~in the case of~~for employee refresh restricted stock ~~units,~~ unit grants, 1/16th per quarter ~~thereafter.~~vest from the vesting commencement date. As of ~~October 31, 2017, 16,633,551~~April 30, 2021, 26,683,430 shares were reserved for future issuance under the 2015 Plan.

In January 2015, our board of directors adopted the 2015 Employee Stock Purchase Plan (2015 ESPP), which became effective prior to the completion of our IPO. A total of 2,500,000 shares of Class A common stock was initially reserved for issuance under the 2015 ESPP. On the first day of each fiscal year, shares available for issuance are increased based on the provisions of the 2015 ESPP. The 2015 ESPP allows eligible employees to purchase shares of our Class A common stock at a discount of up to 15% through payroll deductions of their eligible compensation, subject to any plan limitations. ~~Except for the initial offering period, the~~The 2015 ESPP provides for 24-month offering periods beginning March 16 and September 16 of each year, and each offering period consists of four six-month purchase periods.

On each purchase date, eligible employees may purchase our stock at a price per share equal to 85% of the lesser of (1) the fair market value of our stock on the offering date or (2) the fair market value of our stock on the purchase date. In the event the price is lower on the last day of any purchase price period, in addition to using that price as the basis for that purchase period, the offering period resets and the new lower price becomes the new offering price for a new 24 month offering period. As of ~~October 31, 2017, 2,202,188~~April 30, 2021, 1,356,993 shares were reserved for future issuance under the 2015 ESPP.

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

Shares Subject to Options Outstanding

Weighted-Average

Weighted-

Remaining

Average Exercise

Contractual Life

Aggregate

Shares

Price

(Years)

Intrinsic Value

(in thousands)

Balance as of January 31, 2017

12,318,800

$
7.44

6.42

$
119,606

Options granted

1,533,056

17.46

Option exercised

(1,561,172
)

6.36

Options forfeited/cancelled

(852,990
)

15.05

Balance as of October 31, 2017

11,437,694

$
8.37

5.99

$
155,364

Vested and expected to vest as of October 31, 2017

11,330,158

$
8.30

5.97

$
154,675

Exercisable as of October 31, 2017

8,939,286

$
6.36

5.30

$
139,342

	Shares Subject to Options Outstanding					Weighted- Average
				Weighted-		Remaining
				Average Exercise		Contractual Life		Aggregate
	Shares			Price		(Years)		Intrinsic Value
								(in thousands)
Balance as of January 31, 2021		6,617,037		$	10.77		3.77	$	48,098
Options granted		—			—
Options exercised		(175,460	)		7.73
Options forfeited/cancelled		—			—
Balance as of April 30, 2021		6,441,577		$	10.85		3.55	$	67,482
Vested and expected to vest as of April 30, 2021		6,381,107		$	10.76		3.52	$	67,406
Exercisable as of April 30, 2021		5,224,876		$	8.71		2.66	$	65,940

The aggregate intrinsic value of options vested and expected to vest and exercisable as of ~~October 31, 2017~~April 30, 2021 is calculated based on the difference between the exercise price and the current fair value of our common stock. The aggregate intrinsic value of exercised

options for the ~~nine~~three months ended ~~October 31, 2017~~April 30, 2021 and ~~2016~~2020 was ~~$18.8~~$2.5 million and ~~$21.5~~$2.2 million, respectively. The aggregate estimated fair value of stock options granted to employees that vested ~~for~~during the ~~nine~~three months ended ~~October 31, 2017~~April 30, 2021 and ~~2016~~2020 was ~~$7.2~~$0.4 million and ~~$12.7~~$0.5 million, respectively. There were 0 options granted to employees during the three months ended April 30, 2021. The weighted-average grant date fair value of options granted to employees during the ~~nine~~three months ended ~~October 31, 2017 and 2016~~April 30, 2020 was ~~$7.04 and $5.45~~$5.41 per ~~share, respectively.~~share.

As of ~~October 31, 2017,~~April 30, 2021, there was ~~$15.1~~$1.2 million of unrecognized stock-based compensation expense related to outstanding stock options granted to employees that is expected to be recognized over a weighted-average period of ~~2.40~~1.38 years.

To further align our stockholders’ interests with executive officers’ interests, the ~~compensation committee~~Compensation Committee of our board of directors approved and granted ~~475,000~~ performance-based stock options with market-based performance goalsunder the 2015 Plan to certain executive officers~~where vesting is~~ , which are subject to both the achievement of the market-based performance goal established by the Compensation Committee and the continued employment of the ~~participant~~participant. These performance-based stock options were awarded during our fiscal years ending January 31, 2018, 2019, and 2020, and vest only to the ~~achievement of~~extent that both the market-based performance ~~goals established by the compensation committee. Subject to the achievement~~goal and time-based condition are satisfied. As of ~~the performance goals, 25%~~April 30, 2021, the total outstanding balance of ~~the~~ performance-based stock options ~~vest one year from the vesting commencement date, and 1/48~~^th ~~continue to vest each month thereafter.~~ was 1,375,000.

The grant date fair value of these awards was determined using a Monte Carlo valuation ~~model. As~~model and the related stock-based compensation expense is recognized based on an accelerated attribution method. Of the total $1.2 million in unrecognized stock-based compensation expense for stock options as of ~~October 31, 2017, these~~April 30, 2021, $0.7 million related to outstanding performance-based stock options with market-based performance goals, ~~were not met. During the nine months ended October 31, 2017, 250,000 performance-based stock options were forfeited in connection with~~which is expected to be recognized over a ~~participant’s resignation~~weighted-average period of ~~employment.~~1.67 years.

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

As of ~~October 31, 2017,~~April 30, 2021, there was ~~$196.6~~$339.3 million of unrecognized stock-based compensation expense related to outstanding restricted stock units granted to employees that is expected to be recognized over a weighted-average period of ~~2.91~~2.98 years.

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. Typically, near the beginning of each fiscal year, our Compensation Committee adopts the performance criteria and targets for the incentive compensation plan for that fiscal year, which identifies the plan participants, the performance measures and the associated target levels for each measure, and the potential payouts based on actual performance for the fiscal year.

In the first quarter of fiscal year 2021, our Compensation Committee adopted and approved the performance criteria and targets for fiscal year 2021 under our omnibus Executive Incentive Plan (the Fiscal 2021 Executive Bonus Plan). Based on a review of our actual achievement of pre-established corporate financial objectives and additional inputs from our Compensation Committee, the Fiscal 2021 Executive Bonus Plan was determined, settled and paid out in the first quarter of fiscal year 2022 in the form of fully vested restricted stock units. During the first quarter of fiscal year 2022, we recognized stock-based compensation expense related to the Fiscal 2021 Executive Bonus Plan in the amount of $3.2 million.

In the first quarter of fiscal year 2022, our Compensation Committee adopted and approved the performance criteria and targets for fiscal year 2022 under our omnibus Executive Plan (the Fiscal 2022 Executive Bonus Plan). The Fiscal 2022 Executive Bonus Plan provides opportunities for 100% equity incentive compensation payouts based on our actual achievement of pre-established corporate financial objectives, subject to review and a final approval by our Compensation Committee. During the three months ended April 30, 2021, we recognized stock-based compensation expense related to the Fiscal 2022 Executive Bonus Plan in the amount of $2.6 million. The unrecognized compensation expense related to the ungranted and unvested Fiscal 2022 Executive Bonus Plan is $9.0 million, based on the expected performance against the pre-established corporate financial objectives as of April 30, 2021, which is expected to be recognized over a remaining weighted-average period of less than one year. The payouts of the Fiscal 2022 Executive Bonus Plan are expected to be made in the form of fully vested restricted stock units in the first quarter of fiscal year 2023.

As of ~~October 31, 2017,~~April 30, 2021, there was ~~$8.6~~$25.4 million of unrecognized stock-based compensation expense related to the 2015 ESPP that is expected to be recognized over the remaining term of the respective offering periods.

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

We estimated the fair value of employee stock options and 2015 ESPP purchase rights using a Black-Scholes option pricing model with the following ~~assumptions:~~assumptions.

	Three Months Ended										Nine Months Ended										Three Months Ended
	October 31,										October 31,										April 30,
	2017					2016					2017					2016					2021					2020
Employee Stock Options
Expected term (in years)					6.1					6.0		5.5		-	6.1		5.5		-	6.0				N/A						5.8
Risk-free interest rate					2.0%		1.3	%	-	1.4%		1.8	%	-	2.1%		1.3	%	-	1.5%				N/A						0.6	%
Volatility					39%					40%		38	%	-	40%		40	%	-	43%				N/A						46	%
Dividend yield					0%					0%					0%					0%				N/A						0	%
Employee Stock Purchase Plan
Expected term (in years)		0.5		-	2.0		0.5		-	2.0		0.5		-	2.0	0.5			-	2.0		0.5	-		2.0		0.5		-	2.0
Risk-free interest rate		1.2	%	-	1.4%		0.5	%	-	0.8%		0.9	%	-	1.4%		0.5	%	-	0.9%	0.1%		-	0.2%			0.3	%	-	0.4	%
Volatility		29	%	-	40%		39	%	-	51%		28	%	-	43%		39	%	-	60%	42%		-	52%			44	%	-	52	%
Dividend yield					0%					0%					0%					0%				0%						0	%

The assumptions used in the Black-Scholes option pricing model were determined as follows:

Fair Value of Common Stock. Prior to our IPO in January 2015, our board of directors considered numerous objective and subjective factors to determine the fair value of our common stock at each grant date. These factors included, but were not limited to, (i) contemporaneous valuations of our common stock performed by unrelated third-party specialists; (ii) the prices for our redeemable convertible preferred stock sold to outside investors; (iii) the rights, preferences and privileges of our redeemable convertible preferred stock relative to our common stock; (iv) the lack of marketability of our common stock; (v) developments in the business; and (vi) the likelihood of achieving a liquidity event, such as an IPO or a merger or acquisition, given prevailing market conditions.

~~Subsequent to the completion of our IPO, we~~We use the market closing price for our Class A common stock as reported on the New York Stock Exchange to determine the fair value of our common stock at each grant date.

Expected Term. The expected term represents the period that our share-based awards are expected to be outstanding. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options and 2015 ESPP purchase rights.

Expected Volatility. ~~Since we do not have sufficient trading history of our common stock,~~We estimate the expected volatility ~~was derived from~~of the stock option grants and 2015 ESPP purchase rights based on the historical ~~stock volatilities~~volatility of ~~several unrelated public companies within the same industry that we consider to be comparable to~~ our ~~business~~Class A common stock over a period equivalent to the expected term of the stock option grants and 2015 ESPP purchase ~~rights.~~rights, respectively.

Risk-free Interest Rate. The risk-free rate that we use is based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the ~~options.~~options and 2015 ESPP purchase rights.

Dividend Yield. We have never declared or paid any cash dividends and do not plan to pay cash dividends in the foreseeable future, and, therefore, use an expected dividend yield of ~~zero.~~0.

We calculate our basic and diluted net loss per share in conformity with the two-class method required for companies with participating securities. Under the two-class method, basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, less shares subject to repurchase. The diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, restricted stock units, employee stock purchase plan, repurchasable shares from early exercised options and unvested restricted stock, and contingently issuable shares are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share as their effect is antidilutive.

The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock are identical, except with respect to voting and conversion. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis. We did not present dilutive net loss per share on an as-if converted basis because the impact was not dilutive.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):

	Three Months Ended October 31,
	2017						2016						Three Months Ended April 30,
	Class A			Class B			Class A			Class B			2021			2020
Numerator:
Net loss	$	(35,061	)	$	(7,863	)	$	(16,978	)	$	(21,255	)	$	(14,573	)	$	(25,550	)

Denominator:
Weighted-average number of shares outstanding—basic and diluted		109,972			24,664			56,964			71,311			161,733			151,943
Net loss per share—basic and diluted	$	(0.32	)	$	(0.32	)	$	(0.30	)	$	(0.30	)	$	(0.09	)	$	(0.17	)

	Nine Months Ended October 31,
	2017						2016
	Class A			Class B			Class A			Class B
Numerator:
Net loss	$	(84,998	)	$	(37,297	)	$	(46,036	)	$	(68,874	)

Denominator:
Weighted-average number of shares outstanding—basic and diluted		92,469			40,575			50,764			75,948
Net loss per share—basic and diluted	$	(0.92	)	$	(0.92	)	$	(0.91	)	$	(0.91	)

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

Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

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 ~~United States~~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 began to file foreign tax returns in the United Kingdom starting with the year ended January 31, 2013, in France, Germany and Japan starting with the year ended January 31, 2014, in Canada starting with the year ended January 31, 2015, and in Australia, Sweden, and Netherlands starting with the year ended January 31, 2016. Certain tax years remain open to examination.

We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. We do not expect our gross unrecognized tax benefits to change significantly over the next 12 months.

Our chief operating decision maker reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, we have a single reporting segment and operating unit structure. Since we operate in ~~one~~1 operating segment, all required segment information can be found in the condensed consolidated financial statements.

On ~~November 27, 2017,~~April 7, 2021, we entered into ~~a secured credit~~an investment agreement (Investment Agreement) with ~~Wells Fargo Bank, National Association with a maturity date~~certain investment funds which are managed or advised by KKR Credit Advisors (US) LLC or Affiliates thereto (collectively “KKR”) relating to the issuance and sale of ~~November 27, 2020 (November 2017 Facility). The November 2017 Facility provides~~500,000 shares of our Series A Convertible Preferred Stock, par value $0.0001 per share, for an ~~$85.0~~aggregate purchase price of $500 million, ~~revolving credit facility, with a sublimit of $30.0 million available for~~or $1,000 per share (the “Issuance”).

Prior to the ~~issuance of letters of credit. The proceeds~~consummation of the ~~revolving loans may be used for general corporate purposes.~~ Issuance and as expressly contemplated by the Investment Agreement, KKR elected to syndicate a portion of the investment to certain investment partners. Each of the KKR-led group agreed to become a “party”, “Permitted Investor Transferee”, and “Investor Party” under the Investment Agreement.

The ~~revolving loans accrue interest~~closing of the Issuance occurred on May 12, 2021.

On June 2, 2021 we announced the commencement of a “modified Dutch Auction” tender offer to purchase up to $500 million in value of shares of our Class A common stock, or such lesser number of shares of our Class A common stock as are properly tendered and not properly withdrawn, at a ~~prime rate plus a margin of 0.25% or,~~price not less than $22.75 nor greater than $25.75 per share, to the seller in cash, less any applicable withholding taxes and without interest. The tender offer is scheduled to expire at our option, a LIBOR rate (based on one, three or six-month interest periods) plus a margin of 1.00%. Interest on the revolving loans is payable quarterly in arrears with respect to loans based on the prime rate and12:00 midnight, New York City time, at the end of ~~an interest period in~~ the ~~case of loans based~~day on June 29, 2021, unless the ~~LIBOR rate (or at each three month interval if the interest period~~offer is longer than three months). As of November 29, 2017, there was $40.0 million in revolving loans outstanding and $26.0 million in letters of credit issued under the November 2017 Facility. Borrowings under the November 2017 Facility were collateralized byextended or terminated. We expect to use substantially all of the proceeds from the Issuance to fund our ~~assets.~~

~~The November 2017 Facility requires us~~purchase of shares pursuant to ~~comply with a maximum leverage ratio and a minimum liquidity requirement. Additionally,~~ the November 2017 Facility contains customary affirmative and negative covenants, including covenants limiting our, and our subsidiaries’, ability to, among other things, grant liens, incur debt, pay dividends or distributions on the capital stock, effect certain mergers, make investments, dispose of assets and enter into transactions with affiliates, in each case subject to customary exceptions for a credit facility of the size and type of the November 2017 Facility.

On November 27, 2017, we paid in full all amounts outstanding under the December 2015 Facility, including the outstanding principal balance of $40.0 million, and terminated the December 2015 Facility and all related loan documents and collateral documents, in conjunction with entering into the November 2017 Facility. We were not obligated to pay any early termination penalties as a result of the termination. The related remaining unamortized debt issuance and end of term fees was not material. We disclosed our debt commitment in Contractual Obligations and Commitments within Item 2 to reflect our entry into the November 2017 Facility and our termination of the December 2015 Facility.

On November 29, 2017, the restrictions on our certificates of deposits that collateralized the letters of credit were released as the letters of credit were deemed to be included under the November 2017 Facility sublimit. As such, we released $26.0 million from restricted cash to cash and cash equivalents. We expect the release of this restricted cash will have a material impact on the condensed consolidated balance sheet and consolidated statement of cash flows for the three months and twelve months ending January 31, 2018.tender offer.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled “Risk Factors” and in other parts of this Quarterly Report on Form 10-Q.

Box ~~provides a leading~~is the Content Cloud: one secure, cloud-native platform for managing the entire content journey. Content – from blueprints to wireframes, videos to documents, proprietary formats to PDFs – is the source of an organization’s unique value. Our cloud content management platform ~~that~~ enables ~~organizations~~our customers, including 67% of ~~all sizes~~the Fortune 500, to securely manage ~~cloud~~the entire content lifecycle, from the moment a file is created or ingested to when it’s shared, edited, published, approved, signed, classified, and retained. Box keeps content secure and compliant, while also allowing easy ~~secure~~ access and sharing of this content from anywhere, on any ~~device.~~ device – both within the organization and with external partners.

With our Software-as-a-Service (SaaS) ~~cloud-based~~ platform, users can collaborate on content both internally and with external parties, automate content-driven business processes, develop custom applications, and implement data protection, security and compliance features to comply with legal and regulatory requirements, internal policies and industry standards and regulations. The Box Content Cloud accelerates business processes, improves employee productivity, enables secure remote work, and protects an organization’s most valuable data. Our platform enables a broad set of high-value business use cases across ~~an enterprise, across multiple~~enterprises, hundreds of file formats and media types, and user experiences. Our platform integrates with leading enterprise business applications, and is compatible with multiple application environments, operating systems and devices, ensuring that workers ~~have~~can securely access to their critical business content whenever and wherever they need ~~it.~~it.

We were founded and publicly launched our platform in 2005 with a simple but powerful idea: to make it incredibly easy for people to securely manage, share and collaborate on their most important content online. In ~~2006,~~addition, we introduced a free version of our product in order to rapidly grow our user base, and we surpassed one million registered users by July 2007. As users began to bring our solution into the workplace, we learned that businesses were eager for a solution to empower user-friendly content sharing and collaboration in a secure, manageable way. Starting in 2007, we began enhancing our platform to serve businesses and large enterprises, which meant expanding our business functionality with features such as our administrative console, identity integration, activity reporting and full-text search. To further satisfy the requirements of IT departments in large organizations, we began to invest heavily in enhancing the security of our platform. Also in 2007, we began to build an enterprise sales team. The continual evolution of our platform features allowed our sales team to sell into increasingly larger organizations. To empower users to work securely from anywhere, we built native applications for all major mobile platforms. The introduction of our iPad application in 2010 further accelerated enterprise adoption of our platform. In 2012, we introduced our Box OneCloud platform and our Box Embed framework to encourage developers and independent software vendors (ISVs) to build powerful applications that connect to Box, furthering the reach of the Box service. We continuedcontinue to innovate by expanding our core services and offerings ~~to include~~with a focus on frictionless security and compliance, seamless internal and external collaboration and workflow, and integration with best-of-breed applications. For example, we provide Box Shield, our advanced security offering that helps customers reduce the risk of accidental data leakage and protect their business from insider threats and account compromise; Box KeySafe, a solution that builds on top of Box’s strong encryption and security capabilities to give customers greater control over the encryption keys used to secure the file contents that are stored with Box; Box Governance, which gives customers a better way to comply with regulatory policies, satisfy e-discovery requests and effectively manage sensitive business information; Box Relay, which allows our end users to easily build, manage and track their own workflows; Box Platform, which further enables customers and partners to build enterprise apps using our open APIs and developer tools; and Box Zones, which gives global customers the ability to store their data locally in certain ~~regions;~~regions. With Box ~~Platform, which further enables customers~~Consulting, we also provide in-house professional services such as implementation support, content migration, and ~~partners to build enterprise apps using the Box Platform; and Box Relay, which~~change management. The increasing traction of these product innovations allows our ~~users~~customers to ~~easily build, manage and track their own workflows.~~ realize the full set of capabilities of our Content Cloud.

We ~~continued~~are also continuing to expand the scope of what customers can do with their content using Box. In February 2021, we announced our ~~international presence further with~~decision to acquire SignRequest, a leading electronic signature provider, and to develop Box Sign – an e-signature solution natively integrated into Box. With Box Sign, our customers will be able to send, sign, and manage documents within their content platform of record – rather than using siloed, costly point solutions. In February 2021, we also announced the ~~opening~~introduction of our ~~international offices.~~all-new Box Shuttle, our content migration service. With the all-new Box Shuttle, we’re making it easier and more cost-effective for customers to get their content into Box, thereby allowing them to apply the same security and governance policies across all of their business-critical content.

We offer our solution to our customers as a subscription-based service, with subscription fees based on the requirements of our customers, including the number of users and functionality deployed. The majority of our customers subscribe to our service through one-year contracts, although we also offer our services for terms ranging from one month to three years or more. We typically invoice our customers at the beginning of the term, in multiyear, annual, quarterly or monthly installments. We recognize ~~subscription~~ revenue ~~ratably over the term of the subscription period.~~

~~Our objective is to build an enduring business that creates sustainable revenue and earnings growth over the long term. To best achieve this objective,~~as we focus on growing the number of users and paying organizations through direct field sales, direct inside sales, indirect channel sales and through word-of-mouth by individual users, some of whom use our services at no cost. Individual users and organizations can also simply sign up to use our solution on our website. We believe this approach not only helps us buildsatisfy a ~~critical mass of users but also has a viral effect within organizations as more of their employees use our service and encourage their IT professionals to deploy our services to a broader user base.~~

We have achieved significant growth in a short period of time. Our user base includes over 57 million registered users. We define a registered user as a Box account that has been provisioned to a unique user ID. As of October 31, 2017, over 17% of our registered users were paying users who register as part of a larger enterprise or business account or by using a personal account. We currently have 80,000 paying organizations, and our solution is offered in 22 languages. We define paying organizations as separate and distinct buying entities, such as a company, an educational or government institution, or a distinct business unit of a large corporation, that have entered into a subscription agreement with us to utilize our services.

Organizations typically purchase our solution in the following ways: (i) employees in one or more small groups within the organization may individually purchase our service; (ii) organizations may purchase IT-sponsored, enterprise-level agreements with deployments for specific, targeted use cases ranging from tens to thousands of user seats; (iii) organizations may purchase IT- sponsored, enterprise-level agreements where the number of user seats sold is intended to accommodate and enable nearly all information workers within the organization in whatever use cases they desire to adopt over the term of the subscription; or (iv) organizations may purchase our Box Platform service to create custom business applications for their internal use and extended ecosystem of customers, suppliers and partners.

We intend to continue scaling our organization to meet the increasingly complex needs of our customers. Our sales and customer success teams are organized to efficiently serve organizations ranging from small businesses to the world’s largest global organizations. We have invested, and expect to continue to invest in our sales and marketing teams to sell our services around the world, as well as in our development efforts to deliver additional features and capabilities of our cloud services to address our customers’ evolving needs. We also expect to continue to make investments in both our infrastructure to meet the needs of our growing user base both in and outside the United States, and in our professional services organization (Box Consulting) to address the strategic needs of our customers in more complex deployments and to drive broader adoption across a wide array of use cases. As a result of our continuing investments to scale our business in each of these areas, we do not expect to be profitable for the foreseeable future.

For the nine months ended October 31, 2017 and 2016, our revenue was $369.5 million and $288.7 million, respectively, representing year-over-year growth of 28%, and our net losses were $122.3 million and $114.9 million, respectively. For the nine months ended October 31, 2017 and 2016, revenue from customers outside the United States represented 21% and 17% of our revenue, respectively. Box is headquartered in Redwood City, California and operates offices across the United States, Europe, and Asia.

Our business model focuses on maximizing the lifetime value of a customer relationship. We make significant investments in acquiring new customers and believe that we will be able to achieve a positive return on these investments by retaining customers, cross-selling our newer products and expanding the size of our deployments within our customer base over time. In connection with the acquisition of new customers, we incur and recognize significant upfront costs. These costs include sales and marketing costs associated with acquiring new customers, such as sales commission expenses, a significant portion of which is expensed upfront and the remaining portion of which is expensed over the length of the non-cancellable subscription term, and marketing costs, which are expensed as incurred. Dueperformance obligation. Accordingly, due to our subscription model, we recognize revenue for our subscription and premier services ratably over the term of the ~~subscription period,~~contract.

For the three months ended April 30, 2021 and 2020, our revenue was $202.4 million and $183.6 million, respectively, representing year-over-year growth of 10%. As of April 30, 2021, our remaining performance obligations were $864.8 million, representing a 20% increase from our remaining performance obligations of $722.7 million as of April 30, 2020. For the three months

ended April 30, 2021, our operating loss was $10.3 million, and our operating margin was negative 5%, compared to our operating loss of $24.2 million and our operating margin of negative 13% for the three months ended April 30, 2020. For the three months ended April 30, 2021, our free cash flow was positive $75.9 million, an increase of $36.1 million from our free cash flow of positive $39.9 million for the three months ended April 30, 2020.

We continue to monitor, analyze and respond to evolving developments regarding the COVID-19 pandemic, which ~~commences when all~~has significantly impacted global economic activity and social practices. As part of these efforts, we have taken steps to protect the ~~revenue recognition criteria have been met. Although our objective is for each customer to be profitable for us over the duration~~health and welfare of our ~~relationship,~~employees by temporarily closing most of our offices and suspending almost all business-related travel, while continuing our commitment and efforts to serve customers that rely on us. In addition, we have shifted our customer and marketing events to virtual-only experiences.

Although the ~~costs we incur with respect to any customer relationship, whether~~COVID-19 pandemic has not had a ~~new customer or an expansion within an existing customer, may exceed revenue in earlier periods because we recognize those costs faster than we recognize~~material adverse impact on our financial results for the ~~associated revenue.~~

~~Because~~first quarter of ~~these dynamics, we experience a range~~our fiscal year 2022, the pandemic has negatively impacted some of ~~profitability with~~ our customers ~~depending in large part upon what stage of the~~and prospects. As a result, we have experienced, and may continue to experience, increased customer ~~phase they are in. We generally incur higher~~churn and delayed sales and marketing expenses for new customers and existing customers who are still in an expanding stage. For new customers, our associated sales and marketing expenses typically exceed the first year revenue we recognize from those customers. For customers who are expanding their use of Box, we incur various associated marketing expensescycles, as well as sales commission expenses, though we typically recognize higher revenue than sales and marketing expenses. For typical customers who are renewing their Box subscriptions, our associated sales and marketing expenses are significantly less than the revenue we recognize from those customers. These differences are primarily driven by the higher compensation we provide to our sales force for new customers and ~~customer subscription expansions compared~~prospective customers reducing budgets related to services that we offer. Despite these adverse impacts, the ~~compensation we provide~~COVID-19 pandemic has also created additional opportunities for Box by enabling our customers’ and prospects’ employees to engage in secure remote work through our ~~sales force for routine subscription renewals~~platform.

The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, and financial position will depend on future developments, which are uncertain and cannot be predicted at this time, and include the severity and duration of the pandemic, the availability and effectiveness of COVID-19 vaccines globally, actions that may be taken by ~~customers. In addition,~~government authorities to contain the virus and minimize its economic impact, passing of or not passing further stimulus packages by governments, the impact of COVID-19 on our ~~sales~~customers, business partners and ~~marketing expenses,~~employees, and other ~~than~~factors identified in Part II, Item 1A "Risk Factors" of this Form 10-Q. As a result, the ~~compensation we provide to~~extent and magnitude of the impact COVID-19 will have on our ~~sales force, are generally higher for acquiring new customers versus expansions or renewals of existing customer subscriptions. We believe that, over time, as our existing customer base grows~~business and a relatively higher percentage of our revenue is attributable to renewals versus new or expanding Box deployments, we will experience lower associated sales and marketing expenses as a percentage of revenue.operating results cannot be predicted at this time.

We use the key metrics below for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these key metrics provide meaningful supplemental information regarding our performance. We believe that both management and investors benefit from referring to these key metrics in assessing our performance and when planning, forecasting, and analyzing future periods. These key metrics also facilitate management's internal comparisons to our historical performance as well as comparisons to certain competitors' operating results. We believe these key metrics are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by ~~our~~ institutional investors and the analyst community to help ~~them~~ analyze the health of our business. The below data is presented in millions, except for percentage rate data.

Remaining performance obligations (RPO) represent, at a point in time, contracted revenue that has not yet been recognized. RPO consists of deferred revenue and backlog, offset by contract assets. Backlog is defined as non-cancellable contracts deemed certain to be invoiced and recognized as revenue in future periods. Future invoicing is determined to be certain when we have an executed non-cancellable contract or a significant penalty is due upon cancellation, and invoicing is not dependent on a future event such as the delivery of a specific new product or feature, or the achievement of contractual contingencies. While Box believes RPO is a leading indicator of revenue as it represents sales activity not yet recognized in revenue, it is not necessarily indicative of future revenue growth as it is influenced by several factors, including seasonality, contract renewal timing, average contract terms and foreign currency exchange rates. Box monitors RPO to manage the business and evaluate performance. We do not consider RPO to be a non-GAAP financial measure given that it is calculated in accordance with GAAP.

RPO as of April 30, 2021 were $864.8 million, an increase of 20% from April 30, 2020.The increase in RPOwas primarily driven by expansion within existing customers as they broadened their deployment of our product offerings, longer customer contract durations, the addition of new customers, and the timing of customer-driven renewals.

Billings represent our revenue plus the ~~change~~changes in deferred revenue and contract assets in the period. Billings we record in any particular period primarily reflect ~~sales to new customers plus~~ subscription renewals and expansion within existing customers plus sales to new customers, and represent amounts invoiced for all of our products and professional services. We typically invoice our customers at the beginning of the term, in multiyear, annual, quarterly or monthly installments. If the customer ~~elects~~negotiates to pay the full subscription amount at the beginning of the period, the total subscription amount for the entire term will be reflected in billings. If the customer ~~elects~~negotiates to be invoiced annually or more frequently, only the amount billed for such period will be included in billings.

~~We believe that billings~~Billings help investors better understand our sales activity for a particular period, which is not necessarily reflected in our revenue given that we recognize subscription revenue ratably over the ~~subscription~~contract term. We consider billings a significant performance ~~measure and after adjusting for any shifts in relative payment frequencies, a leading indicator of future revenue.~~measure. We monitor billings to manage our business, make planning decisions, evaluate our performance and allocate resources. We believe that billings offer valuable supplemental information regarding the performance of our business and will help investors better understand the sales volumes and performance of our business. ~~Although we consider billings to be a significant performance measure, we~~We do not consider itbillings to be a non-GAAP financial measure given that it is calculated using exclusively revenue, ~~and~~ deferred revenue, ~~both~~and contract assets, all of which are financial measures calculated in accordance with GAAP.

Billings ~~increased 29% in~~for the ~~nine~~three months ended ~~October 31, 2017 over~~April 30, 2021 were $159.4 million, an increase of 24% from the ~~nine~~three months ended ~~October 31, 2016.~~April 30, 2020. The increase in billings was primarily driven by expansion within existing customers as they broadened their deployment of our product offerings, longer customer contract durations, the addition of new customers, ~~with larger initial deployments, expansion~~and the timing of ~~the number of users within existing customers, and an enhanced developer access fee from one of our resellers.~~ customer-driven renewals.

Our use of billings has ~~the following~~certain limitations as an analytical tool and should not be considered in isolation or as a substitute for revenue or an analysis of our results as reported under GAAP. Billings are recognized when invoiced, while the related subscription and premier services revenue is recognized ratably over the contract term ~~of the subscription or premier support services. When~~as we ~~invoice customers more frequently than their subscription period, amounts not yet invoiced will not be reflected in deferred revenue or billings.~~satisfy a performance obligation. Also, other companies, including companies in our industry, may not use billings, may calculate billings differently, may have different billing frequencies, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of billings as a comparative measure.

~~For the remainder of fiscal year 2018,~~Over time, we expect ~~normalized~~to continue to normalize payment durations. ~~We expect our billings growth and revenue growth to correlate with one another which will mitigate fluctuations in billings not correlated to future revenue~~. In addition, as we have gained and expect to continue to gain more traction with large enterprise customers, we also anticipate our quarterly billings to increasingly concentrate in the back half of our fiscal year, especially in the fourth quarter.

A calculation of billings starting with revenue, the most directly comparable GAAP financial measure, is presented below (in thousands):

We define free cash flow as cash ~~from~~flows from operating activities less purchases of property and equipment, principal payments of ~~capital~~finance lease ~~obligations,~~liabilities, capitalized internal-use software costs, and other items that did not or are not expected to require cash settlement and ~~which~~that management considers to be outside ~~of~~of our core business. We specifically identify ~~other~~ adjusting ~~items~~items in ~~our~~our reconciliation of GAAP to non-GAAP ~~financial~~financial measures. ~~Historically, these items have included restricted cash used to guarantee significant letters of credit for our Redwood City headquarters.~~ We consider free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business and strengthening ~~the~~the balance ~~sheet;~~sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures. A reconciliation of free cash flow to net cash ~~used in~~provided by operating activities, its nearest

GAAP equivalent, is presented in the non-GAAP Financial Measures section of this report.The presentation of free cash flow is also not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.

~~Free cash flow for~~ For the ~~nine~~three months ended ~~October 31, 2017 was negative $4.4 million, an improvement of $30.6 million as compared to~~ ~~the nine months ended~~ ~~October 31, 2016. The increase in~~ April 30, 2021 and 2020, free cash flow was ~~primarily driven by an increase in cash provided by operations of $29.1~~positive $75.9 million and ~~a decrease in capital expenditures of $8.8~~positive $39.9 million, partially offset by an increase in capital lease obligation payments of $7.3 million. The primary factors affecting the increase in cash flow from operating activities include the changes in our operating assets and liabilities of $19.3 million and improvement of our net loss adjusted for non-cash charges by $9.8 million. The decrease in capital expenditures was primarily due to a reduction in capital expenditures related to the completion of our new Redwood City headquarters, partially offset by our facilities investments in Austin, Tokyo and London. As we continue to invest in our data center operations, we expect capital lease obligations to increase in the foreseeable future. Improvement in our working capital management process and the completion of our Redwood City headquarters have driven significant improvements in free cash flow.respectively.

Net retention rate is defined as the net percentage of Total Account Value (TAV) retained from existing customers, including expansion. We calculate our net retention rate as of a period end by starting with the ~~annual contract value (ACV)~~TAV from customers ~~with contract value of $5,000 or more~~ as of 12 months prior to such period end (Prior Period ~~ACV)~~TAV) and a subscription ~~term~~customer of Box for at least 12 months. We then calculate ~~ACV~~TAV from these same customers as of the current period end (Current Period ~~ACV)~~TAV). Finally, we divide the ~~aggregate~~ Current Period ~~ACV for the trailing 12 month period~~TAV by the ~~aggregate~~ Prior Period ~~ACV for~~TAV and report the ~~trailing~~average of this calculation over the prior 12 ~~month period~~months to arrive at our net retention rate. We believe our net retention rate is an important metric that provides insight into the long-term value of our subscription agreements and our ability to retain and grow revenue from our customer base. We focus on contracts that have a value of $5,000 or more because, over time, these customers give us the best indicator for the growth of our business and the potential for incremental business as they renew and expand their deployments, and contracts with these customers represented a substantial majority of our revenue for ~~the nine months ended~~ ~~October 31, 2017. Retention~~Net retention rate is an operational metric and there is no comparable GAAP financial measure to which we can reconcile this particular key metric.

Our net retention ~~rate was approximately 112%~~rates were 103% and ~~115%~~107% as of ~~October 31, 2017~~April 30, 2021 and ~~2016,~~2020, respectively. ~~The calculation of our~~Our net retention ~~rate reflects both net user expansion and the loss of customers who do not renew their subscriptions with us, which was below 5% of the Prior Period ACV. Our retention~~ rates ~~consistently exceeded 100% and~~ were primarily attributable to ~~an increase~~seat growth in ~~user expansion.~~existing customers and strong attach rates of add-on products. As our customers purchase add-on products, we tend to realize significantly higher average contract values and stronger net retention rates as compared to customers who only purchase our core product. We believe our go-to-market efforts to deliver a solution selling strategy and our investments in product, ~~Customer Success,~~customer success, and Box Consulting ~~are driving~~have been a significant factor in our ~~strong~~ customer retention results. As we penetrate customer accounts, we expect our ~~rate of growth in expansion to trend down over time but our~~net retention rate to remain above 100% for the foreseeable future.

We derive our revenue primarily from three sources: (1) subscription revenue, which is comprised of subscription fees from customers ~~utilizing~~who have access to our cloud content management platform and other subscription-based services, which all include routine customer support; (2) revenue from customers purchasing our premier ~~support~~services package; and (3) revenue from professional services such as implementing best practice use cases, project management and implementation consulting services.

To date, practically all of our revenue has been derived from subscription and premier ~~support~~ services. Subscription and premier ~~support~~services revenue isare driven primarily by the number of customers, the number of seats sold to each customer and the price of our services.

~~Subscription~~We recognize revenue as we satisfy a performance obligation. Accordingly, due to our subscription model, we recognize revenue for our subscription and premier ~~support revenue is recognized~~services ratably over the contract ~~term~~term. We typically invoice our customers at the beginning ~~on the later~~ of the ~~date the service is provisioned to the customer and the date all other revenue recognition criteria have been met.~~term, in multiyear, annual, quarterly or monthly installments. Our subscription and ~~support~~premier services contracts are typically non-cancellable and do not contain refund-type provisions. The majority of our customers subscribe to our service through one-year contracts, although we also offer our services for terms ranging between one month to three years or more. We typically invoice our customers at the beginning of the term, in multiyear, annual, quarterly or monthly installments. Amounts that have been invoiced are initially recorded as deferred revenue and are recognized ratably over the invoice period. Amounts that have not been invoiced are not reflected in deferred revenue.

Professional services are generally billed on a fixed price basis, for which revenue is recognized asover time based on the ~~services are rendered for time and material contracts, and using the proportional performance method over the period the services are performed for fixed price contracts.~~proportion performed. Professional services revenue was not material as a percentage of total revenue for all periods presented.

Revenue is presented net of sales and other taxes we collect on behalf of governmental authorities.

Our cost of revenue consists primarily of costs related to providing our ~~cloud content management~~subscription services to our paying customers, including employee compensation and related expenses for ~~datacenter~~data center operations, customer support and professional services personnel, payments to outside ~~infrastructure~~technology service providers, depreciation of servers and equipment, security services and other tools, as well as amortization ofexpense associated with acquired ~~technology.~~technology and capitalized internally developed software. We allocate overhead such as rent, information technology costs and employee benefit costs to all departments based on headcount. As such, general overhead expenses are reflected in cost of revenue and each of the operating expense categories set forth below. We expect our cost of revenue to increase in dollars and may increase as a percentage of revenue as we continue to invest in our datacenter operations and customer support to support the growth of our business, our customer base, as well as our international expansion.

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs are the most significant component of each category of operating expenses. Operating expenses also include allocated overhead costs for facilities, information technology costs and employee benefit costs.

Research and Development.Research and development expense consists primarily of employee compensation and related expenses, as well as allocated overhead. Our research and development efforts are focused on scaling our platform, building an ecosystem of best-of-breed applications and platforms, infrastructure, adding enterprise grade features, functionality and enhancements such as workflow automation, intelligent content management capabilities, and advanced security ~~and enhancing~~to enhance the ease of use of our ~~cloud-based~~cloud content management services. We ~~expect our research and~~capitalize certain qualifying costs to develop software for internal use incurred during the application development ~~expense to increase in dollars but decrease as a percentage of revenue over time, as we continue to invest in our future products and services.~~stage.

Sales and Marketing.Sales and marketing expense consists primarily of employee compensation and related expenses, sales commissions, marketing programs, travel-related expenses, as well as allocated overhead. Marketing programs include but are not limited to advertising, events, corporate communications, brand building, and product marketing. Sales and marketing expense also consists of ~~datacenter~~data center and customer support costs related to providing our cloud-based services to our free users. We market and sell our ~~cloud-based~~cloud content management services worldwide through our direct sales organization and through indirect distribution channels such as strategic resellers. We expect our sales and marketing expense to continue to increase in dollars but decrease as a percentage of revenue over time as we increase the size of our sales and marketing organization and expand our international presence.

General and Administrative.General and administrative expense consists primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, recruiting, information systems, ~~and~~security, compliance, fees for external professional services and ~~cloud based~~cloud-based enterprise systems, as well as allocated overhead. External professional services fees are

primarily comprised of outside legal, ~~litigation,~~ accounting, ~~temporary services,~~ audit and outsourcing services. ~~We expect our general~~

Interest and ~~administrative expense to increase in dollars but to decrease as a percentage of revenue over time due to increasing operational excellence and scale.~~

Interest and other expense, net consists of interest expense, ~~and~~ interest ~~income. Interest expense consists of interest charges for our line of credit, fees on our letters of credit, the amortization of capitalized debt issuance costs, and capital leases. Interest~~ income, consists of interest earned on our cash, cash equivalents, and restricted cash. We have historically invested our cash in overnight deposits and short term, investment-grade corporate debt, and asset backed securities.

~~Other income (loss), net consists primarily of~~ gains and losses from foreign currency transactions, and other income ~~(expense).~~and expense. Interest expense consists primarily of interest charges for our line of credit and interest rate swap agreement, interest expense related to finance leases, unused commitment fees on our line of credit, the amortization of capitalized debt issuance costs, fees on our letters of credit, and the amortization of issuance costs of our convertible senior notes. Interest income consists primarily of interest earned on our cash and cash equivalents and short-term investments. We have historically invested our cash and cash equivalents in overnight deposits, certificates of deposit, money market funds, and short term, investment-grade corporate debt, marketable securities and asset backed securities.

Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and state income taxes in the United States and, as applicable, changes in our deferred taxes and related valuation allowance positions and uncertain tax positions.

The following tables set forth our results of operations for the periods presented ~~in dollars~~(in thousands, except per share amounts, and as a percentage of our ~~revenue:~~revenue):

Three Months Ended

Nine Months Ended

October 31,

October 31,

2017

2016

2017

2016

(in thousands)

(in thousands)

Revenue

$
129,304

$
102,811

$
369,467

$
288,679

Cost of revenue(1)(2)

34,471

27,115

99,972

82,576

Gross profit

94,833

75,696

269,495

206,103

Operating expenses:

Research and development(2)

34,812

29,652

102,388

84,824

Sales and marketing(2)

81,670

66,796

225,604

186,454

General and administrative(1)(2)

20,910

16,999

63,037

49,087

Total operating expenses

137,392

113,447

391,029

320,365

Loss from operations

(42,559
)

(37,751
)

(121,534
)

(114,262
)

Interest expense, net

(287
)

(222
)

(802
)

(587
)

Other income (loss), net

277

(22
)

560

609

Loss before provision for income taxes

(42,569
)

(37,995
)

(121,776
)

(114,240
)

Provision for income taxes

355

238

519

670

Net loss

$
(42,924
)

$
(38,233
)

$
(122,295
)

$
(114,910
)

Net loss per common share, basic and diluted

$
(0.32
)

$
(0.30
)

$
(0.92
)

$
(0.91
)

Weighted-average shares used to compute net loss
    per share, basic and diluted

134,636

128,275

133,044

126,712

(1)     Includes intangible assets amortization as follows:

Three Months Ended

Nine Months Ended

October 31,

October 31,

2017

2016

2017

2016

(in thousands)

(in thousands)

Cost of revenue

$
—

$
506

$
365

$
2,804

General and administrative

39

39

116

116

Total intangible assets amortization

$
39

$
545

$
481

$
2,920

(2)     Includes stock-based compensation expense as follows:

Three Months Ended

Nine Months Ended

October 31,

October 31,

2017

2016

2017

2016

(in thousands)

(in thousands)

Cost of revenue

$
2,814

$
1,986

$
7,945

$
5,328

Research and development

9,705

7,730

28,419

21,602

Sales and marketing

8,208

6,744

23,882

18,390

General and administrative

4,796

3,457

12,290

9,750

Total stock-based compensation

$
25,523

$
19,917

$
72,536

$
55,070

	Three Months Ended
	April 30,
	2021			2020
Revenue	$	202,441		$	183,561
Cost of revenue (1)		60,947			53,995
Gross profit		141,494			129,566
Operating expenses:
Research and development (1)		50,859			53,114
Sales and marketing (1)		69,811			72,750
General and administrative (1)		31,087			27,942
Total operating expenses		151,757			153,806
Loss from operations		(10,263	)		(24,240	)
Interest and other expense, net		(3,999	)		(1,103	)
Loss before provision for income taxes		(14,262	)		(25,343	)
Provision for income taxes		311			207
Net loss	$	(14,573	)	$	(25,550	)
Net loss per share, basic and diluted	$	(0.09	)	$	(0.17	)
Weighted-average shares used to compute net loss per share, basic and diluted		161,733			151,943	��

Three Months Ended

Nine Months Ended

October 31,

October 31,

2017

2016

2017

2016

Percentage of Revenue:

Revenue

100

%

100

%

100

%

100

%
Cost of revenue(1)(2)

27

26

27

29

Gross profit

73

74

73

71

Operating expenses:

Research and development(2)

27

29

28

29

Sales and marketing(2)

63

65

61

65

General and administrative(1)(2)

16

17

17

17

Total operating expenses

106

111

106

111

Loss from operations

(33
)

(37
)

(33
)

(40
)

Interest expense, net

—

—

—

—

Other income (loss), net

—

—

—

—

Loss before provision for income taxes

(33
)

(37
)

(33
)

(40
)

Provision for income taxes

—

—

—

—

Net loss

(33
)
%

(37
)
%

(33
)
%

(40
)
%

(1) Includes intangible assets amortization as follows:

	Three Months Ended						Nine Months Ended
	October 31,						October 31,
	2017			2016			2017			2016
Cost of revenue		—	%		—	%		—	%		1	%
General and administrative	—			—			—			—
Total intangible assets amortization		—	%		—	%		—	%		1	%

(2) Includes stock-based compensation expense as follows:

	Three Months Ended						Nine Months Ended						Three Months Ended
	October 31,						October 31,						April 30,
	2017			2016			2017			2016			2021			2020
Cost of revenue		2	%		2	%		2	%		2	%		3	%		3	%
Research and development		8			8			8			7			7			9
Sales and marketing		6			7			7			6			6			6
General and administrative		4			3			3			3			5			4
Total stock-based compensation		20	%		20	%		20	%		18	%		21	%		22	%

Comparison of the Three Months Ended ~~October 31, 2017~~April 30, 2021 and ~~2016~~2020

~~Revenue was $129.3 million for the three months ended October 31, 2017, compared to $102.8 million for the three months ended October 31, 2016, representing an increase of $26.5 million, or 26%.~~ The increase in revenue was primarily driven by ~~an increase in subscription services. The~~expansion within our existing customers as they broadened their deployment of our product offerings with strong attach rates of add-on products at higher price per seat. Additionally, the increase in subscription services was ~~primarily due to~~also driven by the addition of new customers, as the number of paying organizations increased by ~~16%~~6% from ~~October 31, 2016~~April 30, 2020 to 2017, as well as increased sales of our additional product offerings. Also in this period, there were renewals from, and expansion within, existing customers as they broadened their deployment of our product offerings, as reflected in our retention rate of 112% as of October 31, 2017.

~~Cost of revenue was $34.5 million, or 27% of revenue, for~~April 30, 2021. During the three months ended ~~October 31, 2017,~~April 30, 2021, we experienced strong growth in the Japan market, driving an increase in revenue from non-U.S. customers to 31%, compared to ~~$27.1 million, or 26% of revenue, for~~27% during the three months ended ~~October 31, 2016, representing an~~April 30, 2020. This increase is partially offset by customers partially churning their deployment with Box.

The increase in absolute dollars was primarily due to an increase of ~~$2.0~~$3.2 million in ~~rent primarily related to the expansion of new~~hosted data ~~centers, a net increase of $1.9 million in depreciation primarily related to the purchase of additional data center equipment,~~ service costs, an increase of ~~$1.3~~$0.9 million in ~~employee~~acquired intangible assets amortization, and ~~related costs primarily driven by the increase in headcount from 227 as of October 31, 2016 to 258 as of October 31, 2017,~~ an increase of $0.8 million in ~~stock-based compensation~~software and maintenance expense primarily driven by ~~an increase~~increases in ~~equity grants,~~amortization of internally developed software and ~~an increase in investments for our growing paid users. The increase was partially offset by a decrease~~on-premises contracts. In addition, there were increases of ~~$1.0~~$0.8 million and $0.7 million in ~~datacenter service~~stock-based compensation expense and employee and related costs, ~~due to further optimizations in infrastructure costs and a $0.5 million decrease in the amortization of certain intangible assets that reached the end of their estimated useful lives.~~ respectively. Cost of revenue as a percentage of revenue increased ~~1 point year-over-year primarily due~~100 basis points year-over-year. We expect our cost of revenue to ~~our continued investments~~increase in ~~our data center~~dollars but decrease slightly as a percentage of revenue over time as we continue to optimize infrastructure ~~to support our expected revenue growth in paying customers and new products.~~efficiency.

Research and development expenses were $34.8 million, or 27% of revenue, for the three months ended October 31, 2017, compared to $29.7 million, or 29% of revenue, for the three months ended October 31, 2016, representing an increase of $5.2 million, or 17%. The ~~increase~~decrease in absolute dollars was primarily due to ~~an increase~~decreases of ~~$3.3~~$2.0 million ~~in employee~~ and ~~related costs primarily driven by the increase in headcount from 304 employees as of October 31, 2016 to 333 employees as of October 31, 2017, and an increase of $2.0~~$1.0 million in stock-based compensation expense ~~primarily driven by the increase~~and employee and related costs, respectively, due to a reduction in ~~equity grants. Despite an increase in absolute dollars spent,~~headcount and increased concentration of research and development ~~expense~~in lower cost regions. The decrease in research and development expenses was partially offset by a decrease of $0.6 million in capitalized internally developed software costs. Research and development expenses as a percentage of revenue decreased 2400 basis points year-over-year. ~~While we continued~~We continue to invest in enhancements of our ~~product~~products and ~~service offerings and develop~~services, developing new products, ~~we were able to do so at a lower percentage of revenue year-over-year as~~and further differentiating our ~~revenue growth outpaced~~offerings. We expect our research and development ~~spending~~.expenses to increase in dollars but remain relatively

stable as a percentage of revenue over time, as we continue to make significant improvements to our content cloud product offerings and services, including the introduction Box Sign and the expansion of our advanced security, compliance, collaboration, workflow automation, and integration capabilities.

Sales and marketing expenses were $81.7 million, or 63% of revenue, for the three months ended October 31, 2017, compared to $66.8 million, or 65% of revenue, for the three months ended October 31, 2016, representing an increase of $14.9 million, or 22%. The ~~increase~~decrease in absolute dollars was primarily due to ~~an increase~~decreases of ~~$7.7~~$1.8 million and $0.7 million in employee and related costs and ~~an increase~~allocated overhead costs, respectively, due to a reduction in headcount. In addition, there were decreases of $1.5 million in stock-based compensation expense primarily driven by the increase in headcount from 659 employees as of October 31, 2016 to 859 employees as of October 31, 2017. In addition, there was an increase of $3.0 and $0.5 million in ~~allocated~~travel-related costs ~~attributable mainly~~and marketing expenses, respectively, primarily due to ~~increased facilities and infrastructure costs, an increase~~the impact of ~~$2.1~~the COVID-19 pandemic, a decrease of $1.3 million in ~~marketing expenses in connection with our annual user conference (BoxWorks 2017), investments in marketing technology~~outside agency and ~~demand generation~~,consulting services, and ~~an increase~~ a decrease of ~~$1.6~~$0.4 million in ~~commission expenses~~. data center and customer support costs to support our free users.The ~~increase~~decrease in sales and marketing expenses was partially offset by an $2.1 million increase in commission expenses primarily driven by increased sales and increased amortization of deferred commissions and a $1.5 million ~~decrease~~increase in ~~datacenter and customer support costs to support our free users.~~stock-based compensation expense. Sales and marketing expenses as a percentage of revenue decreased 2500 basis points year-over-year due to the impact of the COVID-19 pandemic and our focus on driving greater efficiency from our solution selling strategy and simplifying our product offerings, as well our focus on higher performing geographies and segments producing a greater return on investment.

Our sales and marketing expenses are generally higher for acquiring new, or expanding existing, customers than for ~~expansions or~~ renewals of existing customer ~~subscriptions,~~subscriptions. We expect to continue to invest in capturing our large market opportunity globally and capitalize on our competitive position with a ~~decrease in cost to support~~continued focus on our ~~free users. Over time, as~~profitability objectives. We expect our ~~existing customer base grows and a~~

~~relatively higher percentage of our revenue is attributable to renewals versus new or expanding Box deployments, we expect that~~ sales and marketing expenses ~~will~~to increase in dollars but continue to decrease as a percentage of revenue. We continue to invest aggressively to capture our large market opportunity and capitalize on our competitive position, while growing our sales and marketing efficiency to achieve our long-term margin objectives.

~~General and administrative expenses were $20.9 million, or 16% of~~ revenue for the three months ended October 31, 2017, compared to $17.0 million, or 17% of revenue, for the three months ended October 31, 2016, representing an increase of $3.9 million, or 23%. The increase in absolute dollars was primarily due to an increase of $2.3 million in employee and related costs and an increase of $1.3 million in stock-based compensation expense primarily driven by the increase in headcount from 220 employees as of October 31, 2016 to 276 employees as of October 31, 2017. In addition, there was a $0.7 million increase in enterprise subscription software.

Revenue was $369.5 million for the nine months ended October 31, 2017, compared to $288.7 million for the nine months ended October 31, 2016, representing an increase of $80.8 million, or 28%. The increase in revenue was primarily driven by an increase in subscription services. The increase in subscription services was due to the addition of new customers, as the number of paying organizations increased by 16% from October 31, 2016 to 2017. Also in this period, there were renewals from, and expansion within, existing customers as they broadened their deployment of our product offerings, as reflected in our retention rate of 112% as of October 31, 2017.

Cost of revenue was $100.0 million, or 27% of revenue, for the nine months ended October 31, 2017, compared to $82.6 million, or 29% of revenue, for the nine months ended October 31, 2016, representing an increase of $17.4 million, or 21%. The increase in absolute dollars was primarily due to an increase of $5.0 million in rent primarily related to the expansion of new data centers, an increase of $2.6 million in stock-based compensation expense primarily driven by ~~the increase in headcount from 227 as of October 31, 2016 to 258 as of October 31, 2017, and~~ ~~an increase in equity grants,~~ ~~an increase of $2.0 million in employee and related costs, an increase of $1.8 million in~~ ~~outside agency consulting and contractor services, an increase of $1.4 million in datacenter service costs~~, and an increase in investments for our growing paid users. The increase was partially offset by a $2.4 million decrease in the amortization of certain intangible assets that reached the end of their estimated useful. Despite an increase in absolute dollars, cost of revenue as a percentage of revenue decreased 2 points year-over-year. While we continued to invest in our data center infrastructure ~~to support our expected growth in paying customers and new products,~~ ~~we were able to do so at a lower percentage of revenue year-over-year as our revenue growth outpaced our data center infrastructure spending.~~

Research and development expenses were $102.4 million, or 28% of revenue, for the nine months ended October 31, 2017, compared to $84.8 million, or 29% of revenue, for the nine months ended October 31, 2016, representing an increase of $17.6 million, or 21%. The increase in absolute dollars was primarily due to an increase of $9.5 million in employee and related costs and an increase of $6.8 million in stock-based compensation expense primarily driven by the increase in headcount from 304 employees as of October 31, 2016 to 333 employees as of October 31, 2017, and an increase in equity grants. In addition, there was an increase of $1.5 million in outside agency consulting and contractor services related to enhancements of our products and development of new products. Despite an increase in absolute dollars spent, research and development expense as a percentage of revenue decreased 1 point year-over-year. While we continued to invest in our product and service offerings and develop new products, we were able to do so at a lower percentage of revenue year-over-year as our revenue growth outpaced our research and development spending.

Sales and marketing expenses were $225.6 million, or 61% of revenue, for the nine months ended October 31, 2017, compared to $186.5 million, or 65% of revenue, for the nine months ended October 31, 2016, representing an increase of $39.2 million, or 21%. The increase in absolute dollars was primarily due to an increase of $20.6 million in employee and related costs and an increase of $5.5 million in stock-based compensation primarily driven by the increase in headcount from 659 employees as of October 31, 2016 to 859 employees as of October 31, 2017. In addition, there was an increase of $6.1 ~~million in allocated costs attributable mainly to increased facilities and infrastructure costs,~~ an increase of $5.0 million in commission expenses, an increase of $4.2 million in marketing expenses related to our annual user conference (BoxWorks 2017), investments in marketing technology and demand generation, and an increase of $1.5 million in travel-related costs. The increase in sales and marketing expenses was partially offset by a $5.8 million decrease in datacenter and customer support costs to support our free users. Sales and marketing expenses as a percentage of revenue decreased 4 points year over year primarily due to improved marketing efficiency, as our sales and marketing expenses are generally higher for acquiring new customers versus expansions or renewals of existing customer subscriptions, and a decrease in cost to support our free users. Over time, as our existing customer base grows and a relatively higher percentage of our revenue is attributable to renewals ~~rather than~~versus new or expanding Box deployments and as we continue to focus on improving sales productivity and simplifying our product offerings. While we expect certain expenses that ~~sales and marketing expenses will continue~~were reduced due to ~~decrease as a percentage of revenue. We continue~~COVID-19 to ~~invest aggressively~~partially return over time, we do not expect to ~~capture our large market opportunity and capitalize on our competitive position, while growing our sales and marketing efficiency~~return to ~~achieve our long-term margin objectives.~~pre-COVID-19 levels, even after we return to an office-based environment.

General and administrative expenses were $63.0 million, or 17% of revenue, for the nine months ended October 31, 2017, compared to $49.1 million, or 17% of revenue, for the nine months ended October 31, 2016, representing an increase of $14.0 million, or 28%. The increase in absolute dollars was primarily due to an increase of ~~$5.3~~$1.3 million in stock-based compensation expense driven by equity grants to existing and new employees, an increase of $0.3 million in employee and related costs driven by the refresh of salaries in the current fiscal year, an increase of $0.8 million in acquisition-related fees, and an increase of $0.6 million in outside agency, consulting, and audit and tax services. The increase in general and administrative expenses was partially offset by a decrease of $0.4 million in fees related to shareholder activism. General and administrative expense as a percentage of revenue remained flat year-over-year. We expect our general and administrative expense to slowly increase in dollars but to decrease as a percentage of revenue over time as we benefit from greater operational efficiency.

The increase in interest and other expense, net is primarily due to an increase of $2.5 million in ~~stock-based compensation expense primarily driven by the increase in headcount from 220 employees as~~foreign currency losses and a decrease of ~~October 31, 2016 to 276 employees as of October 31, 2017, an increase of $4.2~~$0.4 million in ~~outside agency~~interest income from our certificates of deposit and contractor costs as we further invest in our systems, processes and infrastructure, and an increase of $1.6 million in enterprise subscription software. In addition, general and administrative expense for the nine months ended October 31, 2016 includes money market funds due to a ~~benefit of $1.7 million recorded in connection with the settlement agreement reached with Open Text~~.

As of ~~October 31, 2017,~~April 30, 2021, we had cash and cash equivalents, restricted cash, and short-term investments of ~~$172.9~~$612.3 million. Our cash and cash equivalents and short-term investments are comprised primarily of overnight cash ~~deposits.~~deposits, money market funds, and certificates of deposit. Since our inception, we have financed our operations primarily through equity, cash generated from sales and ~~to a lesser extent,~~ debt financing. We believe our existing cash and cash equivalents, together with our finance leases and credit facilities, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, subscription renewal activity, billing frequency, data center expansions, the timing and extent of spending to support development efforts, the expansion of ~~sales and marketing and~~ international ~~operation~~ activities, the introduction of new and enhanced services offerings, and the continuing market acceptance of our services. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. ~~If we are unable to raise additional capital when desired,~~

For the three months ended April 30, 2021 and 2020, our ~~business, operating results and financial condition would be adversely affected.~~cash flows were as follows (in thousands):

In December 2015, we entered into a revolving credit facility (December 2015 Facility), which provided for a revolving loan facility in the amount of up to $40.0 million maturing in December 2017. In February 2017, we amended the December 2015 Facility to extend the maturity date to December 2018. The December 2015 Facility was denominated in U.S. dollars and, depending on certain conditions, each borrowing was subject to a floating interest rate equal to either the prime rate plus a spread of 0.25% to 2.75% or a reserve adjusted LIBOR rate (based on one, three or six-month interest periods) plus a spread of 1.25% to 3.75%. Although no minimum deposit was required for the December 2015 Facility, we were eligible for the lowest interest rate if we maintained at least $40 million in deposits with the lender. In addition, there was an annual fee of 0.2% on the total commitment amount. At closing, we drew $40.0 million at 1.82% (six month LIBOR plus 1.25%). Borrowings under the December 2015 Facility were collateralized by substantially all of our assets in the United States. The December 2015 Facility also contained various covenants, including covenants related to the delivery of financial and other information, the maintenance of quarterly financial covenants, as well as customary limitations on dispositions, mergers or consolidations and other corporate activities.

~~On November 27, 2017, we terminated the December 2015 Facility and entered into the November 2017 Facility. Refer to Note 12 within Item 1 for additional details.~~

For the ~~nine~~three months ended ~~October 31, 2017,~~April 30, 2021, cash provided by operating activities was ~~$13.1~~$94.8 million. The primary ~~factor~~factors affecting our operating cash flows during this period ~~was~~were our net loss of ~~$122.3~~$14.6 million, ~~partially~~favorably offset by non-cash charges of ~~$117.5 million and changes in our operating assets and liabilities of $17.9 million. Non-cash charges consisted primarily of $72.5~~$41.8 million for stock-based compensation, ~~$29.3~~$19.4 million for depreciation and amortization of our property and equipment and ~~intangible assets, and $15.7~~capitalized software, $10.5 million for amortization of deferred ~~commissions.~~commissions, and net cash inflows of $37.2 million provided by changes in our operating assets and liabilities.

The primary drivers for the changes in operating assets and liabilities include a ~~$24.3~~$116.8 million decrease in accounts receivable that was primarily due to ~~increased efforts in~~higher sales and relative timing of our cash collections and a ~~$13.2~~$10.9 million decrease in operating right-of-use assets, partially offset by a $47.0 million decrease in deferred revenue that was primarily due to seasonality in our sales cycle which is concentrated in the back half of our fiscal year, a $13.9 million decrease in operating lease liabilities, an $11.9 million decrease in accounts payable, accrued expenses and other liabilities, an $8.8 million increase in prepaid and other assets, and a $7.9 million increase in deferred commissions due to new and expanded deployments with paying customers induring the ~~nine months ended October 31, 2017, an $11.0 million increase in deferred revenue, and a $4.2 million decrease in~~ ~~accounts payable, accrued expenses and other liabilities~~ ~~primarily attributable to timing of invoice payments, which include payments related to our investment in international expansion for the nine months ended October 31, 2017.~~period.

Cash used in investing activities of ~~$4.8~~$109.0 million for the ~~nine~~three months ended ~~October 31, 2017~~April 30, 2021 was primarily ~~due~~driven by $56.6 million in cash paid for acquisitions, net of cash acquired, $50.0 million in cash paid for the purchase of our short-term investment, $1.2 million of capitalized internally developed software costs associated with the development of additional significant features and functionality to ~~capital expenditures in connection with~~our product, and $1.1 million of fixed asset purchases to support our ~~increased headcount~~offices and ~~facilities investments in Austin, London, and Tokyo.~~employees.

Cash used in financing activities of ~~$13.0~~$18.8 million for the ~~nine~~three months ended ~~October 31, 2017~~April 30, 2021 was primarily ~~due to $26.2~~driven by $15.7 million of employee payroll taxes paid related to net share settlement of restricted stock, ~~units and $12.7~~$13.3 million of principal payments of ~~capital~~finance lease ~~obligations,~~liabilities, and $3.3 million of capitalized internal-use software costs associated with our on-premises software contracts, partially offset by ~~$17.5~~$12.5 million ~~of proceeds~~ from issuances of common stock under the 2015 ESPP and ~~$9.4~~$1.4 million of proceeds from the exercise of stock options.

In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026. The ~~following summarizes our contractual~~Notes are senior unsecured obligations and ~~commitments as~~do not bear regular interest. Each $1,000 principal amount of ~~October 31, 2017:~~the Notes will initially be convertible into 38.7665 shares of our Class A common stock, which is equivalent to an initial conversion price of approximately $25.80 per share, subject to adjustment upon the occurrence of specified events. Refer to Note 9 for a description of our convertible senior notes.

Through ~~October 31, 2017,~~April 30, 2021, we did not have any relationships with unconsolidated ~~organizations or financial partnerships, such as structured finance or special purpose~~ entities that ~~would~~ have, ~~been established~~or are reasonably likely to have, a material effect on our financial statements.

Our principal commitments consist of (i) obligations under operating leases for office spaces and data centers, (ii) obligations under finance leases for servers and related equipment for or data center operations, (iii) purchase obligations not recognized on the ~~purpose~~condensed consolidated balance sheet as of ~~facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.~~April 30, 2021, which relate primarily to infrastructure services and IT software and support services, and (iv) debt, including obligations under both our November 2017 Facility and Notes. For more information regarding our obligations for leases, purchase agreements, and debt, refer to Notes 5, 8, and 9, respectively, in Part I, Item 1. Financial Statements.

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

~~There~~Except for items discussed under Use of Estimates and Recently Adopted Accounting Pronouncementsunder Part I, Item 1. Financial Statements—Note 1, there have been no material changes to our critical accounting policies and estimates during the ~~nine~~three months ended ~~October 31, 2017~~April 30, 2021 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended January 31, ~~2017.~~2021.

Refer to Part I, Item 1. Financial Statements—Note 1 for information regarding the effect of new accounting pronouncements on our financial statements.

Regulation S-K Item 10(e), “Use of Non-GAAP Financial Measures in Commission Filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of non-GAAP operating ~~loss,~~income (loss), non-GAAP operating margin, non-GAAP net ~~loss,~~income (loss), non-GAAP net ~~loss~~income (loss) per share, and free cash flow (collectively, the non-GAAP financial measures) each meet the definition of a non-GAAP financial measure.

We use these non-GAAP financial measures and our key metrics for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures and key metrics provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these non-GAAP financial measures and key metrics in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures and key metrics also facilitate ~~management's~~management’s internal comparisons to our historical performance as well as comparisons to our ~~competitors'~~competitors’ operating results. We believe these non-GAAP financial measures and key metrics are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

We define non-GAAP operating ~~loss~~income (loss) as operating ~~loss~~income (loss) excluding expenses related to stock-based compensation (SBC), acquired intangible assets amortization, and as applicable, other special items. ~~We specifically identify other adjusting items in our reconciliation of GAAP to Non-GAAP financial measures.~~ Non-GAAP operating margin is defined as non-GAAP operating ~~loss~~income (loss) divided by revenue. ~~Similarly, the same items are also excluded from the calculation of non-GAAP operating margins.~~ Although ~~stock-based compensation~~SBC is an important aspect of the compensation of ~~Box’s~~our employees and executives, determining the fair value of certain of the stock-based instruments we utilize involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options, which is an element of our ongoing stock-based compensation expense, is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. For restricted ~~share~~stock unit awards, the amount of stock-based compensation expenses is not reflective of the value ultimately received by the grant recipients. Management believes it is useful to exclude ~~stock-based compensation~~SBC in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. Management also views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s ~~research~~developed technology and ~~development efforts,~~ trade names, ~~and customer relationships,~~ as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of ~~acquired intangible assets~~purchased intangibles is a static expense, one that is not typically affected by operations during any particular period. Furthermore, Box excludes the following expenses as they are considered by management to be special items outside of Box’s core operating results: (1) fees related to shareholder activism, which include directly applicable third-party advisory and professional service fees, (2) expenses related to certain litigation, (3) expenses associated with restructuring activities, consisting primarily of severance and other personnel-related costs, and (4) expenses related to announced acquisitions, including transaction and discrete tax costs. There are no expenses related to litigation or restructuring activities excluded from non-GAAP operating income (loss) in any of the periods presented.

We ~~further exclude legal settlement~~define non-GAAP net income (loss) as net loss excluding expenses related to stock-based compensation, acquired intangible assets amortization and as applicable, other special items. We specifically identify other adjusting items in our reconciliation of GAAP to non-GAAP net income (loss). These items include expenses related to certain litigation and the amortization of the issuance costs associated with our Notes, which are amortized as interest expense, because they are considered by management to be special items outside our core operating results.

We define non-GAAP net ~~loss~~income (loss) per share as non-GAAP net ~~loss excluding expenses related to stock-based compensation, intangible assets amortization and as applicable, other special items.~~ ~~We specifically identify other~~income (loss) divided by the weighted-average outstanding shares. Similarly, the same adjusting ~~items~~items specified in ~~our~~our reconciliation of GAAP to non-GAAP ~~financial measures.~~ ~~We define~~net income (loss) are also excluded from the calculation of non-GAAP net ~~loss~~income (loss) per share as non-GAAP net loss divided by the weighted average outstanding shares. We exclude expenses related to certain litigation because they are considered by management to be special items outside our core operating results.share.

be outside of our core business. We specifically identify other adjusting items in our reconciliation of GAAP to non-GAAP financial measures. ~~Historically, these items have included restricted cash used to guarantee significant letters of credit for our Redwood City headquarters.~~ We consider free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business and strengthening ~~the~~the balance ~~sheet,~~sheet; but it is not intended to represent the residual cash flow available for discretionary expenditures. A reconciliation of free cash flow to net cash ~~used in~~provided by operating activities, its nearest GAAP equivalent, is presented below.The presentation of free cash flow is also not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.

A limitation of our non-GAAP financial measures is that they do not have uniform definitions. Our definitions will likely differ from the definitions used by other companies, including peer companies, and therefore comparability may be limited. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP. Additionally, in the case of stock-based compensation expense, if we did not pay a portion of compensation in the form of stock-based compensation expense, the cash salary expense included in costs of revenue and operating expenses would be higher which would affect our cash position.

We compensate for these limitations by reconciling non-GAAP financial measures to the most comparable GAAP financial measures. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view our non-GAAP financial measures in conjunction with the most comparable GAAP financial measures.

Our reconciliation of the non-GAAP financial measures for the three ~~and nine~~ months ended ~~October 31, 2017~~April 30, 2021 and ~~2016~~2020 are as follows (in thousands, except per share data and percentages):

Three Months Ended

Nine Months Ended

October 31,

October 31,

2017

2016

2017

2016

GAAP operating loss

$
(42,559
)

$
(37,751
)

$
(121,534
)

$
(114,262
)

Stock-based compensation

25,523

19,917

72,536

55,070

Intangible assets amortization

39

545

481

2,920

Expenses related to a legal verdict(1)

—

—

—

(1,664
)

Non-GAAP operating loss

$
(16,997
)

$
(17,289
)

$
(48,517
)

$
(57,936
)

GAAP operating margin

(33
)
%

(37
)
%

(33
)
%

(40
)
%
Stock-based compensation

20

19

20

19

Intangible assets amortization

—

1

—

1

Expenses related to a legal verdict(1)

—

—

—

(1
)

Non-GAAP operating margin

(13
)
%

(17
)
%

(13
)
%

(21
)
%

GAAP net loss

$
(42,924
)

$
(38,233
)

$
(122,295
)

$
(114,910
)

Stock-based compensation

25,523

19,917

72,536

55,070

Intangible assets amortization

39

545

481

2,920

Expenses related to a legal verdict(1)

—

—

—

(1,664
)

Non-GAAP net loss

$
(17,362
)

$
(17,771
)

$
(49,278
)

$
(58,584
)

GAAP net loss per share, basic and diluted

$
(0.32
)

$
(0.30
)

$
(0.92
)

$
(0.91
)

Stock-based compensation

0.19

0.16

0.55

0.43

Intangible assets amortization

—

—

—

0.02

Expenses related to a legal verdict(1)

—

—

—

—

Non-GAAP net loss per share, basic and diluted

$
(0.13
)

$
(0.14
)

$
(0.37
)

$
(0.46
)

Weighted-average shares outstanding, basic and diluted

134,636

128,275

133,044

126,712

GAAP net cash provided by (used in) operating activities

$
14,094

$
(6,829
)

$
13,112

$
(15,939
)

Purchases of property and equipment

(3,003
)

(1,892
)

(4,800
)

(13,639
)

Payments of capital lease obligations

(4,781
)

(2,178
)

(12,693
)

(5,439
)

Free cash flow

$
6,310

$
(10,899
)

$
(4,381
)

$
(35,017
)

Net cash used in investing activities

$
(3,001
)

$
(1,884
)

$
(4,769
)

$
(6,258
)

Net cash (used in) provided by financing activities

$
(3,423
)

$
3,194

$
(12,967
)

$
4,203

	Three Months Ended
	April 30,
	2021				2020
GAAP operating loss	$	(10,263	)		$	(24,240	)
Stock-based compensation		41,790				40,043
Acquired intangible assets amortization		901				—
Acquisition-related expenses		920				—
Fees related to shareholder activism		1,050				1,402
Non-GAAP operating income	$	34,398			$	17,205

GAAP operating margin		(5	)	%		(13	)	%
Stock-based compensation		21				22
Acquired intangible assets amortization		—				—
Acquisition-related expenses		—				—
Fees related to shareholder activism		1				—
Non-GAAP operating margin		17		%		9		%

GAAP net loss	$	(14,573	)		$	(25,550	)
Stock-based compensation		41,790				40,043
Acquired intangible assets amortization		901				—
Acquisition-related expenses		920				—
Fees related to shareholder activism		1,050				1,402
Amortization of debt issuance costs		469				—
Non-GAAP net income	$	30,557			$	15,895

GAAP net loss per share, basic and diluted	$	(0.09	)		$	(0.17	)
Stock-based compensation		0.26				0.26
Acquired intangible assets amortization		—				—
Acquisition-related expenses		0.01				—
Fees related to shareholder activism		0.01				0.01
Amortization of debt issuance costs		—				—
Non-GAAP net income per share, basic	$	0.19			$	0.10
Non-GAAP net income per share, diluted	$	0.18			$	0.10
Weighted-average shares used to compute GAAP net loss per share, basic and diluted		161,733				151,943
Weighted-average shares used to compute Non-GAAP net income per share
Basic		161,733				151,943
Diluted		169,221				157,608

GAAP net cash provided by operating activities	$	94,772			$	61,917
Purchases of property and equipment, net of proceeds from sales		(1,145	)			(1,407	)
Principal payments of finance lease liabilities		(13,262	)			(17,356	)
Capitalized internal-use software costs		(4,475	)			(3,291	)
Non-GAAP free cash flow	$	75,890			$	39,863
GAAP net cash used in investing activities	$	(108,965	)		$	(4,591	)
GAAP net cash (used in) provided by financing activities	$	(18,848	)		$	15,303

We had cash and cash equivalents, ~~and~~ restricted cash, and short-term investments of ~~$172.9~~$612.3 million as of ~~October 31, 2017.~~ April 30, 2021. Our cash ~~equivalents~~ and ~~restricted~~ cash equivalents primarily consist of overnight deposits and ~~certificates of deposits. All restricted cash is recorded at its estimated fair value.~~money market funds. We do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates and we do not enter into investments for trading or speculative purposes.

In December 2015, we entered into a revolving credit facility (December 2015 Facility) in the amount of up to $40.0 million, which was originally scheduled to mature in December 2017. The December 2015 Facility was denominated in U.S. dollars and, depending on certain conditions, each borrowing was subject to a floating interest rate equal to either the prime rate plus a spread of 0.25% to 2.75% or a reserve adjusted LIBOR rate (based on one, three or six-month interest periods) plus a spread of 1.25% to 3.75%. Although no minimum deposit was required for the December 2015 Facility, we were eligible for the lowest interest rate if we

~~maintained at least $40 million in deposits with the lender. In February 2017, we amended the December 2015 Facility to extend the maturity date to December 2018.~~

Interest rate risk also reflects our exposure to movements in interest rates associated with the ~~December 2015~~November 2017 Facility. As of ~~October 31, 2017,~~April 30, 2021, we had total debt outstanding with a carrying amount of ~~$40~~$30.0 million which approximates fair value. ~~A hypothetical 10% increase or decrease in interest rates of October 31, 2017 would not have a material impact on the fair value of our outstanding debt.~~

~~On November 27, 2017, we terminated the December 2015 Facility and entered into the November 2017 Facility.~~ The revolving loans accrue interest at a prime rate plus a margin of 0.25% or, at our option, a LIBOR rate (based on one, three or six-month interest periods) plus a margin of 1.00%.

Effective September 5, 2019, we entered into an interest rate swap agreement with Wells Fargo Bank, National Association, in order to minimize our interest rate risk exposure due to the volatility of LIBOR. Under the Swap Agreement, we have hedged a portion of the variable interest payments of our debt by effectively fixing our interest payments over the five-year term of the agreement. As of ~~November 29, 2017, there was $40.0 million in revolving loans outstanding and $26.0 million in letters~~April 30, 2021, our interest rate swap had a notional value of ~~credit issued under the November 2017 Facility. Refer to Note 12 within Item 1 for additional details.~~ $30.0 million.

A hypothetical 10% increase or decrease in interest ~~rate~~rates after April 30, 2021 under the November 2017 Facility and in connection with our Swap Agreement would not have a material impact on the combined net fair value of our outstanding ~~debt.~~debt and Swap Agreement.

In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026. The Notes are senior unsecured obligations and do not bear regular interest. As a result, the interest and market value changes affect the fair value of the Notes but do not impact our financial position, cash flows, or results of operations. Additionally, we carry the Notes at face value on our balance sheet, and we present the fair value for required disclosure purposes only.

Our sales contracts are denominated predominantly in U.S. dollars. We support sales contracts denominated in 1611 foreign currencies and consequently, our customer billings denominated in foreign currencies are subject to foreign currency exchange risk. 11Five of the 1611 currencies are only offered at this time through our online sales experience and are required to be settled by credit cards; accordingly, our foreign currency exposure on these transactions is limited only to ordinary credit card settlement timeframes. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates. Our international subsidiaries maintain certain asset and liability balances that are denominated in foreign currencies. Additionally, fluctuations in foreign currency exchange rates can result in fluctuations in our total assets, liabilities, and cash flows and may cause us to recognize transaction gains and losses in our statement of ~~operations.~~operations impacting our revenue and operating expenses. To date we have managed our foreign currency risk by maintaining offsetting assets and liabilities and minimizing ~~non-USD~~non-U.S. dollar cash balances, and have not entered into derivatives or hedging transactions as our exposure to foreign currency exchange rates has not been material to our historical operating results; however, we may do so in the future if our exposure to foreign currency should become more significant. ~~There~~For the three months ended April 30, 2021, we recognized $2.2 million in foreign currency exchange losses. For the three months ended April 30, 2020, there were no ~~significant~~material foreign exchange gains or ~~losses in the nine months ended October 31, 2017 and 2016.~~losses.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ~~(Exchange~~(the Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we are a party to litigation and subject to claims that arise in the ordinary course of business. We investigate these 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 ~~October 31, 2017.~~April 30, 2021.

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes, before making a decision to invest in our Class A common stock. If any of the risks actually occur, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.

Our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks include, among others, the following:

~~We have a history of cumulative losses, and we do not expect to be profitable for the foreseeable future.~~

~~We have incurred significant losses in each period since our inception in 2005.~~ ~~We incurred net losses of $151.8 million, $202.9 million and $168.2 million in our fiscal years ended January 31, 2017, 2016 and 2015, respectively~~, and $122.3 million in the nine months ended October 31, 2017. As of October 31, 2017, we had an accumulated deficit of 1.0 billion. These losses and accumulated deficit reflect the substantial investments we made to acquire new customers and develop our services. We intend to continue scaling our business to increase our number of users and paying organizations and to meet the increasingly complex needs of our customers. We have invested, and expect to continue to invest, in our sales and marketing organizations to sell our services around the world and in our product development organization to deliver additional features and capabilities of our cloud services to address our customers’ evolving needs. We also expect to continue to make significant investments in our infrastructure and in our professional service organization as we focus on customer success. As a result of our continuing investments to scale our business in each of these areas, we do not expect to be profitable for the foreseeable future. Furthermore, to the extent we are successful in increasing our customer base, we will also incur increased losses due to upfront costs associated with acquiring new customers, particularly as a result of the limited free trial version of our service, and the nature of subscription revenue which is generally recognized ratably over the term of the subscription period, which is typically one year, although we also offer our services for terms ranging from one month to three years or more. We cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability.

~~We have a limited operating history, which makes it difficult to predict our future operating results.~~

We were incorporated and introduced our first service in 2005. As a result of our limited operating history, our ability to accurately forecast our future operating results is limited and subject to a number of uncertainties. We have encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to changes in our markets, or if we do not address these risks and uncertainties successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.

The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.

The market for cloud content management services is fragmented, rapidly evolving and highly competitive, with relatively low barriers to entry for certain applications and services. Many of our competitors and potential competitors are larger and have greater ~~name~~brand recognition, ~~substantially~~ longer operating histories, ~~larger marketing budgets~~ and significantly greater resources than we do. Our primary competitors in the cloud content management market include Microsoft and OpenText (Documentum). In the enterprise file sync and share market, our primary competitors include ~~but are not limited to,~~ Microsoft, Google ~~Dropbox,~~ and, ~~Open Text (including Documentum).~~to a lesser extent, Dropbox. With the introduction of new technologies and market entrants, we expect competition ~~to continue~~ to intensify in the future. If we fail to compete effectively, our business will be harmed. Some of our ~~principal~~ competitors offer their products or services at a lower price or for free, which has ~~resulted in~~placed pricing ~~pressures~~pressure on our business. If we are unable to achieve our target pricing levels, our operating results ~~would~~will be negatively impacted. In addition, pricing pressures and increased competition ~~generally~~ could result in reduced sales, lower

margins, losses or the failure of our services to achieve or maintain widespread market acceptance, any of which could harm our business.

Many of our competitors are able to devote greater resources to the development, promotion and sale of their products or services. In addition, many of our competitors have established marketing relationships and major distribution agreements with channel partners, consultants, system integrators and resellers. Moreover, many software vendors could bundle products or offer them at lower prices as part of a broader product sale or enterprise license arrangement. Some competitors may offer products or services that address ~~one or a number of~~ business execution functions at lower prices or with greater depth than our services. ~~As a result, our~~Our competitors may be able to respond more quickly and effectively to new or changing opportunities, technologies, standards or customer requirements. Furthermore, some potential customers, particularly large enterprises, may elect to develop their own internal solutions. For any of these reasons, we may not be able to compete successfully against our current and future competitors.

Our business depends substantially on customers renewing their subscriptions with us and expanding their use of our services. Any decline in our customer renewals or failure to convince our customers to broaden their use of our services would harm our future operating results.

In order for us to maintain or improve our operating results, it is important that our customers renew their subscriptions with us when their existing subscription term expires. We cannot assure you that customers will renew their subscriptions upon expiration at the same or higher level of service, if at all. Our net retention rate has decreased over time, and may continue to decrease in the future, as some of our customers have elected and may elect not to renew their subscriptions with us or to decrease the scope of their deployments. Our net retention rates were approximately 103% and 107% as of April 30, 2021 and 2020, respectively.

Our net retention rate may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our services, the effectiveness of our customer support services, the performance of our partners and resellers, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base and our ability to successfully integrate acquired technology into our products, our ability to execute on our product roadmap, the effects of global economic conditions, such as those arising from the COVID-19 pandemic, or reductions in our customers’ spending levels. If our customers do not renew their subscriptions, renew them on less favorable terms, purchase fewer seats, or fail to purchase new product offerings, our revenue may decline, and we may not realize improved operating results from our customer base.

In addition, our business growth depends in part on our customers expanding their use of our services. The use of our cloud content management platform often expands within an organization as new users are added or as additional services are purchased by or for other departments within an organization. Further, as we have introduced new services throughout our operating history, our existing customers have constituted a significant portion of the users of such services. If our customers do not expand their use of our services, our operating results may be adversely affected.

If the market for cloud-based enterprise ~~service~~services declines or develops more slowly than we expect, our business could be adversely affected.

The market for cloud-based enterprise services is not as mature as the on-premise enterprise software ~~market, and it is uncertain whether a cloud-based service like ours will achieve and sustain high levels of customer demand and market acceptance.~~market. Because we derive, and expect to continue to derive, substantially all of our revenue and cash flows from sales of our cloud content management ~~and collaboration solution,~~solutions, our success will depend to a substantial extent on the widespread adoption of cloud computing in general and of cloud-based content ~~collaboration~~management services in particular. Many organizations have invested substantial personnel and financial resources to integrate traditional enterprise software into their organizations and, therefore, may be reluctant or unwilling to migrate to a cloud-based model for storing, accessing, sharing and managing their content. It is difficult to predict customer adoption rates and demand for our services, the future growth rate and size of the cloud computing market or the entry of competitive services. The expansion of the cloud content management ~~and collaboration~~ market depends on a number of factors, including the cost, performance and perceived value associated with cloud computing, as well as the ability of companies that provide cloud-based services to address security and privacy concerns. If we or other providers of cloud-based services experience security incidents, loss of customer data, disruptions in delivery of services, network outages, disruptions in the availability of the internet or other problems, the market for cloud-based services as a whole, including our services, may be negatively affected. If cloud-based services do not achieve widespread adoption, or there is a reduction in demand for cloud-based services, caused by a lack of customer acceptance, technological challenges, weakening economic or political conditions, security or privacy concerns, competing technologies and products, decreases in corporate spending or otherwise, it could result in decreased revenue, harm our growth rates, and adversely affect our business and operating results.

~~We have experienced rapid growth. If~~Because we ~~fail to manage~~recognize revenue from subscriptions for our ~~growth effectively, we~~services over the term of the subscription, downturns or upturns in new business may not be ~~unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.~~

~~We have experienced a period of rapid growth~~immediately reflected in our operations, employee headcount, and the size of our customer base. You should not consider our recent growth as indicative of our future performance. However, we anticipate that we will continue to expand our operations and employee headcount in the near term, including internationally. This growth has placed, and future growth will place, a significant strain on our management, administrative, operational and financial infrastructure. Our success will depend in part on our ability to manage this growth effectively. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. Failure to effectively manage our growth could result in difficulty or delays in deploying customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties. Any of these difficulties could adversely impact our business performance and operating results.

~~Our business depends substantially on~~We generally recognize revenue from customers ~~renewing~~ratably over the terms of their ~~subscriptions with us and expanding their use~~subscription agreements, which are typically one year, although we also offer our services for terms ranging from one month to three years or more. As a result, most of ~~our services. Any~~the revenue we report in each quarter is the result of subscription agreements entered into during prior quarters. Consequently, a decline in new or renewed subscriptions in any one quarter may not be reflected in our ~~customer renewals or~~revenue results for that quarter. However, any such decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales, our failure to ~~convince~~achieve our ~~customers to broaden their use~~internal sales targets, a decline in the market acceptance of our services, ~~would harm~~or a decrease in our net retention rate may not be fully reflected in our operating results until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from additional sales must be recognized over the applicable subscription term.

If we are unable to attract new customers at rates that are consistent with our expectations, our future revenue and operating ~~results.~~results could be adversely impacted.

In order for us to ~~maintain or~~ improve our operating results and continue to grow our business, it is important that ~~our~~we continue to attract new customers ~~renew their subscriptions with us when their existing subscription term expires. Our customers have no obligation to renew their subscriptions upon expiration,~~ and ~~we cannot assure you that customers will renew subscriptions at the same or higher level of service, if at all. Although our retention rate remains high, it has decreased over time as some~~expand deployment of our solutions and products with existing customers. To the extent we are successful in increasing our customer base, we could incur increased losses because costs associated with new customers are generally incurred up front, while revenue is recognized ratably over the term of our subscription services. Alternatively, to the extent we are unsuccessful in increasing our customer base, we could also incur increased losses as costs associated with marketing programs and new products intended to attract new customers would not be offset by incremental revenue and cash flow. Catastrophic events, such as the COVID-19 pandemic, may financially impact our existing and prospective customers and cause them to delay or reduce their technology spending, which may adversely affect our ability to attract new customers. All of these factors could negatively impact our future revenue and operating results.

The continuing impacts of the COVID-19 pandemic may have ~~elected not~~an adverse effect on our business, operations and future financial performance.

In March 2020, the World Health Organization declared COVID-19 a pandemic. Governments and municipalities around the world have instituted measures to ~~renew their subscriptions with us.~~

~~Our retention rate may decline or fluctuate~~control the spread of COVID-19, including quarantines, shelter-in-place orders, school closures, travel restrictions, and closure of non-essential businesses. These measures have led to significant adverse economic impacts which have had, and could continue to have, an adverse impact on our business operations in a number of ways, including, without limitation, (1) disruptions to our sales operations and marketing efforts as a result of ~~a number~~the inability of ~~factors, including~~ our ~~customers’ satisfaction or dissatisfaction with~~sales team to travel and meet customers in person, (2) negative impacts on our customers and prospects that could result in (i) extended customer sales cycles, delayed spending on our services, ~~the effectiveness~~impairment of our ~~customer support~~ability to collect accounts receivable, and (ii) reduced payment frequencies, demand for our services, renewal rates, and spending on our services, and (3) negative impacts to the ~~performance~~financial condition or operations of our vendors and business partners, as well as disruptions to the supply chain of hardware needed to offer our services. Moreover, as a result of the COVID-19 pandemic, we are temporarily requiring nearly all of our employees to work remotely, which may lead to disruptions and ~~resellers,~~decreased productivity and other adverse operational business impacts. The extent to which the COVID-19 pandemic and resultant economic impact affects our ~~pricing,~~business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

Our business depends on the ~~prices~~overall demand for cloud content management services and on the economic health of ~~competing products~~our current and prospective customers. The United States and other key international economies have experienced cyclical downturns from time to time that have resulted in a significant weakening of the economy, more limited availability of credit, a reduction in business confidence and activity, and other difficulties that may affect one or ~~services, mergers and acquisitions affecting~~more of the industries to which we sell our ~~customer base,~~services. An economic downturn, recession, or uncertainty about economic conditions, including the effects of ~~global economic conditions~~COVID-19, in the United States, Europe, Japan and other key markets for our services could cause customers to delay or reduce their information technology spending. This could result in reductions in ~~our customers’ spending levels. If our customers do not renew their subscriptions, purchase~~

~~fewer seats, renew on less favorable terms or fail to purchase new product offerings, our revenue may decline, and we may not realize improved operating results from our customer base.~~

In addition, the growth of our business depends in part on our customers expanding their use of our services. The use of our cloud content platform often expands within an organization as new users are added or as additional services are purchased by or for other departments within an organization. Further, as we have introduced new services throughout our operating history, our existing customers have constituted a significant portion of the users of such services. If we are unable to encourage our customers to broaden their usesales of our services, longer sales cycles, reductions in subscription duration and value, slower adoption of new technologies and increased price competition. Any of these events would likely have an adverse effect on our business, operating results ~~may~~and financial position. In addition, there can be ~~adversely affected.~~no assurance that cloud content management and collaboration spending levels will increase following any recovery.

If we are not able to successfully launch new products and services or provide ~~successful~~ enhancements or new features ~~and modifications~~ to our existing products and services, our business could be adversely affected.

Our industry is marked by rapid technological developments and new and enhanced applications and services. If we are unable to provide enhancements and new features for our existing services or offer new services that achieve market acceptance or ~~that~~ keep pace with rapid technological developments, our business could be adversely affected. For example, we have introduced Box Relay, a tool that allows users to create custom workflows, Box Platform, which allows our customers to leverage Box’s powerful content services within their own custom applications, Box KeySafe, a solution that builds on top of Box’s strong encryption and security capabilities to give customers greater control over the encryption keys used to secure the file contents that are stored with Box, Box Zones, which gives global customers the ability to store their data locally in certain regions, Box Accelerator, which improves upload speeds for our global customers, and Box Governance, which gives customers a better way to comply with regulatory policies, satisfy e-discovery requests and effectively manage sensitive business information. The success of any new products and services, enhancements, ~~new features~~ or modifications to our existing products and services depends on several factors, including ~~the~~their timely completion, introduction and market ~~acceptance~~acceptance. We also may experience business or economic disruptions that could adversely affect the productivity of ~~such enhancements, features or services.~~our employees and result in delays in our product development process. For example, as a result of the COVID-19 pandemic, we are temporarily requiring nearly all of our employees to work remotely, which may lead to disruptions and decreased productivity that could result in delays in our product development process. Failure in this regard may significantly impair our revenue ~~growth.~~growth and our future financial results. In addition, because our services are designed to operate on a variety of systems, we ~~will need to~~must continuously modify and enhance our services to keep pace with changes in internet-related hardware, mobile operating systems, ~~such as iOS and Android,~~ and other software, communication, browser and database technologies. We may not be successful in ~~either~~ developing these modifications and enhancements or in bringing them to market in a timely fashion. Furthermore, modifications to existing platforms or technologies will increase our research and development expenses. Any failure of our services to operate effectively with existing or future network platforms and technologies could reduce the demand for our services, result in customer dissatisfaction and adversely affect our business.

Actual or perceived security vulnerabilities in our services or any breaches of our security controls and unauthorized access to our or a customer’s data could harm our business and operating results.

The services we offer involve the storage of large amounts of our and our customers’ sensitive and proprietary information, ~~across a broad industry spectrum. Cyber attacks~~some of which may be considered personally identifiable. Cyberattacks and other malicious internet-based activity, including ransomware, malware and viruses, continue to increase in frequency and in magnitude ~~generally,~~ and ~~cloud-based content collaboration services have been targeted in the past.~~we face security threats from malicious third parties that could obtain unauthorized access to our systems, infrastructure and networks. These ~~increasing~~ threats ~~are being driven by~~may come from a variety of sources including nation-state sponsored espionage and hacking activities, industrial espionage, organized crime, sophisticated organizations, ~~and~~ hacking groups and ~~individuals.~~individuals and insider threats. These sources can also implement social engineering techniques to induce our partners, users, employees or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ data. ~~Additionally, hackers~~Hackers that acquire user account information at other companies can attempt to use that information to compromise the accounts of personnel, or our users’ accounts if an account shares the same sensitive information such as passwords. As we increase our customer base and our brand becomes more widely known and recognized, and as our service is used in more heavily regulated industries where there may be a greater concentration of sensitive and protected data, such as healthcare, government, life sciences, and financial services, we may become more of a target for these malicious third parties. In addition, because Box is configured by administrators and users to select their default settings, the third-party integrations they enable, and their privacy and permissions settings, an administrator or user could intentionally or inadvertently configure settings to share their sensitive data. For example, a Box user can choose to share the content they store in Box with third parties by creating a link that can be customized to be accessible by anyone with the link. While this feature is designed to be used for a variety of legitimate use cases in which a user wishes to share non-sensitive content with a broad or public audience, if a user were to intentionally or inadvertently configure a setting that allowed public access to their sensitive data, that data could be discovered and accessed by an unintended third party.

Given that our customers manage significant amounts of sensitive and proprietary information on our platform, and many of our customers are in heavily regulated industries where there may be a greater concentration of sensitive and proprietary data, our reputation and market position are particularly sensitive to impacts from actual or perceived security breaches or concerns regarding security. If our security measures are or are believed to be inadequate or breached as a result of third-party action, employee negligence, error or malfeasance, product defects, social engineering techniques, improper user configuration or otherwise, and this results in, or is believed to result in, the disruption of the confidentiality, integrity or availability of our data or our customers’ data, we could incur significant liability to various parties, including our customers and to individuals or organizations whose information is ~~being~~ stored by our customers, and our business, ~~may suffer and our~~ reputation or competitive position may be ~~damaged.~~harmed. Techniques used to obtain unauthorized access to, or to sabotage, systems or networks, are constantly evolving and generally are not recognized until launched against a target. Therefore, we may be unable to anticipate these techniques, react in a timely manner, or implement adequate preventive ~~measures. In addition,~~measures, and we may face delays in our detection or remediation of, or other responses to, security breaches and other security-related incidents. We also expect to incur significant costs in our ongoing efforts to detect and prevent security breaches and other security-related incidents, and in the event of an actual or perceived security breach or other security-related incident. Additionally, our service providers may suffer, or be perceived to suffer, data security breaches or other incidents that may compromise data stored or processed for us that may give rise to any of the foregoing.

Our customer contracts often include (i) specific obligations that we maintain the availability of the customer’s data through our service and that we secure customer content against unauthorized access or loss, and (ii) provisions whereby we indemnify our customers for third-party claims asserted against them that result from our failure to maintain the availability of their content or securing the same from unauthorized access or loss. While our customer contracts contain limitations on our liability in connection with these obligations and indemnities, if an actual or perceived security breach occurs, the market perception of the effectiveness of our security measures could be harmed, we could be subject to indemnity or damage claims in certain customer contracts, and we could lose future sales and customers, any of which could harm our business and operating results. Furthermore, while our errors and omissions insurance policies include liability

coverage for certain of these matters, if we ~~experienced~~experience a widespread security breach or other incident that ~~impacted~~impacts a significant number of our customers to whom we owe ~~these~~ indemnity obligations, we could be subject to indemnity claims or other damages that exceed ~~such~~our insurance coverage. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

Our sales to government entities are subject to a number of additional challenges and risks.

We sell to ~~U.S. federal and state and foreign~~ government ~~agencies~~ customers, and we may increase sales to government entities in the future. ~~Sales to government entities are subject to a number of additional challenges and risks.~~ Selling to government entities can be highly competitive, ~~expensive and time consuming,~~ often requiring significant upfront time and expense without any assurance that these efforts will generate a

sale. Government certification requirements may change, or we may lose one or more government certifications, and in doing so restrict our ability to sell into the government sector or maintain existing government customers until we ~~have attained~~attain revised certifications. Government demand and payment for our products and services are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our solutions. For example, as a result of the COVID-19 pandemic, many governments and municipalities are experiencing budget shortfalls, which may cause them to delay or reduce their technology spending. Moreover, an extended federal government shutdown resulting from budgetary decisions may limit or delay federal government spending on our solutions and adversely affect our revenue. Government entities may also have statutory, contractual or other legal rights to terminate contracts with us for convenience or due to a default, and any such termination may adversely affect our future operating results.

As a substantial portion of our sales efforts are increasingly focused on cloud content management use cases and are targeted at enterprise and highly-regulated customers, our sales ~~cycle~~cycles may become longer and more expensive, we may encounter greater pricing pressure and implementation and customization challenges, and we may have to delay revenue recognition for more complicated transactions, all of which could harm our business and operating results.

As a substantial portion of our sales efforts are increasingly focused on cloud content management use cases and are targeted at enterprise and highly-regulated customers, we face greater costs, longer sales cycles and less predictability in the completion of some of our sales. In this market segment, the customer’s decision to use our services may be an enterprise-wide ~~decision, in which case these~~decision. These types of sales opportunities require us to provide greater levels of customer education regarding the uses and benefits of our services, as well as education regarding security, privacy, and data protection laws and regulations, especially for those customers in more heavily regulated industries or those with significant international operations. In addition, larger enterprises may demand more customization, integration, ~~and~~ support services, and features. ~~As a result of these~~Furthermore, our sales efforts may be impeded by catastrophic events, including public health epidemics such as the COVID-19 pandemic, that limit our ability to travel or meet customers in person. These factors ~~these sales opportunities may require us to devote greater sales support and professional services resources to these customers, which~~ could increase our costs, lengthen our sales cycle and leave fewer sales support and professional services resources for other ~~customers. This would potentially require us to delay revenue recognition on some of these transactions until the technical or implementation requirements have been met.~~customers. Professional services may also be performed by a third party or a combination of our own staff and a third party. Our strategy is to work with third parties to increase the breadth of capability and depth of capacity for delivery of these services to our customers. If a customer is not satisfied with the quality or interoperability of our services with their own IT environment, we could incur additional costs to address the situation, which could adversely affect our margins. Moreover, any customer dissatisfaction with our services could damage our ability to encourage broader adoption of our services by that customer. In addition, any negative publicity resulting from such situations, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers.

If we fail to meet the service level commitments we provide under our subscription agreements, we could be obligated to provide credits or refunds for prepaid amounts related to unused subscription services or face subscription terminations, which could adversely affect our revenue. Furthermore, any failure in our delivery of high-quality customer support services may adversely affect our relationships with our customers and our financial results.

Our customer subscription agreements provide service level commitments. If we are unable to meet our service level commitments or suffer periods of downtime that exceed the periods allowed under our customer agreements, we may be obligated to provide customers with service credits which could significantly impact our revenue in the period in which the downtime occurs and the credits could be due. For example, in 2019, a modification to a perimeter network configuration caused an internal routing problem that led to all Box services being temporarily unavailable. We could also face subscription terminations, which could significantly impact our current and future revenue. Any extended service outages could also adversely affect our reputation, which would also impact our future revenue and operating results.

Our customers depend on our customer success organization to resolve technical issues relating to our services. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenue, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on the ease of use of our services, our reputation and positive recommendations from our existing customers. Any failure to maintain, or a market perception that we do not maintain, high-quality customer support could adversely affect our reputation and our ability to sell our services to existing and prospective customers.

We are in the process of expanding our international operations, which exposes us to significant risks.

A key element of our growth strategy is to expand our international operations and develop a worldwide customer base. In addition, we have opened, and may continue to open, international offices and hire employees to work at these offices in order to gain access to additional talent. For example, we recently established an office in Warsaw, Poland and acquired SignRequest B.V., a company located in The Netherlands. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic, geographic, social, and political risks that differ from those in the United States. Because of our limited experience with international operations and significant differences between international and U.S. markets, we may not

succeed in creating demand for our services outside of the United States or in effectively selling our services in all of the international markets we enter. In addition, we will face specific risks in doing business internationally that could adversely affect our business, including:

We sell our services and incur operating expenses in various currencies. Therefore, fluctuations in the relative value of the U.S. dollar and foreign currencies may impact our operating results. We currently manage our exchange rate risk by matching foreign currency assets with payables and by maintaining minimal non-U.S. dollar cash reserves, but we do not have any other hedging programs in place to limit the risk of exchange rate fluctuation. In the future, however, to the extent our foreign currency exposures become more material, we may elect to deploy normal and customary hedging practices designed to more proactively mitigate such exposure. We cannot be certain such practices will ultimately be available and/or effective at mitigating all foreign currency risk to which we are exposed. If we are unsuccessful in detecting material exposures in a timely manner, our deployed hedging strategies are not effective, or there are no hedging strategies available for certain exposures that are prudent given the associated risks and the potential mitigation of the underlying exposure achieved, our operating results or financial position could be adversely affected in the future.

In addition, the United Kingdom’s (UK) withdrawal from the European Union (EU), or Brexit, became effective on January 31, 2020. The UK and EU have signed an EU-UK Trade and Cooperation Agreement, which became provisionally applicable on January 1, 2021 and will become formally applicable once ratified by the UK and EU. This agreement provides details on how some aspects of the UK and EU’s relationship will operate going forward, however there continues to be uncertainty over the practical consequences of Brexit. Many of the regulations that now apply in the UK will likely be amended in the future as the UK determines its new approach, which may result in significant divergence from EU regulations. This lack of clarity could lead to economic and legal uncertainty, including significant volatility in global stock markets and currency exchange rates, among other things. Any of these effects of Brexit, among others, could adversely affect our operations, especially in the United Kingdom, and our financial results.

If we are unable to maintain and promote our brand, our business and operating results may be harmed.

We believe that maintaining and promoting our brand is critical to expanding our customer base. Maintaining and promoting our brand will depend largely on our ability to continue to provide useful, reliable and innovative services, which we may not do successfully. We may introduce new features, products, services or terms of service that our customers do not like, which may negatively affect our brand and reputation. Additionally, the actions of third parties may affect our brand and reputation if customers do not have a positive experience using third-party apps or other services that are integrated with Box. Maintaining and enhancing our brand may require us to make substantial investments, and these investments may not achieve the desired goals. If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business and operating results could be adversely affected.

We have a history of cumulative losses, and we may not be able to achieve or maintain profitability.

We incurred net losses of $43.4 million, $144.3 million, and $134.6 million in our fiscal years ended January 31, 2021, 2020 and 2019, respectively and $14.6 million in the three months ended April 30, 2021. As of April 30, 2021, we had an accumulated deficit of $1.3 billion. These losses and accumulated deficit reflect the substantial investments we made to acquire new customers and develop our services. We intend to continue scaling our business to increase our number of users and paying organizations and to meet the increasingly complex needs of our customers. We have invested, and expect to continue to invest, in our sales and marketing organizations to sell our services around the world and in our product development organization to deliver additional features and capabilities of our cloud services to address our customers’ evolving needs. We also expect to continue making significant investments in our infrastructure and in our professional service organization as we focus on customer success. Furthermore, to the extent we are successful in increasing our customer base, we will also incur increased losses due to upfront costs associated with acquiring new customers, including as a result of the limited free trial version of our service, and the nature of subscription revenue, which is generally recognized ratably over the term of the subscription period, which we offer for terms ranging from one month to three years or more. As a result, we cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability.

Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.

Our quarterly operating results may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, and as a result, may not fully reflect the underlying performance of our business. Factors that may cause fluctuations in our quarterly financial results include, but are not limited to:

Privacy concerns and laws or other ~~domestic or foreign~~ regulations may reduce the effectiveness of our services and harm our business.

Users can use our services to store identifying information or information that otherwise is considered personal information. Federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations regarding the collection, use and disclosure of personal information obtained from consumers, businesses and other ~~individuals. Foreign data~~individuals and entities. Data protection, privacy, consumer protection and other laws and regulations, particularly in Europe, are often more restrictive than those in

the United States. The costs of compliance with, and other burdens imposed by, such laws, policies and regulations that ~~are applicable~~apply to our business or ~~the~~our customers’ businesses ~~of our customers~~ may limit the use and adoption of our services and reduce overall demand for them.

These ~~U.S. federal and state and foreign~~ laws and regulations, which ~~can~~may be ~~enforced~~enforceable by private parties and/or governmental entities, are constantly evolving and can be subject to significant change. A number of new laws coming into effect and/or proposals pending before federal, state and foreign legislative and regulatory bodies could affect our business. For example, the European Commission ~~has~~ enacted the General Data Protection Regulation (GDPR), which imposes significant obligations on companies regarding the handling of personal data and provides for penalties for noncompliance of up to the greater of 20 million euros or four percent of a ~~general~~company’s global revenue. Further, local data protection ~~regulation that becomes effective~~authorities in ~~May 2018 and will supersede current EU data protection legislation, impose~~Europe may adopt regulations and/or guidance more stringent ~~EU data protection requirements, and provide for greater penalties for noncompliance. Additionally, in October 2015,~~than the ~~European~~GDPR, which may impose additional compliance costs or other burdens that impact our business. In 2020, the Court of Justice of the European Union (CJEU) invalidated the ~~U.S.-EU Safe Harbor~~EU-US Privacy Shield framework, ~~that had been~~and imposed additional obligations on companies when relying on model contractual clauses approved by the European Commission (EC) to transfer personal data from the EU to the U.S. This CJEU decision may result in ~~place since 2000, which allowed companies to meet certain~~the EC and European ~~legal requirements~~data protection regulators applying differing standards for, ~~the transfer~~and requiring ad hoc verification of, transfers of personal data from the EU to the U.S. The CJEU’s decision may require us to take additional steps to legitimize any personal data transfers that are impacted by this decision, which may result in increased costs of compliance and limitations on our customers and us. This CJEU decision or other legal challenges relating to cross-border data transfers may serve as a basis for challenges to our personal data handling practices, or those of our customers, and may otherwise adversely impact our business, financial condition and operating results.

Brexit has created uncertainty around data protection issues and could lead to further legislative and regulatory changes. For example, pursuant to a post-Brexit trade deal between the UK and the EU, transfers of personal information from the European Economic Area (EEA) to the UK are non-restricted for a period of up to six months from January 1, 2021. However, unless the EC makes an adequacy decision with respect to the UK before the end of that period, the UK will be considered a “third country” under the GDPR and transfers of European personal information to the UK will require additional safeguard as stipulated by Chapter 5 of the GDPR to render such transfers lawful. Additionally, the UK Data Protection Act of 2018 substantially implements the GDPR in the UK and was the subject of statutory amendments that further aligned it with the GDPR in 2019. It remains unclear, however, how the UK’s data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the United ~~States. Although U.S.~~Kingdom will be regulated.

In 2018, the State of California enacted the California Consumer Privacy Act (CCPA), that became operative on January 1, 2020. The CCPA requires covered companies to, among other things, provide new disclosures to California consumers, and ~~EU authorities reached a political agreement on February 2, 2016, regarding~~afford such consumers new abilities to opt-out of certain sales of personal information. Additionally, a new ~~means for legitimizing personal data transfers from~~privacy law, the ~~EEA~~California Privacy Rights Act (CPRA), was approved by California voters in November 2020. The CPRA’s substantive provisions become effective on January 1, 2023, and new guidance and supporting regulations are expected to be introduced by July 1, 2022. The CPRA will replace the ~~United States, the EU-U.S. Privacy Shield, it is facing mounting legal challenges. It is unclear what effect these challenges to the EU-U.S. Privacy Shield will have~~CCPA and ~~whether it will continue to function as an appropriate means for~~may potentially result in further uncertainty and require us to ~~legitimize personal~~incur additional costs and expenses. Aspects of the interpretation and enforcement of the CCPA and CPRA remain unclear. We cannot fully predict the impact of the CCPA and CPRA on our business or operations, but they may require us to modify our data ~~transfers from the EEA~~processing practices and policies and incur substantial costs and expenses in an effort to ~~the U.S. Similarly, there~~comply. There also have been a number of other recent legislative proposals in the United States, at both the federal and state level, that would impose new obligations in areas such as privacy and liability for copyright infringement by third parties. ~~In June 2016, the United Kingdom held a referendum in~~

~~which voters approved an exit from the European Union, commonly referred to as “Brexit,” which could also lead to further legislative and regulatory changes.~~ ~~In March 2017, the United Kingdom began the process to leave the EU by April 2019.~~ In addition, some countries are considering or have enacted legislation requiring local storage and processing of data that could increase the cost and complexity of delivering our services. If we are unable to develop and offer services that meet our legal duties or help our customers meet their obligations under the laws or regulations relating to privacy, data protection, or information security, we may become subject to significant fines and penalties, which would harm our business.

~~These~~Moreover, these existing and proposed laws and regulations can be costly to comply with, ~~can~~ delay or impede the development or adoption of our products and services, reduce the overall demand for our products and services, increase our operating costs, require significant management time and attention, and slow the pace at which we close (or prevent us from closing) sales transactions. Additionally, any actual or alleged noncompliance with these laws and regulations could result in negative publicity and subject us to investigations, claims or other remedies, including demands that we modify or cease existing business practices, and expose us to significant fines, penalties and other damages.

Furthermore, government agencies may seek to access sensitive information that our users upload to Box, or restrict users’ access to Box. Laws and regulations relating to government access and restrictions are evolving, and compliance with such laws and regulations could limit adoption of our services by users and create burdens on our business. Moreover, regulatory investigations into our compliance with privacy-related laws and regulations could increase our costs and divert management attention.

If we are not able to satisfy data protection, security, privacy, and other government- and industry-specific requirements, our growth could be harmed.

There are a number of data protection, security, privacy and other government- and industry-specific requirements, including those that require companies to notify individuals of data security incidents involving certain types of personal data. Security compromises experienced by our competitors, by our customers or by us may lead to public disclosures, which could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, or cause existing customers to elect not to renew their agreements with us. Our customers also expect, and in some instances require, us to meet voluntary certifications or adhere to standards established by third parties. Although we currently have certain certifications such as ISO/IEC 27001, 27017, and 27018, we may not be successful in continuing to maintain those certifications or in obtaining other certifications. In addition, some of the industries we serve have industry-specific requirements relating to compliance with certain security and regulatory standards, such as GxP and FedRAMP, and those required by ~~the~~ HIPAA, FINRA, and the HITECH Act. As we expand into new ~~verticals~~industries and regions, we will likely need to comply with these and other new requirements to compete effectively. If we cannot adequately comply ~~or if we incur a violation in one or more of~~with these requirements, our growth could be adversely impacted, and we could incur significant ~~liability.~~liability and our reputation and business could be harmed.

~~Because we recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results.~~Risks Related to Our Technical Operations Infrastructure and Dependence on Third Parties

We generally recognize revenue from customers ratably over the terms of their subscription agreements, which are typically one year, although we also offer our services for terms ranging from one month to three years or more. As a result, most of the revenue we report in each quarter is the result of subscription agreements entered into during prior quarters. Consequently, a decline in new or renewed subscriptions in any one quarter may not be reflected in our revenue results for that quarter. However, any such decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our services, and potential changes in our retention rate may not be fully reflected in our operating results until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from additional sales must be recognized over the applicable subscription term.

~~Our platform must integrate with a variety of operating systems and software applications that are developed by others, and if~~If we are unable to ensure that our solutions interoperate with ~~such~~operating systems and software applications developed by others, our service may become less competitive, and our operating results may be harmed.

We offer our services across a variety of operating systems and through the internet. We are dependent on the interoperability of our platform with third-party mobile devices, tablets, desktop and mobile operating systems, as well as web browsers that we do not control. Any changes in such systems, devices or web browsers that degrade the functionality of our services or give preferential treatment to competitive services could adversely affect usage of our ~~services. In order for us~~services and our ability to deliver high quality services, it is important that these services work well with a range of operating systems, networks, devices, web browsers and standards that we do not control. In addition, because a substantial number of our users access our services through mobile devices, we are particularly dependent on the interoperability of our services with mobile devices and operating systems.services. We may not ~~be successful~~succeed in developing relationships with key participants in the mobile industry or in developing services that operate effectively with these operating systems, networks, infrastructure, devices, web browsers and standards. In the event that ~~it is difficult for~~ our users ~~to access~~experience difficulty accessing and ~~use~~using our services, our user growth may be harmed, and our business and operating results could be adversely affected.

~~We cannot accurately predict new subscription or expansion rates and the impact these rates may have on our future revenue and operating results.~~

In order for us to improve our operating results and continue to grow our business, it is important that we continue to attract new customers and expand deployment of our solution with existing customers. To the extent we are successful in increasing our customer base, we could incur increased losses because costs associated with new customers are generally incurred up front, while revenue is recognized ratably over the term of our subscription services. Alternatively, to the extent we are unsuccessful in increasing our customer base, we could also incur increased losses as costs associated with marketing programs and new products intended to attract new customers would not be offset by incremental revenue and cash flow. Furthermore, if our customers do not expand their deployment of our services, our revenue may grow more slowly than we expect. All of these factors can negatively impact our future revenue and operating results.

~~Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.~~

Our quarterly operating results, including the levels of our revenue, billings, gross margin, profitability, cash flow, and deferred revenue, may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control and, as a result, may not fully reflect the underlying performance of our business. Fluctuations in quarterly results may negatively impact the value of our Class A common stock. Factors that may cause fluctuations in our quarterly financial results include, but are not limited to:

~~One of our marketing strategies is to offer a limited free version of our service, and we may not be able to realize the benefits of this strategy.~~

We offer a limited version of our service to users free of charge in order to promote additional usage, brand and product awareness, and adoption. Some users never convert from a free version to a paid version of our service. Our marketing strategy also depends in part on persuading users who use the free version of our service to convince decision-makers to purchase and deploy our

service within their organizations. To the extent that these users do not become, or do not lead others to become, paying customers, we will not realize the intended benefits of this marketing strategy, and our ability to grow our business and revenue may be harmed.

If we fail to effectively manage our technical operations infrastructure, our customers may experience service outages and delays in the deployment of our services, which may adversely affect our business.

We have experienced significant growth in the number of users and the amount of data that our operations infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet ~~the needs of all of~~ our ~~customers.~~customers’ needs. We also seek to maintain excess capacity to facilitate the rapid provisioning of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters and the evolution of our services. However, the provision of new hosting infrastructure requires significant lead-time. We have experienced, and may in the future experience, website disruptions, incidents of data corruption, service outages and other performance problems. These problems may be caused by a variety of factors, including infrastructure changes, changes to our core services architecture, changes to our infrastructure necessitated by legal and compliance requirements governing the storage and transmission of data, human or software errors, viruses, security attacks, fraud, spikes in customer usage, primary and redundant hardware or connectivity failures, dependent data center and other service provider failures and denial of service issues. Additionally, our ability to properly manage our technical operations infrastructure depends on the reliability of the global supply chain for hardware, network, and platform infrastructure equipment. Significant and unforeseen disruptions to the supply chain may impede our ability to meet our infrastructure capacity requirements. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time, which may harm our reputation and operating results. Furthermore, if we ~~do not accurately predict our infrastructure requirements,~~encounter any of these problems in the future, our customers may lose access to important data or experience data corruption or service outages that may subject us to financial penalties, other liabilities and customer losses. If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity, which could adversely affect our reputation and our business.

Interruptions or delays in service from our third-party ~~datacenter~~data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services and harm our business.

We currently store and process our customers’ information within ~~three~~multiple third-party ~~datacenter~~data center hosting facilities located in ~~Northern California~~Nevada and in third-party cloud computing and hosting facilities inside and outside of the United States. As part of our ~~current~~ disaster recovery arrangements, our production environment and metadata related to our customers’ data is currently replicated in near real time in ~~a facility~~facilities located in ~~Las Vegas,~~ Nevada. In addition, all of our customers’ data is typically replicated on a third-party storage ~~platform~~platforms located inside and outside of the United States. These facilities may be located in areas prone to natural disasters and may experience

events such as earthquakes, floods, fires, power loss, telecommunications failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism, cyber-attacks and similar ~~misconduct.~~misconduct, including by state-sponsored or otherwise well-funded actors. Any damage to, or failure of, our systems generally, or those of the third-party cloud computing and hosting providers, could result in interruptions in our ~~service. Interruptions in our~~ service, which may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rate and our ability to attract new customers. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption. Our business will also be harmed if our customers and potential customers believe our service is unreliable. Despite precautions taken at ~~these~~our third-party data center hosting facilities, the occurrence of ~~a natural disaster,~~disasters, security issues (including an act of terrorism or an armed conflict), certain geopolitical events, labor or trade disputes, or pandemics (such as COVID-19), could lead to a decision to close the facilities without adequate notice or other unanticipated problems ~~at these facilities could~~that result in lengthy interruptions in our service or cause us to not comply with certification requirements. Even with the disaster recovery arrangements, we have never performed a full live failover of our services and, in an actual disaster, we could learn our recovery arrangements are not sufficient to address all possible scenarios and our service could be interrupted for a longer period than expected. For example, in 2019, a modification to a perimeter network configuration caused an internal routing problem which led to all Box services being temporarily unavailable. As we continue to add ~~datacenters,~~data centers, increase our dependence on third-party cloud computing and hosting providers, and add capacity in our existing ~~datacenters,~~data centers, we may move or transfer our data and our customers’ data. Despite precautions taken during ~~this process,~~any of these data center moves and data transfers, any unsuccessful data transfers may impair the delivery of our ~~service. Further,~~service and materially and adversely disrupt our operations and our service delivery to our customers, which could result in contractual penalties or damage claims from customers. In addition, changes to our data center infrastructure could occur over a period longer than planned, require greater than expected investment and other internal and external resources and cause us to incur increased costs as we operate multiple data center facilities. It may also take longer than expected to realize the intended benefits from any data center infrastructure migrations and improvements, and disruptions or unexpected costs may continue to ~~grow~~occur while we enhance our data center infrastructure.

Our services are becoming increasingly mission-critical for our customers and if these services fail to perform properly or if we are unable to scale our services to meet our customers’ needs, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims.

Our services are becoming increasingly mission-critical to our customers’ business operations, as well as their ability to comply with legal requirements, regulations, and standards such as GxP, FINRA, HIPAA, and FedRAMP. These services and offerings are inherently complex and may contain material defects or errors that could cause interruptions in the availability of our services, as well as user error, which could result in loss or delayed market acceptance and sales, breach of contract or warranty claims, issuance of sales credits or refunds for prepaid amounts related to unused subscription services, loss of customers, diversion of development and customer service resources, and harm to our reputation. The costs incurred in correcting any material defects or errors might be substantial and could adversely affect our operating results. Further, our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our insurance may not cover all claims made against us and defending a lawsuit, regardless of its merit, could be costly and divert management’s attention.

Because of the large amount of data that we collect and manage, it is possible that hardware failures, software errors, errors in our systems, or by third-party service providers, user errors, or internet outages could result in significant data loss or corruption. Furthermore, the availability or performance of our services could be adversely affected by a number of factors, including customers’ inability to access the internet, the failure of our network or software systems, security breaches or variability in customer traffic for our services. We have been, and in the future may be, required to issue credits or refunds for prepaid amounts related to unused services or otherwise be liable to our customers for damages they may incur resulting from some of these events.

Furthermore, we will need to ensure that our services can scale to meet the needs of our customers, ~~additional burdens~~particularly as we continue to focus on larger enterprise customers. If we are not able to provide our services at the scale required by our customers, potential customers may not adopt our solution and existing customers may not renew their agreements with us.

We rely on third parties for certain financial and operational services essential to our ability to manage our business. A failure or disruption in these services could materially and adversely affect our ability to manage our business effectively.

We rely on third parties for certain essential financial and operational services. Most of these services have traditionally been provided by large enterprise software vendors who license their software to customers. However, we receive many of these services on a subscription basis from various software-as-a-service companies that are smaller and have shorter operating histories than traditional software vendors. Moreover, these vendors provide their services to us via a cloud-based model instead of software that is installed on our premises. We depend upon these vendors to provide us with services that are always available and are free of errors or defects that could cause disruptions in our business processes, and any failure by these vendors to do so, or any disruptions in networks or the availability of the internet, would adversely affect our ability to operate and manage our operations.

We employ third-party software for use in or with our services, and the inability to maintain licenses to this software, or errors in the software, could result in increased costs, or reduced service levels, which would adversely affect our business.

Our services incorporate certain third-party software obtained under open source licenses or licenses from other companies. We anticipate that we will continue to rely on such third-party software and development tools in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be ~~placed~~difficult or costly to replace. In addition, integration of the software used in our services with new third-party software may require significant work and require substantial investment of our time and resources. Also, to the extent that our services depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our services, delay the introduction of new services, result in a failure of our services, and injure our reputation. For example, we discovered that a bug in a third-party software library we use in our services caused a very small subset of files uploaded during a short period of time (from mid-December 2017 to early January 2018) to be stored in a partially-corrupted state. Our use of additional or alternative third-party software would require us to enter into additional license agreements with third parties. If we are unable to maintain licenses to software necessary to operate our business, or if third-party software that we use contains errors or defects, our costs may increase, or the services we provide may be harmed, which would adversely affect our business.

Our growth depends in part on the success of our strategic relationships with third parties.

In order to grow our business, we anticipate that we will continue to depend on our ~~hosting~~relationships with third parties, such as alliance partners, resellers, distributors, system integrators and ~~computing facilities.~~ developers. For example, we have entered into agreements with partners such as IBM, Microsoft, Google, Macnica Networks, and Mitsui Knowledge Industry to market, resell, integrate with or endorse our services. Identifying partners and resellers, and negotiating and documenting relationships with them, requires significant time and resources.

We also depend on our ecosystem of system integrators, partners and developers to create applications that will integrate with our platform or permit us to integrate with their product offerings. This presents certain risks to our business, including:

In ~~particular, a rapid expansion~~addition, our competitors may be effective in providing incentives to third parties to favor their products or services, or to prevent or reduce subscriptions to our services. In some cases, we also compete directly with our partners’ product offerings, and if these partners stop reselling or endorsing our services or impede our ability to integrate our services with their products, our business and operating results could be adversely affected. Moreover, competitor acquisitions of our partners could result in a decrease in the number of current and potential customers, as our partners may no longer facilitate the adoption of our services by potential customers.

If we are unsuccessful in establishing or maintaining our relationships with third parties, or realizing the anticipated benefits from such partnerships, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased customer usage of our services or increased revenue.

Our business is subject to the risks of natural disasters, pandemics and other catastrophic events that could disrupt our business operations and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

The occurrence of any catastrophic event, including a pandemic (such as COVID-19), earthquake, fire, flood, tsunami, or other weather event, power loss, telecommunications failure, software or hardware malfunctions, cyber-attack, war, or terrorist attack, could result in lengthy interruptions in our service. Our corporate headquarters is located in the San Francisco Bay Area, a region known for seismic activity. Our insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other

significant natural disaster. In addition, pandemics, acts of terrorism or war could cause disruptions to the internet or the economy as a whole, which could have a significant impact on our ~~network~~business and operating results. If our or our partners’ business continuity and disaster recovery arrangements prove to be inadequate, our services could be interrupted. Our partners, suppliers, and customers are also subject to the risk of catastrophic events. In those events, our ability to deliver our services in a timely manner, as well as the demand for our services, may be adversely impacted by factors outside our control. If our systems were to ~~fail.~~fail or be negatively impacted as a result of a natural disaster, pandemic or other catastrophic event, our ability to deliver our services to our customers would be impaired, we could lose critical data, our reputation could suffer and we could be subject to contractual penalties.

If we overestimate or underestimate our data center capacity requirements, our operating results could be adversely affected.

Only a small percentage of our customers that are organizations currently use our service as a way to organize all of their internal files. In particular, larger organizations and enterprises typically use our service to connect people and their most important information so that they are able to get work done more efficiently. However, over time, we may experience an increase in customers that look to Box as their complete content storage solution. The costs associated with leasing and maintaining our data centers already constitute a significant portion of our capital and operating expenses. We continuously evaluate our short- and long-term data center capacity requirements to ensure adequate capacity for new and existing customers while minimizing unnecessary excess capacity costs. If we overestimate the demand for our cloud content management ~~service~~services and therefore secure excess data center capacity, or if we are unable to meet our contractual minimum commitments, our operating margins could be reduced. If we underestimate our data center capacity requirements, we may not be able to service the expanding needs of ~~new and existing~~ customers and may be required to limit new customer acquisition, which would impair our revenue growth. Furthermore, regardless of our ability to appropriately

manage our data center capacity requirements, only a small percentage of our customers currently use Box to organize all of their internal files, and an increase in the number of organizations, in particular large businesses and enterprises, that use our service as a larger component of their content storage requirements, could result in lower gross and operating margins or otherwise have an adverse impact on our financial condition and operating results.

Changes in laws and regulations related to the internet or changes in the internet infrastructure itself, or disruption in access to the internet or critical services on which the internet depends, may diminish the demand for our services, and could have a negative impact on our business.

The future success of our business depends upon the continued use and availability of the internet as a primary medium for commerce, communication and business services. Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. The adoption of any laws or regulations that adversely affect the growth, popularity or use of the internet, including laws or practices limiting internet neutrality, could decrease the demand for, or the usage of, our services, increase our cost of doing business, adversely affect our operating results, and require us to modify our services in order to comply with these changes. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally, or result in reductions in the demand for internet-based services such as ours.

In addition, the use of the internet and, in particular, the cloud as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease of use, accessibility, and quality of service. The performance of the internet and its acceptance as a business tool have been adversely affected by “viruses,” “worms,” “denial of service attacks” and similar malicious activity. The internet has also experienced a variety of outages, disruptions and other delays as a result of this malicious activity targeted at critical internet infrastructure. These service disruptions could diminish the overall attractiveness to existing and potential customers of services that depend on the internet and could cause demand for our services to suffer.

We depend on highly skilled personnel to grow and operate our business, and if we are unable to hire, retain and motivate our personnel, we may not be able to grow effectively.

Our future success depends upon our continued ability to identify, hire, develop, motivate and retain highly skilled personnel, representing diverse backgrounds, experiences, and skill sets, including senior management, engineers, designers, product managers, sales representatives, and customer support representatives. Our ability to execute efficiently is dependent upon contributions from our employees, including our senior management team and, in particular, Aaron Levie, our co-founder, Chairman and Chief Executive Officer. In addition, occasionally, there may be changes in our senior management team that may be disruptive to our business. For example, Stephanie Carullo recently joined us as our Chief Operating Officer. If our senior management team, including any new hires that we may make, fails to work together effectively and to execute on our plans and strategies on a timely basis, our business could be harmed.

~~Our growth strategy also depends on our ability to expand our organization with highly skilled personnel.~~ Identifying, recruiting, training and integrating qualified individuals will require significant time, expense and attention. In addition to hiring new employees, we must continue to focus on retaining our best ~~employees. Many~~employees, and fostering a diverse and inclusive work environment that enables all of our employees ~~may be able~~ to ~~receive significant proceeds from sales of our equity in the public markets, which may reduce their motivation to continue to work for us.~~prosper. Competition for highly skilled personnel is intense, particularly in the San Francisco Bay Area, where our headquarters is located. Moreover, our ability to attract and hire personnel may be materially adversely affected by changes to immigration laws or the availability of work visas. We may need to invest significant amounts of cash and equity to attract and retain new employees, and we may never realize returns on these investments. Changes to U.S. immigration and work authorization laws and regulations can be significantly affected by political forces and levels of economic activity. Our international expansion and our business in general may be materially adversely affected if legislative or administrative changes to immigration or visa laws and regulations impair our hiring processes or projects involving personnel who are not citizens of the country where the work is to be performed.

If we are not able to effectively add and retain employees, our ability to achieve our strategic objectives will be adversely impacted, and our business will be harmed.

Our success is also dependent upon contributions from our executive officers and other key employees and, in particular, Aaron Levie, our co-founder and Chief Executive Officer. There may be changes in our senior management team that could disrupt our business. The loss of one or more of our executive officers or key employees, or the failure of our senior management team to work together effectively and execute our plans and strategies, could harm our business.

Failure to adequately expand and optimize our direct sales force and successfully maintain our online sales experience could impede our growth.

We will need to continue to optimize our sales infrastructure in order to grow our customer base and business. As a result of the COVID-19 pandemic, we are temporarily requiring nearly all of our employees to work remotely and restricting business travel, which may negatively impact our ability to recruit and train our sales force. Our business may be adversely affected if our efforts to expand and train our direct sales force do not generate a corresponding increase in revenue. If we are unable to hire, develop and retain talented sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not realize the intended benefits of this investment or increase our revenue.

We maintain our Box website to efficiently service our high volume, low dollar customer transactions and certain customer inquiries. Our goal is to continue to evolve this online experience so it effectively serves the increasing and changing needs of our growing customer base. If we are unable to maintain an effective online solution to meet the future needs of our online customers and to eliminate fraudulent transactions occurring in this channel, we could see reduced online sales volumes as well as a decrease in our sales efficiency, which could adversely affect our results of operations.

Any acquisitions and investments we make could disrupt our business and harm our financial condition and operating results.

We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our services and grow our business. For example, in February 2021 we acquired SignRequest. We may not be able to successfully complete or integrate identified acquisitions. Moreover, we may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition. The risks we face in connection with acquisitions include:

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, incremental operating expenses or the write-off of goodwill, any of which could harm our financial condition or operating results.

Our company culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, and our business may be harmed.

We believe that our culture has been and will continue to be a key contributor to our success. We expect to continue to hire additional employees as we expand our business. If we do not continue to develop our company culture or maintain our core values as we grow and evolve both in the United States and abroad, we may be unable to foster the innovation, creativity and teamwork we believe we need to support our growth.

We may be sued by third parties for alleged infringement of their proprietary rights.

There is considerable patent and other intellectual property development activity in our industry. Our success depends on our not infringing upon the valid intellectual property rights of others. Our competitors, as well as a number of other entities, including non-practicing entities, and individuals, may own or claim to own intellectual property relating to our industry. ~~For example, in 2016 we settled a lawsuit brought against us by Open Text S.A. that had gone to trial and was pending appeal.~~

From time to time, ~~certain other~~ third parties have claimed and in the future may claim that we are infringing upon their intellectual property rights, and we may be found to be infringing upon such rights. In addition, we cannot assure you that actions by other third parties alleging infringement by us of third-party patents will not be asserted or prosecuted against us. In the future, others may claim that our services and underlying technology infringe or violate their intellectual property rights. However, weWe may be unaware of the intellectual property rights that others may claim cover some or all of our technology or services. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify services, or refund fees, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time consuming and divert the attention of our management and key personnel from our business operations. During the course of any litigation, we may make announcements regarding the results of hearings and motions, and other interim developments. If securities analysts or investors regard these announcements as negative, the market price of our Class A common stock may decline.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and ~~our~~ brand.

Our success and ability to compete depend in part on our intellectual property. As of October 31, 2017, we had 59 issued patents in the United States, 18 issued patents in Great Britain, 2 issued patents in Canada, and one issued patent in Japan that expire between 2027 and 2035, as well as 97 pending patent applications in the United States and 7 pending patent applications internationally. We primarily rely on copyright, patent, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate. We may not be able to obtain any further patents, and our pending applications may not

~~result in~~ lead to the issuance of patents. We may also have to expend significant resources to obtain additional patents as we expand our international operations.

In order to protect our intellectual property rights, we may ~~be required to~~ spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and may result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Our failure to secure, protect and enforce our intellectual property rights could materially adversely affect our brand and adversely impact our business.

We rely on third parties for certain essential financial and operational services. Traditionally, the vast majority of these services have been provided by large enterprise software vendors who license their software to customers. However, we receive many of these services on a subscription basis from various software-as-a-service companies that are smaller and have shorter operating histories than traditional software vendors. Moreover, these vendors provide their services to us via a cloud-based model instead of software that is installed on our premises. We depend upon these vendors to provide us with services that are always available and are free of errors or defects that could cause disruptions in our business processes, and any failure by these vendors to do so, or any disruptions in networks or the availability of the internet, would adversely affect our ability to operate and manage our operations.

We are subject to governmental export controls that could impair our ability to compete in international markets due to licensing requirements and economic sanctions programs that subject us to liability if we are not in full compliance with applicable laws.

Certain of our services are subject to export controls, including the U.S. Department of Commerce’s Export Administration Regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. The provision of our products and services must comply with these laws. The U.S. export control laws and U.S. economic sanctions laws include prohibitions on the sale or supply of certain products and services to U.S. embargoed or sanctioned countries, governments, persons and entities and also require authorization for the export of encryption items. In addition, various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our services or could limit our customers’ ability to implement our services in those countries.

Although we take precautions to prevent our services from being provided in violation of such laws, our solutions may have been in the past, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take. If we fail to comply with these laws, we and our employees could be subject to civil or criminal penalties, including the possible loss of export privileges, monetary penalties, and, in extreme cases, imprisonment of responsible employees for knowing and willful violations of these laws. We may also be adversely affected through penalties, reputational harm, loss of access to certain markets, or otherwise.

Changes in tariffs, sanctions, international treaties, and export/import laws may delay the introduction and sale of our services in international markets, prevent our customers with international operations from deploying our services or, in some cases, prevent the export or import of our services to certain countries, governments, persons or entities altogether. Any change in export or import regulations, economic sanctions or related laws, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our services, or in our decreased ability to export or sell our services to existing or potential customers with international operations. Any decrease in the use of our services or limitation on our ability to export or sell our services would likely adversely affect our business, financial condition and operating results.

~~We focus on product innovation and user engagement rather than short-term operating results.~~

We focus heavily on developing and launching new and innovative products and features, as well as on improving the user experience for our services. We also focus on growing the number of users and paying organizations through inside sales, outbound sales, field sales, channel sales and through word-of-mouth by individual users, some of whom use our services at no cost. We prioritize innovation and the experience for users on our platform, as well as the growth of our user base, over short-term operating results. We frequently make product and service decisions that may reduce our short-term operating results if we believe that the decisions are consistent with our goals to improve the user experience and to develop innovative features that we feel our users desire. These decisions may not be consistent with the short-term expectations of investors and may not produce the long-term benefits that we expect.

We provide service level commitments under our subscription agreements. If we fail to meet these contractual commitments, we could be obligated to provide credits or refunds for prepaid amounts related to unused subscription services or face subscription terminations, which could adversely affect our revenue. Furthermore, any failure in our delivery of high-quality customer support services may adversely affect our relationships with our customers and our financial results.

Our subscription agreements with customers provide certain service level commitments. If we are unable to meet the stated service level commitments or suffer periods of downtime that exceed the periods allowed under our customer agreements, we may be obligated to provide these customers with service credits which could significantly impact our revenue in the period in which the downtime occurs and the credits could be due. We could also face subscription terminations, which could significantly impact both our current and future revenue. Any extended service outages could also adversely affect our reputation, which would also impact our future revenue and operating results.

Our customers depend on our customer success organization to resolve technical issues relating to our services. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenue, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on the ease of use of our services, on our reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation and our ability to sell our services to existing and prospective customers.

Our services are becoming increasingly mission-critical for our customers and if these services fail to perform properly or if we are unable to scale our services to meet the needs of our customers, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims.

Our core services and our expanded offerings such as Box KeySafe, Box Governance and Box Platform are becoming increasingly mission-critical to our customers’ internal and external business operations, as well as their ability to comply with legal requirements, regulations, and standards such as FINRA, HIPAA, and FedRAMP. These services and offerings are inherently complex and may contain material defects or errors. Any defects either in functionality or that cause interruptions in the availability of our services, as well as user error, could result in:

The costs incurred in correcting any material defects or errors might be substantial and could adversely affect our operating results. Further, our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our insurance may not cover all claims made against us and defending a lawsuit, regardless of its merit, could be costly and divert management’s attention.

Because of the large amount of data that we collect and manage, it is possible that hardware failures, errors in our systems, user errors, or internet outages could result in data loss or corruption that our customers regard as significant. Furthermore, the availability or performance of our services could be adversely affected by a number of factors, including customers’ inability to access the internet, the failure of our network or software systems, security breaches or variability in customer traffic for our services. We may be required to issue credits or refunds for prepaid amounts related to unused services or otherwise be liable to our customers for damages they may incur resulting from some of these events. In addition to potential liability, if we experience interruptions in the availability of our services, our reputation could be adversely affected, which could result in the loss of customers. For example, our customers access our services through their internet service providers. If a service provider fails to provide sufficient capacity to support our services or otherwise experiences service outages, such failure could interrupt our customers’ access to our services, adversely affect their perception of our services’ reliability and consequently reduce our revenue.

Furthermore, we will need to ensure that our services can scale to meet the needs of our customers, particularly as we continue to focus on larger enterprise customers. If we are not able to provide our services at the scale required by our customers, potential customers may not adopt our solution and existing customers may not renew their agreements with us.

~~If the prices we charge for our services are unacceptable to our customers, our operating results will be harmed.~~

As the market for our services matures, or as new or existing competitors introduce new products or services that compete with ours, we may experience pricing pressure and be unable to renew our agreements with existing customers or attract new customers at prices that are consistent with our pricing model and operating budget. If this were to occur, it is possible that we would have to change our pricing model or reduce our prices, which could harm our revenue, gross margin and operating results.

~~Sales to customers outside the United States or with international operations expose us to risks inherent in international sales.~~

A key element of our growth strategy is to expand our international operations and develop a worldwide customer base. To date, we have not realized a substantial portion of our revenue from customers outside of the United States. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic, geographic, social, and political risks that are different from those in the United States. Because of our limited experience with international operations and significant differences between international and U.S. markets, our international expansion efforts may not be successful in creating demand for our services outside of the United States or in effectively selling subscriptions to our services in all of the international markets we enter. In addition, we will face specific risks in doing business internationally that could adversely affect our business, including:

We sell our services and incur operating expenses in various currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may impact our operating results when translated into U.S. dollars. We currently manage our exchange rate risk by matching foreign currency assets with payables and by maintaining minimal non-USD cash reserves, but we do not have any other hedging programs in place to limit the risk of exchange rate fluctuation. In the future, however, to the extent our foreign currency exposures become more material, we may elect to deploy normal and customary hedging practices designed to more proactively mitigate such exposure. We cannot be certain such practice will ultimately be available and/or effective at mitigating all foreign currency risk to which we are exposed. If we are unsuccessful in detecting material exposures in a timely manner, our deployed hedging strategies are not effective, or there are no hedging strategies available for certain exposures that are prudent given the risks associated and the potential mitigation of the underlying exposure achieved, our operating results or financial position could be adversely affected in the future.

We are also monitoring developments related to Brexit, which could have significant implications for our business. Brexit could lead to economic and legal uncertainty, including significant volatility in global stock markets and currency exchange rates, and differing laws and regulations as the United Kingdom determines which European Union laws to replace or replicate. Any of these effects of Brexit, among others, could adversely affect our operations in the United Kingdom and our financial results.

~~Failure to adequately expand our direct sales force and successfully maintain our online sales experience will impede our growth.~~

We will need to continue to expand and optimize our sales infrastructure in order to grow our customer base and our business. We plan to continue to expand our direct sales force, both domestically and internationally. Identifying and recruiting qualified personnel and training them requires significant time, expense and attention. Our business may be adversely affected if our efforts to expand and train our direct sales force do not generate a corresponding increase in revenue. If we are unable to hire, develop and retain talented sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the intended benefits of this investment or increase our revenue.

We maintain our Box website to efficiently service our high volume, low dollar customer transactions and certain customer inquiries. Our goal is to continue to evolve this online experience so it effectively serves the increasing and changing needs of our growing customer base. If we are unable to maintain the effectiveness of our online solution to meet the future needs of our online customers, we could see reduced online sales volumes as well as a decrease in our sales efficiency, which could adversely affect our results of operations.

~~If we are unable to maintain and promote our brand, our business and operating results may be harmed.~~

~~Our growth depends in part on the success of our strategic relationships with third parties.~~

In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties, such as alliance partners, distributors, system integrators and developers. For example, we have entered into agreements with partners such as AT&T, IBM, Microsoft, Amazon and Google to market, resell, integrate with or endorse our services. Identifying partners and resellers, and negotiating and documenting relationships with them, requires significant time and resources. Also, we depend on our ecosystem of system integrators, partners and developers to create applications that will integrate with our platform or permit us to integrate with their product offerings. Our competitors may be effective in providing incentives to third parties to favor their products or services, or to prevent or reduce subscriptions to our services. In some cases, we also compete directly with our partners’ product offerings, and if these partners stop reselling or endorsing our services or impede our ability to integrate our services with their products, our business and operating results could be adversely affected. In addition, acquisitions of our partners by our competitors could result in a decrease in the number of current and potential customers, as our partners may no longer facilitate the adoption of our services by potential customers.

If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased customer usage of our services or increased revenue.

~~Furthermore, if our partners and resellers fail to perform as expected, our reputation may be harmed and our business and operating results could be adversely affected.~~

~~We depend on our ecosystem of system integrators, partners and developers to create applications that will integrate with our platform or to allow us to integrate with their products.~~

We depend on our ecosystem of system integrators, partners and developers to create applications that will integrate with our platform and to allow us to integrate with their products. This presents certain risks to our business, including:

~~Many of these risks are not within our control to prevent, and our brand may be damaged if these applications do not perform to our users’ satisfaction and that dissatisfaction is attributed to us.~~

We believe that our culture has been and will continue to be a key contributor to our success. We expect to continue to hire additional employees as we expand our business. If we do not continue to develop our company culture or maintain our core values as we grow and evolve both in the United States and internationally, we may be unable to foster the innovation, creativity and teamwork we believe we need to support our growth.

Our services contain open source software, and we license some of our software through open source projects, which may pose particular risks to our proprietary software, products, and services in a manner that could have a negative impact on our business.

We use open source software in our services and will use open source software in the future. In addition, we regularly contribute software source code to open source projects under open source licenses or release internal software projects under open source licenses, and anticipate doing so in the future. The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our services. Additionally, we may from time to time face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering the implicated services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source code may contain bugs or other defects and open source licensors generally do not provide warranties or controls on the functionality or origin of software. Additionally, because any software

source code we contribute to open source projects is publicly available, our ability to protect our intellectual property rights with respect to such software source code may be limited or lost entirely, and we ~~are unable to~~cannot prevent our competitors or others from using such contributed software source code. Any of these risks could be difficult to eliminate or manage and ~~if not addressed,~~ could have a negative effect on our business, financial condition and operating results.

~~Future acquisitions~~Risks Related to Our Financial Position and ~~investments could disrupt our business and harm our financial condition and operating results.~~

Our success will depend, in part, on our ability to expand our services and grow our business in response to changing technologies, customer demands, and competitive pressures. In some circumstances, we may choose to do so through the acquisition of complementary businesses, teams of employees, and technologies rather than through internal development. For example, the team from Wagon Analytics, a data analytics company, joined us in September 2016, and, in 2015, we acquired Verold, a cloud-based 3D model viewer and editor to make it easyNeed for businesses to create engaging and immersive content experiences for the web and mobile. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete or integrate identified acquisitions. The risks we face in connection with acquisitions include:

We may require additional capital to support our operations or the growth of our business, and we cannot be certain that this capital will be available on reasonable terms when required, or at all.

On occasion, we may need additional financing for a variety of reasons, including operating or growing our business, responding to ~~operate~~business opportunities, undertaking acquisitions, or ~~grow~~repaying our ~~business.~~convertible senior notes. Our ability to obtain additional financing, if and when required, will depend on investor and lender demand, our operating performance, the condition of the capital markets and other factors. We cannot guarantee that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our Class A common stock, and our existing stockholders may experience dilution. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the operation or growth of our business could be significantly impaired and our operating results may be harmed.

Financing agreements we are party to or may become party to may contain operating and financial covenants that restrict our business and financing activities.

Our ~~existing~~senior credit ~~agreement~~facility contains certain operating and financial restrictions and covenants that may restrict our and our subsidiaries’ ability to, among other things, incur indebtedness, grant liens on our assets, make loans or investments, consummate certain merger and consolidation transactions, dispose of assets, incur contractual obligations and commitments and enter into affiliate transactions, subject in each case to customary exceptions. We are also required to comply with a minimum liquidity covenant and a maximum leverage ratio. These restrictions and covenants, as well as those contained in any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in, expand or otherwise pursue our business activities and strategies. Our ability to comply with these covenants may be affected by events beyond our control, and breaches of these covenants could result in a default under the senior credit ~~agreement~~facility and any future financial agreements that we may enter into and under other arrangements containing cross-default provisions. If not waived, defaults could cause our outstanding indebtedness under our senior credit ~~agreement~~facility and any future financing agreements that we may enter into to become immediately due and payable, and permit our lenders to terminate their lending commitments and to foreclose upon any collateral securing such indebtedness.

~~Our business depends on the overall demand for cloud content management~~Risks Related to Financial, Accounting, Tax and collaboration and on the economic health of our current and prospective customers. The United States and other key international economies have experienced cyclical downturns from time to time that have resulted in a significant weakening of the economy, more limited availability of credit, a reduction in business confidence and activity, and other difficulties that may affect one or more of the industries to which we sell our services. Uncertainty about economic conditions in the United States, Europe and other key markets for our services could cause customers to delay or reduce their information technology spending. This could result in reductions in sales of our services, longer sales cycles, reductions in subscription duration and value, slower adoption of new technologies and increased price competition. Any of these events would likely have an adverse effect on our business, operating results and financial position. In addition, there can be no assurance that cloud content management and collaboration spending levels will increase following any recovery.

and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. The adoption of any laws or regulations that could adversely affect the growth, popularity or use of the internet, including laws or practices limiting internet neutrality, could decrease the demand for, or the usage of, our products and services, increase our cost of doing business, adversely affect our operating results, and require us to modify our services in order to comply with these changes. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally, or result in reductions in the demand for internet-based services such as ours.

In addition, the use of the internet and, in particular, the cloud as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease of use, accessibility, and quality of service. The performance of the internet and its acceptance as a business tool have been adversely affected by “viruses,” “worms”, “denial of service attacks” and similar malicious activity. The internet has also experienced a variety of outages, disruptions and other delays as a result of this malicious activity targeted at critical internet infrastructure. These service disruptions could diminish the overall attractiveness to existing and potential customers of services that depend on the internet and could cause demand for our services to suffer.

We employ third-party licensed software for use in or with our services, and the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which would adversely affect our business.

Our services incorporate certain third-party software obtained under licenses from other companies. We anticipate that we will continue to rely on such third-party software and development tools in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. In addition, integration of the software used in our services with new third-party software may require significant work and require substantial investment of our time and resources. Also, to the extent that our services depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our services, delay new services introductions, result in a failure of our services, and injure our reputation. Our use of additional or alternative third-party software would require us to enter into additional license agreements with third parties.Other Legal Matters

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act and the listing standards of the New York Stock Exchange (NYSE). We expect that compliance with these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant strain on our personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is properly recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. We are also continuing to improve our internal control over financial reporting. We have expended, and anticipate that we will continue to expend, significant resources in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, including increased complexity resulting from our international expansion. Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future. Additionally, to the extent that we acquire other businesses, the acquired company may not have a sufficiently robust system of internal controls and we may uncover new deficiencies. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal control over financial reporting that we are required to include in our periodic reports that we file with the SEC. Ineffective disclosure

controls and procedures, and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE.

Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results, and cause a decline in the market price of our Class A common stock.

~~Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.~~Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

WeGenerally accepted accounting principles in the United States are subject to interpretation by the ~~Foreign Corrupt Practices Act,~~FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the ~~FCPA,~~reporting of transactions completed before the ~~U.K. Bribery Act~~announcement of a change. In addition, were we to change our critical accounting estimates, including the timing of recognition of subscription revenue and other ~~anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions both domestic and abroad. In addition to~~revenue sources, our own sales force, we also leverage third parties to sell our products and services and conduct our business abroad. We and our third-party intermediaries may have direct or indirect interactions with officials and employeesresults of ~~government agencies or state-owned or affiliated entities and may~~operations could be ~~held liable for the corrupt~~significantly impacted. These or other ~~illegal activities of~~changes in accounting principles could adversely affect our financial results. Any difficulties in implementing these ~~third-party business partners and intermediaries,~~pronouncements could cause us to fail to meet our employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedure to address compliance with such laws, we cannot assure you that our employees and agents will not take actions in violation of our policies or applicable law, forfinancial reporting obligations, which ~~we may be ultimately held responsible. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws~~ could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from U.S. government contracts, all of which may have an adverse effect on our reputation, business, operating resultsregulatory discipline and ~~prospects.~~

~~Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.~~

As of January 31, 2017, we had U.S. federal net operating loss carryforwards of approximately $518.0 million, state net operating loss carryforwards of approximately $498.6 million, and foreign net operating loss carryforwards of approximately $164.8 million. Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended (Code), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative changeharm investors’ confidence in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We have in the past experienced an ownership change which has impacted our ability to fully realize the benefit of these net operating loss carryforwards. If we experience additional ownership changes as a result of future transactions in our stock, then we may be further limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn. Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, financial condition and operating results.us.

Tax laws or regulations could be enacted or changed and existing tax laws or regulations could be applied to us or to our customers in a manner that could increase the costs of our services and adversely impact our business.

The application of federal, state, local and international tax laws to services provided electronically is unclear and continuously evolving. Income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted or amended at any time, such as the Tax Cuts and Jobs Act in the United States, possibly with retroactive effect, and could be applied solely or disproportionately to services provided over the internet. These enactments or amendments could adversely affect our sales activity due to the inherent cost increase the taxes would represent and ultimately result in a negative impact on our operating results and cash flows.

In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted or applied adversely to us, possibly with retroactive effect, which could require us or our customers to pay additional tax amounts, as well as require us or our customers to pay fines or penalties, as well as interest for past amounts. If we are unsuccessful in collecting such taxes due from our customers, we could be held liable for such costs, thereby adversely impacting our operating results and cash flows.

We are subject to income, sales, use, value added and other taxes in the United States and other countries in which we conduct business, and such laws and rates vary by jurisdiction. Our income tax obligations are based in part on our corporate structure and intercompany arrangements, including the manner in which we acquire, develop, value, and use our intellectual property and the valuations of our intercompany transactions. Certain jurisdictions in which we do not collect sales, use, value added or other taxes on our sales may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future. Significant judgment is required in determining our worldwide provision for income taxes. These determinations are highly complex and require detailed analysis of the available information and applicable statutes and regulatory materials. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical tax practices, provisions and accruals. If we receive an adverse ruling as a result of an audit, or we unilaterally determine that we have misinterpreted provisions of the tax regulations to which we are subject, there could be a material effect on our tax provision, net loss or cash flows in the period or periods for which that determination is made. In addition, liabilities associated with taxes are often subject to an extended or indefinite statute of limitations period. Therefore, we may be subject to additional tax liability (including penalties and interest) for a particular year for extended periods of time.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of January 31, 2021, we had U.S. federal net operating loss carryforwards of approximately $697.1 million, state net operating loss carryforwards of approximately $561.7 million, and foreign net operating loss carryforwards of approximately $318.4 million. Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. If we experience ownership changes as a result of future transactions in our stock, then we may

~~Our reported~~be further limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn. Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, financial ~~results~~condition and operating results.

Certain of our services are subject to export controls, including the U.S. Department of Commerce’s Export Administration Regulations and various economic and trade sanction regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. The provision of our products and services must comply with these laws. The U.S. export control laws and U.S. economic sanctions laws include prohibitions on the sale or supply of certain products and services to U.S. embargoed or sanctioned countries, governments, persons and entities and also require authorization for the export of encryption items. In addition, various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our services or could limit our customers’ ability to implement our services in those countries.

Although we take precautions to prevent our services from being provided in violation of such laws, our solutions may have been in the past, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take. If we fail to comply with these laws, we and our employees could be subject to civil or criminal penalties, including the possible loss of export privileges, monetary penalties, and, in extreme cases, imprisonment of responsible employees for knowing and willful violations of these laws. We may also be adversely affected ~~by changes~~through penalties, reputational harm, loss of access to certain markets, or otherwise.

Changes in ~~accounting principles generally accepted~~tariffs, sanctions, international treaties, export/import laws and other trade restrictions or trade disputes may delay the introduction and sale of our services in international markets, prevent our customers with international operations from deploying our services or, in some cases, prevent the export or import of our services to certain countries, governments, persons or entities altogether. Any change in export or import regulations, economic sanctions or related laws, shift in the ~~United States.~~

~~Generally accepted accounting principles (GAAP)~~enforcement or scope of existing regulations, or change in the ~~United States~~countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our services, or in our decreased ability to export or sell our services to existing or potential customers with international operations. Any decrease in the use of our services or limitation on our ability to export or sell our services would likely adversely affect our business, financial condition and operating results.

Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.

We are subject to ~~interpretation by~~ the ~~Financial Accounting Standards Board (FASB)~~Foreign Corrupt Practices Act (FCPA), the ~~SEC~~U.K. Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various ~~bodies formed~~jurisdictions both domestic and abroad. In addition to ~~promulgate~~our own sales force, we also leverage third parties to sell our products and ~~interpret appropriate accounting principles. A change~~services and conduct our business abroad. We and our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedures to address compliance with such laws, we cannot assure you that our employees and agents will not take actions in ~~these principles~~violation of our policies or ~~interpretations~~applicable law, for which we may be ultimately held responsible. Any violation of the FCPA or other applicable anti-bribery, anti-corruption, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from U.S. government contracts, all of which may have ~~a significant~~an adverse effect on our ~~reported financial~~reputation, business, operating results and ~~could affect the reporting of transactions completed before the announcement of a change. For example, in May 2014, the FASB issued accounting standards update No. 2014-09 (Topic 606),~~ ~~Revenue from Contracts with Customers~~, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP and becomes effective for us beginning the first quarter of fiscal 2019. In addition, were we to change our critical accounting estimates, including the timing of recognition of subscription revenue and other revenue sources, our results of operations could be significantly impacted. These or other changes in accounting principles could adversely affect our financial results. ~~See Part I, Item 1. Financial Statements—Note 1 for information regarding the effect of new accounting pronouncements on our financial statements.~~ Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.prospects.

The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering, including our executive officers, employees and directors and their affiliates, which limits your ability to influence the outcome of important transactions, including a change in control.

Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share. Stockholders who held shares of our Class B common stock as of October 31, 2017, including our executive officers, employees and directors and their affiliates, collectively held approximately 59.2% of the voting power of our outstanding capital stock as of such date. Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively continue to control a majority of the combined voting power of our capital stock and therefore are able to control all matters submitted to our stockholders for approval so long as the shares of our Class B common stock represent at least 9.1% of all outstanding shares of our Class A common stock and Class B common stock. These holders of our Class B common stock may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company and might ultimately affect the market price of our Class A common stock.

Transfers by holders of our Class B common stock will generally result in those shares converting into shares of our Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning or charitable purposes. The conversion of shares of our Class B common stock into shares of our Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, Messrs. Levie, Levin and Smith retain a significant portion of their holdings of our Class B common stock for an extended period of time, they could control a significant portion of the voting power of our capital stock for the foreseeable future. As board members, Messrs. Levie, Levin and Smith each owe a fiduciary duty to our stockholders and must act in good faith and in a manner they reasonably believe to be in the best interests of our stockholders. As stockholders, Messrs. Levie, Levin (our former Chief Operating Officer) and Smith are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally.

Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions:

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding capital stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding Class A common stock not held by such stockholder.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock, and could also affect the price that some investors are willing to pay for our Class A common stock.

The market price of our Class A common stock has been and may continue to be volatile, and you could lose all or part of your investment.

The market price of our Class A common stock has been and may continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control and may not be related to our operating performance. ~~For example, from~~ ~~October 31, 2016~~ ~~through October 31, 2017, the closing price of our Class A common stock ranged from $13.70 per share to $21.95 per share.~~ In addition to the factors discussed in this “Risk Factors” section and elsewhere in this ~~Quarterly~~Annual Report on Form ~~10-Q,~~10-K, factors that could cause fluctuations in the market price of our Class A common stock include the following:

In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. ~~This~~Any future securities litigation ~~if instituted against us,~~ could result in substantial costs and a diversion of our management’s attention and resources.

Servicing our future debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to settle conversions of our convertible senior notes in cash, repay the convertible senior notes at maturity, or repurchase the convertible senior notes as required following a fundamental change.

In January 2021, we issued $345.0 million aggregate principal amount of convertible senior notes. Prior to October 15, 2025, the Notes are convertible at the option of the holders only under certain conditions or upon occurrence of certain events. We have made an irrevocable election to settle the principal of the Notes in cash. If holders of the Notes elect to convert their Notes, we will be required to make cash payments in respect of the Notes being converted. Holders of the Notes also have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest. If the Notes have not previously been converted or repurchased, we will be required to repay the Notes in cash at maturity.

Our ability to make required cash payments in connection with conversions of the Notes, repurchase the Notes in the event of a fundamental change, or to repay or refinance the Notes at maturity will depend on market conditions and our past and expected future performance, which is subject to economic, financial, competitive, and other factors beyond our control. We also may not use the cash proceeds we raised through the issuance of the Notes in an optimally productive and profitable manner. Since inception, our business has generated net losses, and we may continue to incur significant losses. As a result, we may not have enough available cash or be able to obtain financing, or financing at acceptable terms, at the time we are required to repurchase or repay the Notes or pay cash with respect to Notes being converted.

In addition, our ability to repurchase or pay cash upon conversion or at maturity of the Notes may be limited by law or regulatory authority. Our failure to repurchase Notes following a fundamental change or to pay cash upon conversion or at maturity of the Notes as required by the indenture would constitute a default under such indenture. A default under the indenture or the fundamental change itself could also lead to a default under our senior credit facility, our other outstanding indebtedness, or agreements governing our future indebtedness and could have a material adverse effect on our business, results of operations, and financial condition. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or to pay cash upon conversion or at maturity of the Notes.

The accounting method for the Notes could adversely affect our financial condition and operating results.

In August 2020, the FASB published an Accounting Standards Update, or ASU 2020-06, to reduce the number of accounting models for convertible debt instruments. We adopted ASU 2020-06, effective February 1, 2021, utilizing the modified retrospective method. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, the Notes will be accounted for as a single liability measured at amortized cost. Further, ASU 2020-06 eliminates the use of the treasury stock method for convertible instruments that can be settled in whole or in part with equity, and instead requires application of the “if-converted” method. Under that method, diluted earnings per share is generally calculated assuming that all the Notes were converted solely into shares of Class A common stock at the beginning of the reporting period, unless the result would be antidilutive. The application of the if-converted method may reduce our reported diluted earnings per share. However, effective February 5, 2021, we have made an irrevocable election to settle the principal portion of the Notes only in cash. Accordingly, effective from that date forward, the earnings per shares results will only be impacted by the conversion premium.

Furthermore, if any of the conditions to the convertibility of the Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than a long-term, liability. This reclassification could be required even if no noteholders convert their Notes and could materially reduce our reported working capital.

In connection with the issuance of the Notes, we entered into capped call transactions with various counterparties. The capped call transactions cover, subject to customary adjustments, the number of shares of our Class A common stock initially underlying the Notes. The capped call transactions are expected generally to reduce or offset the potential dilution to our Class A common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.

From time to time, the counterparties to the capped call transactions or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes. This activity could also cause or prevent an increase or a decrease in the market price of our Class A common stock or the Notes.

We are subject to counterparty risk with respect to the capped call transactions.

The counterparties to the capped call transactions that we entered into are financial institutions, and we will be subject to the risk that one or more of the counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the capped call transactions. Our exposure to the credit risk of the counterparties will not be secured by any collateral.

Global economic conditions have in the past resulted in the actual or perceived failure or financial difficulties of many financial institutions. If a counterparty to one or more capped call transactions becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under such transaction. Our exposure will depend on many factors but, generally, our exposure will increase if the market price or the volatility of our Class A common stock increases. In addition, upon a default or other failure to perform, or a termination of obligations, by a counterparty, the counterparty may fail to deliver the consideration required to be delivered to us under the capped call transactions and we may experience more dilution than we currently anticipate with respect to our Class A common stock. We can provide no assurances as to the financial stability or viability of the counterparties.

Our business could be negatively affected as a result of actions of activist shareholders.

We value constructive input from investors and regularly engage in dialogue with our shareholders regarding strategy and performance. Our board of directors and management team are committed to acting in the best interests of all of our shareholders. There is no assurance that the actions taken by our board of directors and management in seeking to maintain constructive engagement with certain shareholders will be successful.

The company recently received a notice from Starboard Value and Opportunity Master Fund Ltd. (“Starboard”) of its intention to nominate four director candidates for election to our board of directors at our 2021 annual meeting of stockholders. Starboard has also made public statements critical of our board of directors, management and strategic partnerships. Responding to these actions by Starboard and potential actions by other activist shareholders could be costly and time-consuming, disrupt our operations and divert the attention of management, our board of directors and our employees. A contested election with respect to the company's directors could also require us to incur substantial legal, public relations and other advisory fees and proxy solicitation expenses. Further, we may choose to initiate, or may become subject to, litigation as a result of proposals by activist shareholders or proxy contests or matters relating thereto, which would serve as a further distraction to our board of directors and management and could require us to incur significant additional costs.

Additionally, perceived uncertainties as to our future direction as a result of shareholder activism or changes to the composition of our board of directors may lead to the perception of a change in the direction of our business or other instability, which may be exploited by our competitors and/or other activist shareholders and cause concern to our current or potential customers, employees, investors, strategic partners and other constituencies, which could result in lost sales and the loss of business opportunities and make it more difficult to attract and retain qualified personnel and business partners. If customers choose to delay, defer or reduce transactions with us or do business with our competitors instead of us, then our business, financial condition and operating results would be adversely affected. In addition, our share price could experience periods of increased volatility as a result of shareholder activism.

The holders of Series A Convertible Preferred Stock will be entitled to vote on an as-converted to Class A common stock basis and have rights to approve certain actions. Additionally, KKR may exercise influence over us through their ability to designate a member of our board of directors.

The holders of our Series A Convertible Preferred Stock are generally entitled to vote with the holders of our Class A common stock on all matters submitted for a vote of holders of shares of Class A common stock (voting together with the holders of shares of Class A common stock as one class) on an as-converted basis.

Pursuant to the Investment Agreement, KKR has the right to designate one candidate for nomination for election to our board of directors for so long as KKR and its permitted transferees maintain minimum aggregate holdings of our stock as described in further detail in the Investment Agreement. Notwithstanding the fact that all directors will be subject to fiduciary duties to us and to applicable law, the interests of the director designated by KKR may differ from the interests of our security holders as a whole or of our other directors.

Additionally, the consent of the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock is required in order for us to take certain actions, including issuances of securities that are senior to, or equal in priority with, the Series A Convertible Preferred Stock, and payments of special dividends in excess of an agreed upon amount.

As a result, the holders of Series A Convertible Preferred Stock may in the future have the ability to influence the outcome of certain matters affecting our governance and capitalization.

The issuance of shares of our Series A Convertible Preferred Stock reduces the relative voting power of holders of our Class A common stock, and the conversion of those shares into shares of our Class A common stock would dilute the ownership of Class A common stockholders and may adversely affect the market price of our Class A common stock.

The holders of our Series A Convertible Preferred Stock are entitled to vote, on an as-converted basis, together with holders of our Class A common stock on all matters submitted to a vote of the holders of our Class A common stock, which reduces the relative voting power of the holders of our Class A common stock. In addition, the conversion of our Series A Convertible Preferred Stock into Class A common stock would dilute the ownership interest of existing holders of our Class A common stock, and any conversion of the Series A Convertible Preferred Stock would increase the number of shares of our Class A common stock available for public trading, and which adversely affect prevailing market prices of our Class A common stock.

Our Series A Convertible Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to the rights of, our Class A common stockholders, which could adversely affect our liquidity and financial condition.

The holders of our Series A Convertible Preferred Stock have the right to receive a payment on account of the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of our business before any payment may be made to holders of any other class or series of capital stock. In addition, dividends on the Series A Convertible Preferred Stock accrue and are cumulative at the rate of 3.0% per annum, compounding quarterly, and paid-in-kind or paid in cash, at our election.

The holders of our Series A Convertible Preferred Stock also have certain redemption rights, including the right to require us to repurchase all or any portion of the Series A Convertible Preferred Stock at any time following the seventh anniversary of the original issuance date, at 100% of the liquidation preference thereof plus all accrued but unpaid dividends. In addition, upon prior written notice of certain change of control events, the shares of the Series A Preferred Stock will automatically be redeemed by us for a repurchase price equal to the greater of (i) the value of the shares of Series A Preferred Stock as converted into Class A common stock at the then-current conversion price and (ii) an amount in cash equal to 100% of the then-current liquidation preference thereof plus all accrued but unpaid dividends. In the case of clause (ii) above, we will also be required to pay the holders of our Series A Preferred Stock a “make-whole” premium consisting of dividends that would have otherwise accrued from the effective date of such change of control through the fifth anniversary of the original issuance date.

These dividend and share repurchase obligations could impact our liquidity and reduce the amount of cash flows available for working capital, capital expenditures, growth opportunities, acquisitions, and other general corporate purposes. Our obligations to the holders of our Series A Convertible Preferred Stock could also limit our ability to obtain additional financing, which could have an adverse effect on our financial condition. The preferential rights could also result in divergent interests between the holders of our Series A Convertible Preferred Stock and holders of our Class A common stock.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, our market or our competitors, or if they adversely change their recommendations regarding our Class A common stock, the market price of our Class A common stock and trading volume could decline.

The trading market for our Class A common stock is influenced, to some extent, by the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. If any of the analysts who cover us adversely change their recommendations regarding our Class A common stock or provide more favorable recommendations about our competitors, the market price of our Class A common stock would likely decline. If any of the analysts who ~~may~~ cover us ~~were to~~ cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price of our Class A common stock or trading volume to decline.

We do not anticipate declaring any cash dividends to holders of our Class A common stock in the foreseeable future. Consequently, investors may need to rely on sales of our Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase shares of our Class A common ~~stock~~.stock.

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per share		BOX		New York Stock Exchange

	PART I – FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (Unaudited)
	~~Condensed Consolidated Balance Sheets as of October 31, 2017 and January 31, 2017~~	5
	Condensed Consolidated Balance Sheets as of April 30, 2021 and January 31, 2021	5
	Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~October 31, 2017~~April 30, 2021 and ~~2016~~2020	6
	Condensed Consolidated Statements of Comprehensive Loss for the Three ~~and Nine~~ Months Ended ~~October 31, 2017~~April 30, 2021 and ~~2016~~ 2020	7
	Condensed Consolidated Statements of ~~Cash Flows~~Stockholders' Equity for the Three ~~and Nine~~ Months Ended ~~October 31, 2017~~April 30, 2021 and ~~2016~~2020	8
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2021 and 2020	9
	Notes to Condensed Consolidated Financial Statements	910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2226
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3738
Item 4.	Controls and Procedures	3839
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	3940
Item 1A.	Risk Factors	3940
Item 6.	Exhibits	5762
	Signatures	5965

	October 31,			January 31,			April 30,			January 31,
	2017			2017			2021			2021
Servers	$	160,067		$	143,219
Servers and related equipment							$	354,999		$	352,224
Leasehold improvements		64,507			64,379			78,289			80,558
Computer hardware and software		11,996			11,373
Computer hardware								21,689			25,810
Furniture and fixtures		13,073			12,824			13,998			14,157
Construction in progress		13,234			5,882			9,955			11,422
Total property and equipment		262,877			237,677			478,930			484,171
Less: accumulated depreciation		(144,599	)		(120,501	)		(332,830	)		(324,023	)
Total property and equipment, net	$	118,278		$	117,176		$	146,100		$	160,148

	April 30,		January 31,
	2021		2021
Acquired intangible assets, net of amortization	$	19,781	$	—
Internally developed software costs, net of amortization (1) (2)		16,007		16,071
On-premises software, net of amortization (2) (3)		8,290		8,749
Other assets, noncurrent		5,390		5,247
Deposits, noncurrent		2,481		2,707
Other long-term assets	$	51,949	$	32,774

	Three Months Ended April 30, 2020
	Class A Common Stock				Additional Paid-In		Treasury			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Stock			Loss			Deficit			Equity
Balance as of January 31, 2020		150,611	$	15	$	1,302,072	$	(1,177	)	$	(307	)	$	(1,278,246	)	$	22,357
Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes		2,835		—		2,607		—			—			—			2,607
Stock-based compensation related to stock awards		—		—		42,766		—			—			—			42,766
Other comprehensive loss		—		—		—		—			(1,332	)		—			(1,332	)
Net loss		—		—		—		—			—			(25,550	)		(25,550	)
Balance as of April 30, 2020		153,446	$	15	$	1,347,445	$	(1,177	)	$	(1,639	)	$	(1,303,796	)	$	40,848

	April 30, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	324,926	$	—	$	—	$	324,926

	January 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	256,861	$	—	$	—	$	256,861

Years ending January 31:	Operating Leases (1)			Finance Leases
Remainder of 2022	$	41,742		$	38,898
2023		49,593			42,041
2024		48,126			19,584
2025		32,476			1,573
2026		28,391			—
Thereafter		63,616			—
Total lease payments	$	263,944		$	102,096
Less: imputed interest	$	(37,715	)	$	(5,109	)
Present value of total lease liabilities	$	226,229		$	96,987

Balance as of January 31, 2021	$	18,740
Goodwill acquired - SignRequest		43,386
Goodwill acquired - Cloud FastPath		13,230
Foreign currency translation		241
Balance as of April 30, 2021	$	75,597

	Weighted Average Useful Life (1)			Gross Value		Accumulated Amortization			Net Carrying Value
October 31, 2017
Developed technology		2.5	years	$	14,273	$	(14,273	)	$	—
Trade name and other		6.9	years		1,201		(1,138	)		63
Intangibles, net				$	15,474	$	(15,411	)	$	63

January 31, 2017
Developed technology		2.5	years	$	14,273	$	(13,908	)	$	365
Trade name and other		6.9	years		1,201		(1,023	)		178
Intangibles, net				$	15,474	$	(14,931	)	$	543

	Weighted-Average Remaining Useful Life (Years)		Gross Value		Accumulated Amortization			Net Carrying Value
Balance as of January 31, 2021			$	—	$	—		$	—
Developed technology		4.22		20,682		(901	)		19,781
Balance as of April 30, 2021			$	20,682	$	(901	)	$	19,781

Fiscal years ending January 31:
Remainder of 2022	$	3,860
2023		4,912
2024		4,912
2025		3,064
2026		2,976
Thereafter		57
Total	$	19,781

Years ending January 31:	Capital Leases			Operating Leases, net of Sublease Income
Remainder of 2018	$	5,082		$	6,593
2019		17,923		$	28,061
2020		12,415		$	32,453
2021		8,932		$	33,447
2022		1,947		$	30,793
Thereafter		—		$	161,669
Total minimum lease payments	$	46,299		$	293,016
Less: amount representing interest		(1,561	)
Present value of minimum lease payments	$	44,738

Years ending January 31:
Remainder of 2018	$	5,046
2019		25,164
2020		22,708
	$	52,918

Fiscal years ending January 31:
Remainder of 2022	$	7,363
2023		38,104
2024		4,860
2025		434
2026		211,234
Thereafter		—
	$	261,995

	Shares Subject to Options Outstanding					Weighted-Average
				Weighted-		Remaining
				Average Exercise		Contractual Life		Aggregate
	Shares			Price		(Years)		Intrinsic Value
								(in thousands)
Balance as of January 31, 2017		12,318,800		$	7.44		6.42	$	119,606
Options granted		1,533,056			17.46
Option exercised		(1,561,172	)		6.36
Options forfeited/cancelled		(852,990	)		15.05
Balance as of October 31, 2017		11,437,694		$	8.37		5.99	$	155,364
Vested and expected to vest as of October 31, 2017		11,330,158		$	8.30		5.97	$	154,675
Exercisable as of October 31, 2017		8,939,286		$	6.36		5.30	$	139,342

	Number of			Weighted-
	Restricted			Average
	Stock Units			Grant Date
	Outstanding			Fair Value
Unvested balance - January 31, 2017		11,822,316		$	14.67
Granted		6,820,260			17.74
Vested, net of shares withheld for employee payroll taxes		(2,338,184	)		14.51
Forfeited/cancelled		(1,342,417	)		15.12
Unvested balance - October 31, 2017		14,961,975		$	16.22

			Payments Due by Period (in thousands)
			Less Than 1						More Than
	Total		Year		1-3 Years		3-5 Years		5 Years
Debt(1)(2)	$	41,246	$	1,147	$	40,099	$	—	$	—
Operating lease obligations, net of sublease income amounts (3)		293,016		27,150		65,197		56,931		143,738
Capital leases(4)		46,299		18,973		23,746		3,580		—
Purchase obligations(5)		52,918		20,631		32,287		—		—
Total	$	433,479	$	67,901	$	161,329	$	60,511	$	143,738

Exhibit		Incorporated by Reference
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date

3.1	Certificate of Designations Designating the Series A Convertible Preferred Stock	8-K	001-36805	3.1	May 18, 2021

10.1	Investment Agreement, dated April 7, 2021, by and among Box, Inc., Powell Investors III L.P., KKR-Milton Credit Holdings L.P., KKR-NYC Credit C L.P., Tailored Opportunistic Credit Fund, and CPS Holdings (US) L.P.	8-K	001-36805	10.1	April 8, 2021

10.2	Registration Rights Agreement, dated May 12, 2021, by and among the Company and ALOHA European Credit Fund, L.P., Centerbridge Credit Partners Master, L.P., Centerbridge Special Credit Partners III-Flex, L.P., CPS Holdings (US) L.P., Future Fund Board of Guardians, Illinois State Board of Investment, Indiana Public Retirement System, Kennedy Lewis Capital Partners Master Fund II L.P., KKR-Milton Credit Holdings L.P., KKR-NYC Credit C L.P., OHA AD Customized Credit Fund (International), L.P., OHA Artesian Customized Credit Fund I, L.P., OHA BCSS SSD II, L.P., OHA Black Bear Fund, L.P., OHA Centre Street Partnership, L.P., OHA Credit Solutions Master Fund II SPV, L.P., OHA Delaware Customized Credit Fund Holdings, L.P., OHA Delaware Customized Credit Fund-F, L.P., OHA Dynamic Credit ORCA Fund, L.P., OHA Enhanced Credit Strategies Master Fund, L.P., OHA KC Customized Credit Master Fund, L.P., OHA MPS SSD II, L.P., OHA SA Customized Credit Fund, L.P., OHA Strategic Credit Master Fund II, L.P., OHA Structured Products Master Fund D, L.P., OHA Tactical Investment Master Fund, L.P., OHAT Credit Fund, L.P., Powell Investors III L.P., Tailored Opportunistic Credit Fund, The Coca-Cola Company Master Retirement Trust	8-K	001-36805	10.1	May 18, 2021

10.3	Joinder Agreement, dated May 12, 2021, by and among the Company, Powell Investors III L.P., a Cayman Islands exempted limited partnership, KKR-Milton Credit Holdings L.P., a Cayman Islands exempted limited partnership, KKR-NYC Credit C L.P., a Delaware limited partnership, Tailored Opportunistic Credit Fund, an Australian trust and CPS Holdings (US) L.P., a Delaware limited partnership, and ALOHA European Credit Fund, L.P., Centerbridge Credit Partners Master, L.P., Centerbridge Special Credit Partners III-Flex, L.P., Future Fund Board of Guardians, Illinois State Board of Investment, Indiana Public Retirement System, Kennedy Lewis Capital Partners Master Fund II L.P., OHA AD Customized Credit Fund (International), L.P., OHA Artesian Customized Credit Fund I, L.P., OHA BCSS SSD II, L.P., OHA Black Bear Fund, L.P., OHA Centre Street Partnership, L.P., OHA Credit Solutions Master Fund II SPV, L.P., OHA Delaware Customized Credit Fund Holdings, L.P., OHA Delaware Customized Credit Fund-F, L.P., OHA Dynamic Credit ORCA Fund, L.P., OHA Enhanced Credit Strategies Master Fund, L.P., OHA KC Customized Credit Master Fund, L.P., OHA MPS SSD II, L.P., OHA SA Customized Credit Fund, L.P., OHA Strategic Credit Master Fund II, L.P., OHA Structured Products Master Fund D, L.P., OHA Tactical Investment Master Fund, L.P., OHAT Credit Fund, L.P., The Coca-Cola Company Master Retirement Trust	8-K	001-36805	10.2	May 18, 2021

10.4	Waiver of Investment Agreement, dated May 13, 2021, by the Company	8-K	001-36805	10.3	May 18, 2021

10.5	Wells Fargo Bank National Association Limited Consent under Credit Agreement, dated April 7, 2021

10.6☐	Box, Inc. Outside Director Compensation Policy, amended and restated on May 1, 2021

BOX, INC.

By:		/s/ Aaron Levie
		Aaron Levie
	~~Chairman and~~	Chief Executive Officer
		(Principal Executive Officer)

	By:		/s/ Dylan Smith
			Dylan Smith
			Chief Financial Officer
			(Principal Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ ~~(Do not check if a small reporting company)~~

Small reporting company

Emerging growth company