BOX Q1 Earnings Miss Estimates and Revenues Improve Y/Y

Box, Inc. BOX reported first-quarter fiscal 2023 earnings per share of 23 cents, which missed the Zacks Consensus Estimate by 8%. The figure fell 4.2% sequentially but jumped 27.8% year over year.

Total revenues were $238.4 million, beating the consensus mark by 1.8%. Also, the top line increased 17.8% year over year and 2.2% from the prior quarter’s level.

The growing adoption of Box’s Content Cloud drove the top line.

Box closed 60 deals in the fiscal first quarter. Moreover, BOX saw a 73% attach rate of its suites owing to increasing demand for multi-product suite offerings. Also, 37% of revenues were generated from suite sales compared with 25% in the year-ago period.

Strength in customer expansion and retention drove the results. Box’s net retention rate was 111% at the end of the fiscal first quarter, expanding 800 basis points (bps) from the prior fiscal-year quarter’s end-level.

The remaining performance obligations for the reported quarter were $1 billion, which increased 16% on a year-over-year basis.

Box, Inc. Price, Consensus and EPS Surprise

Box, Inc. Price, Consensus and EPS Surprise

Box, Inc. price-consensus-eps-surprise-chart | Box, Inc. Quote

Billings and Deferred Revenues

Billings were $172.2 million for the reported quarter, which improved 8% year over year.

Deferred revenues were $468.4 million in the fiscal first quarter, increasing 11% from the prior fiscal-year quarter’s reading.

Quarter in Detail

Box witnessed several wins and expansions with companies like BBC Studios, Penguin Random House, Polpharma Biologics, Signant Health and The Hospital for Sick Children in the reported quarter.

BOX deepened its integration with Zoom and announced deeper tie-ups between Box Sign and Box Relay, which were positive takeaways from the fiscal first quarter.

BOX made enhancements in the Box App Center to help users, admins and developers access more than 1,500 applications that integrate with it.

Box’s introduction of enhanced capabilities for its flagship security control and intelligent threat detection solution, Box Shield, also supported the quarterly results.

Operating Results

Non-GAAP gross margin was 76.3%, expanding 330 bps from the same-quarter level in the previous year.

Box’s operating expenses of $175.6 million increased 15.7% year over year. As a percentage of revenues, the figure contracted 132 bps from the year-ago quarter’s level to 73.7%.

On a non-GAAP basis, BOX recorded an operating margin of 20.6%, which expanded 360 bps from the prior-year quarter’s level.

Balance Sheet and Cash Flow

As of Apr 30, 2022, cash and cash equivalents were $391.4 million compared with $416.3 million as of Jan 31, 2022. BOX’s short-term investments amounted to $127.9 million compared with $170 million in the previous fiscal quarter.

Accounts receivables amounted to $117.1 million at the end of the fiscal first quarter, which decreased from $256.3 million at the prior fiscal-quarter end.

Box generated $107.7 million of cash from operations in the reported quarter, up from $49.2 million in the previous fiscal quarter. Additionally, BOX generated a free cash flow of $90.9 million in the fiscal first quarter.

In the reported quarter, Box repurchased 4.2 million shares for approximately $110 million.

Guidance

For second-quarter fiscal 2023, Box expects revenues between $244 million and $246 million, suggesting a 15% year-over-year rise at the high-end. The Zacks Consensus Estimate for the same is pegged at $243.98 million.

On a non-GAAP basis, BOX projects earnings per share of 27-28 cents. The Zacks Consensus Estimate for the same is pegged at 27 cents.

Non-GAAP operating margin for the second quarter is expected to be 22%.

For fiscal 2023, Box anticipates revenues between $992 million and $996 million, indicating a year-over-year increase of 14% at the high-end. The Zacks Consensus Estimate for the same is pegged at $993.5 million.

On a non-GAAP basis, BOX raised its guidance for earnings per share from $1.10-$1.14 to $1.11-$1.15. The consensus mark for the same is pegged at $1.13 per share.

Non-GAAP operating margin for 2023 is expected to be 22.5%.

Zacks Rank & Stocks to Consider

Box currently carries a Zacks Rank #3 (Hold). Investors interested in the broader technology sector can consider some better-ranked stocks like Avnet AVT, Monolithic Power Systems MPWR and Analog Devices ADI. While Avnet and Monolithic Power Systems sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avnet has gained 6.3% in the past year. The long-term earnings growth rate for AVT is currently projected at 37.2%.

Monolithic Power Systems has gained 18.9% in the past year. The long-term earnings growth rate for MPWR is currently projected at 25%.

Analog Devices has rallied 0.8% in the past year. The long-term earnings growth rate for ADI is currently projected at 12.3%.

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