Box, Inc. BOX reported loss of 44 cents per share in third-quarter fiscal 2016, greater than the Zacks Consensus Estimate of a loss of 40 cents. Adjusted loss per share excludes one-time items but includes stock-based compensation expense.
Nevertheless, share price moved up more than 3% driven by strong growth in billings and solid guidance.
Results in Detail
Box’s revenues of $78.7 million increased 37.9% year over year. Reported revenues exceeded management’s guided range of $76–$77 million as well as the Zacks Consensus Estimate of $76 million. Billings were $89.4 million, a 37% jump year over year. The company added about 4,000 customers.
Reported gross margin was 70.0%, down 810 basis points from 78.1% a year ago.
Box incurred operating expenses of $110.1 million, up 23.3% year over year from $89.3 million. As a percentage of sales, general & administrative as well as sales & marketing expenses decreased year over year, while research & development expenses increased. As a result, reported operating loss margin was 70.0% as against 78.4% a year ago.
On a GAAP basis, Box incurred net loss of $55.1 million (or loss per share of 45 cents) compared with loss of $51.2 million (or $3.40 a share) in third-quarter fiscal 2015.
On a pro-forma basis, Box generated net loss of $53.6 million compared with $43.3 million in the year-ago quarter. Pro-forma loss per share came in at 44 cents as against $2.88 a year ago.
Coming to the balance sheet, Box ended the quarter with cash and investment balance of $189.7 million as against $242.2 million at the end of the previous quarter. Accounts receivables were $64.4 million compared with $54.0 million in the prior quarter. Deferred revenues were $128.6 million as against $118.3 million in the second quarter.
In the third quarter, cash generated from operations was $17.3 million and capital expenditure was $20.0 million.
Guidance
For the fourth quarter, management expects revenues in the range of $81 million to $82 million. Analysts polled by Zacks expect revenues to be $80 million, below the guided range at the mid-point. Non-GAAP operating margin is expected in the range of (43%) to (44%), while share count is likely to be roughly 123 million.
Also, for fiscal 2016, management expects revenues in the range of $299–$300 million, up from $295–$297 million. Non-GAAP operating margin is expected to be (46%), better than (47%) to (49%) range expected previously, while share count is expected to be about 121 million.
Our Recommendation
Box is a cloud-storage company which went public earlier this year. The company has been continuously investing in security, compliance and administrative technology, and plans to hire more sales personnel. These investments and partnerships with leading enterprises like Amgen, Westfield Corporation, Sally Beauty Holdings, Grey Global Group, Southwest Airlines, Nest Labs, among others, will enable the company to capitalize on the increasing adoption of cloud computing technologies across enterprises and the need for secure collaboration.
However, continuous investments in research and development could dent margins as well as profits, going ahead.
Currently, Box has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are OPOWER, Inc. OPWR, Cvent, Inc. CVT and Paylocity Holding Corporation PCTY. All these stocks sport a Zacks Rank #1 (Strong Buy).
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