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No Surprises In Box's (NYSE:BOX) Q2 Sales Numbers, But Stock Drops


Jabin Bastian /
2021/08/25 4:22 pm EDT
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Cloud content storage and management platform Box (NYSE:BOX) reported results in line with analyst expectations in Q2 FY2022 quarter, with revenue up 11.5% year on year to $214.4 million. Box made a GAAP loss of $8.7 million, down on its loss of $7.65 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 FY2022 Highlights:

  • Revenue: $214.4 million vs analyst estimates of $213 million (small beat)
  • EPS (non-GAAP): $0.21 vs analyst estimates of $0.19 (11.6% beat)
  • Revenue guidance for Q3 2022 is $218.5 million at the midpoint, above analyst estimates of $217 million
  • The company lifted revenue guidance for the full year, from $849 million to $858 million at the midpoint, a 1.06% increase
  • Free cash flow of $29.8 million, down 60.7% from previous quarter
  • Gross Margin (GAAP): 71.6%, up from 69.8% previous quarter

“As companies implement strategies to support a remote workforce and digital processes in this hybrid world, more customers are turning to Box to secure content management and collaboration in the cloud,” said Aaron Levie, co-founder and CEO of Box.

Founded in 2005 by Aaron Levie and Dylan Smith, 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 solid over the last year, growing from quarterly revenue of $192.2 million, to $214.4 million.

Box Total Revenue

This quarter, Box's quarterly revenue was once again up 11.5% year on year. We can see that the company increased revenue by $12 million quarter on quarter. That's a solid improvement on the $3.52 million increase in Q1 2022, so shareholders should appreciate the re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 10.4% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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, licences, technical support and other necessary running expenses was at 71.6% in Q2.

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. Significantly up from the last quarter, 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 Q2 Results

With a market capitalization of $4 billion Box is among smaller companies, but its more than $779.4 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Box improve their gross margin this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. 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. The company is down -4.37% on the results and currently trades at $24.51 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.