Box (NYSE:BOX) Surprises With Q1 Sales, Next Quarter Growth Looks Optimistic

Adam Hejl /
2022/05/25 4:19 pm EDT

Cloud content storage and management platform Box (NYSE:BOX) beat analyst expectations in Q1 FY2023 quarter, with revenue up 17.7% year on year to $238.4 million. The company expects that next quarter's revenue would be around $245 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Box made a GAAP loss of $4.69 million, improving on its loss of $14.5 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 FY2023 Highlights:

  • Revenue: $238.4 million (1.68% beat)
  • EPS (non-GAAP): $0.23 vs analyst expectations of $0.25 (8% miss)
  • Revenue guidance for Q2 2023 is $245 million at the midpoint, above analyst estimates of $243.3 million
  • The company reconfirmed revenue guidance for the full year, at $994 million at the midpoint
  • Free cash flow of $90.8 million, up 172% from previous quarter
  • Gross Margin (GAAP): 73.9%, up from 69.8% same quarter last year

“Our strong first quarter results demonstrate the continued execution of our growth strategy as we execute against a $74 billion market opportunity,” 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' orginally 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.

Sales Growth

As you can see below, Box's revenue growth has been mediocre over the last year, growing from quarterly revenue of $202.4 million, to $238.4 million.

Box Total Revenue

This quarter, Box's quarterly revenue was once again up 17.7% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $5.07 million in Q1, compared to $9.31 million in Q4 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Box is expecting revenue to grow 14.2% year on year to $245 million, improving on the 11.5% 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 12.1% 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 73.9% in Q1.

Box Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.73 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is around the average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market, so it is important to track.

Key Takeaways from Box's Q1 Results

With a market capitalization of $3.78 billion Box is among smaller companies, but its more than $519.2 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.

It was good to see Box improve their gross margin this quarter. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But investors might have been expecting more and the company is down 2.99% on the results and currently trades at $25.25 per share.

Should you invest in Box 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.