Cloud content storage and management platform Box (NYSE:BOX) reported results in line with analyst expectations in Q4 FY2023 quarter, with revenue up 9.91% year on year to $256.5 million. However, guidance for the next quarter was less impressive, coming in at $249 million at the midpoint, being 4.32% below analyst estimates. Box made a GAAP profit of $20.5 million, improving on its loss of $4.33 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) Q4 FY2023 Highlights:
- Revenue: $256.5 million vs analyst estimates of $256.5 million (small miss)
- EPS (non-GAAP): $0.26 vs analyst expectations of $0.34 (24% miss)
- Revenue guidance for Q1 2024 is $249 million at the midpoint, below analyst estimates of $260.2 million
- Management's revenue guidance for upcoming financial year 2024 is $1.06 billion at the midpoint, missing analyst estimates by 3.82% and predicting 6.47% growth (vs 13.5% in FY2023)
- Free cash flow of $74.7 million, up 35.8% from previous quarter
- Gross Margin (GAAP): 76.2%, up from 72.3% same quarter last year
“Fiscal 2023 was another strong year for Box, as we achieved a $1 billion annual revenue run rate on a quarterly basis and significantly expanded our operating margins,” 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 mediocre over the last two years, growing from quarterly revenue of $198.9 million in Q4 FY2021, to $256.5 million.
Box's quarterly revenue was only up 9.91% year on year, which might disappoint some shareholders. We can see that the company increased revenue by $6.53 million quarter on quarter accelerating up on $3.94 million in Q3 2023.
Guidance for the next quarter indicates Box is expecting revenue to grow 4.43% year on year to $249 million, slowing down from the 17.8% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $1.06 billion at the midpoint, growing 6.47% compared to 13.3% increase in FY2023.
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 76.2% in Q4.
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. Significantly up from the last quarter, 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.
Key Takeaways from Box's Q4 Results
With a market capitalization of $4.77 billion Box is among smaller companies, but its more than $461.2 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
Revenue in the quarter missed slightly, and billings missed by a larger amount. It was good to see Box improve their gross margin this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that Box's revenue guidance for the full year missed analysts' expectations and the revenue guidance for next year indicates quite a significant slowdown in growth. Overall, this quarter's results were not the best we've seen from Box. The company is down 10.7% on the results and currently trades at $30 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.