Box CEO Aaron Levie: Artificial intelligence to revolutionize cloud computing – MarketWatch

Box Inc. is accomplishing its current goal of generating cash from its cloud-software business, and Chief Executive Aaron Levie has plans for more changes down the road, including an artificial-intelligence effort.

After reporting fiscal first-quarter earnings Wednesday afternoon, Levie chatted with MarketWatch for about 10 minutes about the path Box BOX, +9.52% has traveled since its 2015 initial public offering, where the enterprise online-storage company goes from here, and how his sneaker game has changed. The interview has been edited for length and clarity.

MarketWatch: Since the IPO, Box has been able to maintain solid revenue growth, but the last two quarters you have generated positive free cash flow for the first time, which you had targeted. Is that the biggest change for the company financially since going public, and what else has been important so far?

Aaron Levie: I think thats a very key point. I would say that, overall, weve been building a cloud content-management platform for a little over a decade, and whats starting to happen is larger and larger enterprises are adopting Box as their core system of record for securing and managing and governing and organizing their corporate information. Were seeing customers basically do larger transactions with us, buying more seats of the service for their user base, and add on additional products like our Box governance capabilities and some of our advanced security technology.

So basically whats happening, were continuing to move more and more upmarket, were getting more efficient over time with our sales force, and were growing a larger base of customers, which obviously produces a larger recurring revenue base, which then drives more efficiency from an operational standpoint, and thus generating free cash flow. So I think whats happening is as you see deal sizes go up and transactions go up and our own internal productivity improve, youre seeing the economics of the business really kind of start to take hold. This is obviously what we had always been building into the business model, but it wasnt always as clear, like when we first went public, that this is what it was going to turn into. I think thats what is starting to happen within the numbers.

MW: A question provided by a person who tweets about Box even more than you, Alex Wilhelm from CrunchBase: How does positive free cash flow impact the business and how do you balance revenue growth with the focus on cash generation?

AL: It hasnt been any kind of significant change as much as just our own evolution as a company. Were now around 1,600 employees, we operate around the world, we have 74,000 customers, so theres a whole bunch of things that as we scale up as an organization not the least of which is going public where we have just become more operationally rigorous. So as were scaling up, it makes sense to ensure we have a sustainable business model that doesnt require outside capital, which is why the cash flow elements to the business are so incredibly important. But it hasnt restricted our growth, were just making sure that we execute as effectively as possible and that were driving that growth in as efficient of a way as possible. I think thats what youre starting to see show up in the business. I dont think were trading off that much from a top-line standpoint, but ultimately were building a much healthier organization and a much healthier business.

MW: Whats the next milestone beyond cash generation? Is actual GAAP profitability ahead? Youve discussed $1 billion in annual revenues, is there a target year for that? Are there other serious financial goals?

AL: Yeah, we are on a path to $1 billion in revenue over the next few years, thats probably the most significant next major medium-term milestone, so obviously this years financial metrics are going to be incredibly important to ensuring were on that path. We guided to more than $500 million in revenue this year, so the $1 billion mark is the next significant material milestone that we kind of have a flag in the ground on.

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MW: When you went public, you talked a lot about how Box was capitalizing on the transition to cloud and mobile, and said that kind of major transformative change in tech happens every 10-15 years. Do you see another of those changes on the way?

AL: Yeah, I think the most significant technology were seeing is artificial intelligence. We think that the impact of AI within the enterprise is going to be enormous and were quite excited about some upcoming announcements we have that will at least point to where Box will be going in the space. I obviously cant reveal too much, but needless to say, we think that AI is going to be substantially powerful for the future of work, and we want to make sure were embedding intelligent experiences into everything we do and everything we build at Box.

MW: Any big changes in your sneaker game since the IPO? You using your cash to move up to some limited edition Yeezys or anything?

AL: No, getting pretty boring on the sneaker front, unfortunately. Im becoming a little more post-IPO in my sneaker choices. Still sneakers, but less, lets say, colorful.

Box shares have gained 35% in 2017, while the S&P 500 SPX, +0.76% has gained 8%.

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Box CEO Aaron Levie: Artificial intelligence to revolutionize cloud computing - MarketWatch