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Box's (NYSE:BOX) Q3 Sales Top Estimates, Stock Soars


Kayode Omotosho /
2021/11/30 4:22 pm EST
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Cloud content storage and management platform Box (NYSE:BOX) beat analyst expectations in Q3 FY2022 quarter, with revenue up 14.3% year on year to $224 million. Guidance for next quarter's revenue was $228 million at the midpoint, 2.26% above the average of analyst estimates. Box made a GAAP loss of $13.8 million, down on its loss of $5.28 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) Q3 FY2022 Highlights:

  • Revenue: $224 million vs analyst estimates of $218.6 million (2.48% beat)
  • EPS (non-GAAP): $0.22 vs analyst estimates of $0.21 (5.26% beat)
  • Revenue guidance for Q4 2022 is $228 million at the midpoint, above analyst estimates of $222.9 million
  • Free cash flow of $31.2 million, roughly flat from previous quarter
  • Gross Margin (GAAP): 71.8%, up from 71% same quarter last year

“Our strong third quarter results show the continued momentum of our long-term growth strategy, as more customers are turning to the Box Content Cloud to deliver secure content management and collaboration built for the new way of working,” 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 acceleration of digital transformation initiatives by enterprises, coupled with the growing volume of electronic documents generated by businesses are important factors that are driving the demand for content management platforms.

Sales Growth

As you can see below, Box's revenue growth has been slower over the last year, growing from quarterly revenue of $196 million, to $224 million.

Box Total Revenue

This quarter, Box's quarterly revenue was once again up 14.3% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $9.55 million in Q3, compared to $12 million in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 10.2% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Box. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

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 71.8% in Q3.

Box Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.71 left to spend on developing new products, marketing & sales and the general administrative overhead. This is around the lower 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 Q3 Results

With a market capitalization of $3.66 billion Box is among smaller companies, but its more than $708.2 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.

Box's revenue guidance for the next quarter looks quite a bit better than what the analysts were expecting. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was a decent quarter, showing the company is staying on target. The company is up 5.03% on the results and currently trades at $24.63 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.