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Why Is Box (BOX) Down 10.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Box (BOX - Free Report) . Shares have lost about 10.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Box due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Box Q1 Revenues Top Estimates, Earnings Miss

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.

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. On a non-GAAP basis, BOX projects earnings per share of 27-28 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. On a non-GAAP basis, BOX raised its guidance for earnings per share from $1.10-$1.14 to $1.11-$1.15. Non-GAAP operating margin for 2023 is expected to be 22.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 11.11% due to these changes.

VGM Scores

Currently, Box has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Box has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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