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Box Inc. (BOX) Q1 Loss Lower than Expected, Stock Tumbles

Box, Inc.BOX reported loss of 31 cents per share in first-quarter fiscal 2017, lower than the Zacks Consensus Estimate of a loss of 39 cents. Adjusted loss per share excludes one-time items but includes stock-based compensation expense.

Nevertheless, share price plunged more than 11% due to lower-than-expected growth in billings, indicating a slowdown in growth.

Results in Detail

Box's revenues of $90.0 million increased 37.4% year over year. Reported revenues exceeded management's guided range of $88-$89 million as well as the Zacks Consensus Estimate of $89 million.

Billings came at $75.9 million, reflecting a 8% jump year over year. However, analysts expected billings to increase 18.9% to $83 million, according to Credit Suisse. During the quarter, the company added more than 5,000 new customers.

Reported gross margin was 69.1%, down 480 basis points from 73.9% a year ago.

Box incurred operating expenses of $100.9 million, 6.1% higher year over year from $95.1 million. As a percentage of sales, general & administrative, sales & marketing expenses as well as research & development expenses decreased year over year. As a result, the company reported operating loss margin of 42.8% compared with the operating loss margin of 71.1% a year ago.

On a GAAP basis, Box incurred net loss of $38.6 million (or loss per share of 31 cents) compared with loss of $47.3 million (or loss of 40 cents a share) in first-quarter fiscal 2016.

On a pro-forma basis, Box generated net loss of $38.8 million compared with $46.0 million net loss in the year-ago quarter. Pro-forma loss per share came in at 31 cents against loss of 39 cents a year ago.

Coming to the balance sheet, Box ended the quarter with cash and investment balance of $183.4 million against $193.1 million at the end of the previous quarter. Accounts receivables were $57.6 million compared with $99.5 million in the prior quarter. Deferred revenues were $155.4 million against $168.0 million in the fourth quarter.

In the fiscal first quarter, cash generated from operations was ($4.2) million and capital expenditure was $11.0 million.

Guidance

For the fiscal second quarter, management expects revenues in the range of $94 million to $95 million. Analysts polled by Zacks expect revenues of $95 million. GAAP earnings per share are expected in the range of ($0.37) to ($0.36) and non-GAAP earnings are estimated at ($0.20) to ($0.19).

Also, for fiscal 2017, management expects revenues in the range of $391-$395 million. Management projected GAAP earnings per share in the range of ($1.43) to ($1.40) and non-GAAP earnings of ($0.78) to ($0.75).

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 namely Cognizant and Adobe, among others, will enable the company to capitalize on 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 Paylocity Holding Corporation PCTY and Zendesk, Inc. ZEN , sporting a Zacks Rank #1 (Strong Buy), and 2U, Inc. TWOU , carrying a Zacks Rank #2 (Buy).

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ZENDESK INC (ZEN): Free Stock Analysis Report

BOX INC-A (BOX): Free Stock Analysis Report

PAYLOCITY HLDG (PCTY): Free Stock Analysis Report

2U INC (TWOU): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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