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Box CEO Aaron Levie: Expect More ‘Seasonality’ to Our Sales

June 2, 2016, 12:16 AM UTC
Box Inc Co-Founder and CEO Levie and Co-Founder and CFO Smith celebrate their company's IPO on the floor of the New York Stock Exchange
Online data storage provider Box Inc Co-Founder and CEO Aaron Levie (C) and Co-Founder and CFO Dylan Smith (2nd R) celebrate their company's IPO on the floor of the New York Stock Exchange January 23, 2015. Box Inc's shares rose as much as 77 percent in their debut on Friday as investors shrugged off concerns about the company's ability to turn profitable in a highly competitive market. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS SCIENCE TECHNOLOGY) - RTR4MO2J
Brendan McDermid/Reuters

Box signed up more than 5,000 paying customers during its latest quarter, including new or expanded contracts with Airbnb, Brooks Brothers, and Whirlpool. That was more than in any other quarter, boosting the company’s total customer count to more than 62,000 organizations.

But the cloud software company closed fewer big, seven-figure contracts in the first fiscal quarter of 2017, ended April 30, than the same period a year ago. That reality reflects a new seasonality to its sales cycle that will push a growing number of bigger deals into the “back-end” quarters of its fiscal year, which runs from February through January.

In other words, the ebb and flow of Box’s big contracts will more closely resemble that of a traditional business software company. Box is hiring accordingly, prioritizing sales representatives who can manage longer sales cycles. Box doesn’t break out its sales headcount numbers.

“Q1 is about building pipeline, and this is where our sales time and attention must be spent,” Box (BOX) CEO Aaron Levie told Fortune, referencing a “record” number of transactions poised to close in the second quarter and beyond.

Box specializes in cloud storage services that let companies store and share documents online. One of its closest partners is IBM (IBM), and the relationship has loomed large on Box’s past few earnings calls with analysts.

Levie said some of the company’s largest deals and customer wins are coming through the IBM alliance. Although the partnership is largely technical, involving joint development projects, IBM is also authorized to sell Box’s services. More are expected in the current quarter. “There is a cadence you create,” he said.

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For the current quarter, Box anticipates revenue of $94 million to $95 million, compared with the $90.2 million it just reported. Its guidance for the full fiscal year calls for revenue of $391 million to $395 million.

Box’s latest quarterly results included a one-time charge of $3.8 million related to the previously undisclosed settlement of a lawsuit brought by OpenText, a Canadian software company that sued Box for patent infringement in mid-2013. The litigation was listed as a risk factor in Box’s IPO papers from January 2015. Levie wouldn’t comment on the details, other than to defend Box’s intellectual property.

By the way, stay tuned for another executive to join Box’s C-suite—a new chief marketing officer—within the next few weeks. Levie said the company is almost ready to name a replacement for Whitney Bouck, the former EMC Documentum executive who left her Box post in mid-December to become COO of electronic-signature software company HelloSign.