Box Inc. delivered strong earnings today in its first financial results since hedge fund investors failed in a bid to oust co-founder and Chief Executive Aaron Levie.

The company reported third-quarter earnings before certain costs such as stock compensation of 22 cents per share on total sales of $224 million, up 14% from a year ago. That was better than expected, as Wall Street had been looking for adjusted earnings of 21 cents per share on $218.6 million in revenue.

“Our strong third-quarter results show the continued momentum of our long-term growth strategy, as more customers are turning to the Box Content Cloud to deliver secure content management and collaboration built for the new way of working,” said Levie (pictured).

The cloud content management company had more good numbers, reporting a net retention rate of 109%, up from 106% in the previous quarter. It’s an important growth metric that shows the percentage of recurring revenue Box has retained from existing customers over a given time period.

Box also reported remaining performance obligations $948.1 million, up 25% year-over-year, while its billings came to $231.5 million, up 25% from a year ago. Finally, the company’s free cash flow came to $31.2 million, up from a free cash flow of just $26.2 million one year ago.

The results were encouraging if not stellar, and may give Levie more breathing room as he tries to take the company forward after winning a crucial shareholder vote in September. Box has been embroiled in a bitter dispute with activist investors at the hedge fund Starboard Value LP for the best part of a year.

Starboard, which owns an 8.4% stake in Box and believes the company isn’t living up to its potential, had pushed for Levie’s removal from its board of directors after failing in a bid to force through a number of changes it wanted to be made. Starboard nominated four directors to Box’s 10-person board, and argued that Box hadn’t been aggressive enough in capitalizing on enterprise trends driven by the coronavirus pandemic.

In the September vote, Levie and fellow directors Peter Leav and Dana Evan were re-elected onto the board by a comfortable margin. Despite losing, Starboard Managing Director Pete Feld promised he isn’t going away.

“As we have repeatedly stated, our only goal has been to help Box perform better and adopt best-in-class practices across operating performance, financial results, governance and compensation in order to create long-term value for the benefit of all stockholders,” Feld said at the time. “We will continue to monitor progress at Box, and we hope to see the company embrace the changes catalyzed by our involvement and create long-term value.”

Levie knows the pressure is on, hence the company has been working overtime of late to ramp up its enterprise offerings. During the quarter, Box held its annual user conference BoxWorks 2021, where it unveiled new ransomware protection features alongside various new productivity enhancements to its platform.

“In addition to our solid financial and customer metrics, we made meaningful product announcements in the third quarter, including the rollout of Box Sign globally, new malware deep scan capability in Box Shield to combat ransomware, and deeper integrations with Microsoft Office and Teams, Salesforce, Slack and Zoom,” Levie said today.

Analyst Holger Mueller of Constellation Research Inc. said that while Box’s results look impressive at first glance, its revenue growth was outpaced by that of its costs. On top of that, the company also has to pay around a third of its revenue as dividends. Still, Mueller said he’s optimistic Levie will be able to dig Box out of its hole in the long run.

“The product innovation has been sparked though, and if Box can maintain this growth it will eventually turn the tide from a loss to a profit,” he said.

For the fourth quarter, Box offered an encouraging forecast with expected revenue of $227 million to $229 million, well ahead of Wall Street’s forecast of $222.9 million.

Photo: The Demo Conference/Flickr