Cloud content storage and management platform Box (NYSE:BOX) reported Q1 FY2024 results that beat analyst expectations, with revenue up 5.65% year on year to $251.9 million. The company expects that next quarter's revenue would be around $261 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Box made a GAAP profit of $8.35 million, improving on its loss of $4.7 million, in the same quarter last year.
Is now the time to buy Box? Access our full analysis of the earnings results here, it's free.
Box (BOX) Q1 FY2024 Highlights:
- Revenue: $251.9 million vs analyst estimates of $249.3 million (1.03% beat)
- EPS (non-GAAP): $0.32 vs analyst estimates of $0.27 (16.6% beat)
- Revenue guidance for Q2 2024 is $261 million at the midpoint, roughly in line with what analysts were expecting
- The company lowered revenue guidance for the full year slightly but this was due to FX, constant-currency growth stayed the same as last quarter's guidance, ($1.05 billion at the midpoint now)
- Free cash flow of $108.2 million, up 45% from previous quarter
- Gross Margin (GAAP): 75.5%, up from 73.9% same quarter last year
“In Q1 we delivered revenue, operating margin and EPS above our guidance ranges, a testament to the value of the Box Content Cloud platform and the execution we have been driving as a company,” said Aaron Levie, co-founder and CEO of Box.
Founded in 2005 by Aaron Levie and Dylan Smith, Box (NYSE:BOX) provides organizations with software to securely store, share and collaborate around work documents in the cloud.
The catch phrase "digital transformation" originally referred to the digitization of documents within enterprises. The growth of digital documents has spurred an explosion of collaboration within and between businesses, which in turn is driving the demand for e-signature and content management platforms.
As you can see below, Box's revenue growth has been unremarkable over the last two years, growing from quarterly revenue of $202.4 million in Q1 FY2022, to $251.9 million.
Box's quarterly revenue was only up 5.65% year on year, which might disappoint some shareholders. But the revenue actually decreased by $4.58 million in Q1, compared to $6.53 million increase in Q4 2023. We'd like to see revenue increase each quarter, but a one-off fluctuation is usually not concerning and the management is guiding for growth to rebound in the next quarter.
Guidance for the next quarter indicates Box is expecting revenue to grow 6.09% year on year to $261 million, slowing down from the 14.7% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 7.68% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Box's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 75.5% in Q1.
That means that for every $1 in revenue the company had $0.76 left to spend on developing new products, marketing & sales and the general administrative overhead. This is a good gross margin that allows companies like Box to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity. It is good to see that the gross margin is staying stable which indicates that Box is doing a good job controlling costs and is not under pressure from competition to lower prices.
Key Takeaways from Box's Q1 Results
With a market capitalization of $4.02 billion Box is among smaller companies, but its more than $517 million in cash and positive free cash flow over the last twelve months give us confidence that Box has the resources it needs to pursue a high growth business strategy.
Box topped analysts’ revenue expectations this quarter, even if just narrowly, and EPS beat more convincingly. Free cash flow was also strong and exceeded expectations. Guidance for next quarter's revenue, non-GAAP operating profit, and adjusted EPS all slightly beat. While Box's revenue guidance for the full year was slightly lowered and missed analysts' expectations, it was due to FX; guidance for constant-currency revenue growth of 10% year on year was not lowered and was above expectations. Non-GAAP operating profit and adjusted EPS for the full year were better than expected. Overall, this quarter's results were quite solid. The company is up 3.85% on the results and currently trades at $29.1 per share.
Box may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.