Cloud content storage and management platform Box (NYSE:BOX) reported results in line with analyst expectations in Q2 FY2023 quarter, with revenue up 14.6% year on year to $246 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter came in at $251 million, in line with analyst estimates. Box made a GAAP profit of $1.04 million, improving on its loss of $8.7 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) Q2 FY2023 Highlights:
- Revenue: $246 million vs analyst estimates of $245.7 million (small beat)
- EPS (non-GAAP): $0.28 vs analyst estimates of $0.28 (1.65% beat)
- Revenue guidance for Q3 2023 is $251 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed revenue guidance for the full year, at $994 million at the midpoint
- Free cash flow of $17.9 million, down 80.2% from previous quarter
- Gross Margin (GAAP): 73.6%, up from 71.6% same quarter last year
“As enterprises look to reduce the cost and complexity of their IT environments, they are turning to Box’s Content Cloud to simplify their technology stack, lower their spend and keep their information secure,” 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.
Sales Growth
As you can see below, Box's revenue growth has been mediocre over the last year, growing from quarterly revenue of $214.4 million, to $246 million.
This quarter, Box's quarterly revenue was once again up 14.6% year on year. We can see that the company increased revenue by $7.58 million quarter on quarter. That's a solid improvement on the $5.07 million increase in Q1 2023, so shareholders should appreciate the acceleration of growth.
Guidance for the next quarter indicates Box is expecting revenue to grow 12% year on year to $251 million, slowing down from the 14.3% 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 11.6% over the next twelve months.
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Profitability
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 73.6% in Q2.
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. This is around the average of what we typically see in SaaS businesses, but 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 Q2 Results
With a market capitalization of $4.23 billion Box is among smaller companies, but its more than $393.5 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
Overall, this quarter's results were not the best we've seen from Box. The company is down 3.41% on the results and currently trades at $28.25 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.
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The author has no position in any of the stocks mentioned.