A month has gone by since the last earnings report for Box (BOX). Shares have added about 7.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Box due for a pullback? 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 Q3 Earnings Top Estimates
Box reported third-quarter fiscal 2023 earnings per share of 31 cents, which surpassed the Zacks Consensus Estimate by 3.3%. The figure jumped 40.9% year over year and 10.7% sequentially.
Total revenues of $250 million missed the consensus mark by 0.3%. The top line increased 11.6% year over year (17% growth on a constant currency basis) and 1.6% from the prior quarter’s level.
The growing adoption of Box’s Content Cloud drove the top line despite macroeconomic headwinds.
Box closed 77 deals in the fiscal third quarter. BOX saw a 73% attach rate of its suites owing to increasing demand for multi-product suite offerings. Nearly 42% of revenues were generated from the suite sales compared with 31% in the year-ago period.
Strength in customer acquisition and retention drove the results. Box’s net retention rate was 110% at the end of the fiscal third quarter, expanding 100 basis points (bps) from the prior-year fiscal quarter’s end-level.
The remaining performance obligations for the reported quarter were $1.06 billion, up 11% on a year-over-year basis (20% growth on a constant currency basis).
Billings and Deferred Revenues
Billings were $258.2 million for the reported quarter, improving 12% year over year (20% growth on a constant currency basis).
Deferred revenues were $467.1 million in the fiscal third quarter, increasing 9% from the prior fiscal-year quarter’s reading.
Quarter in Detail
Box witnessed several wins and expansions with companies like Eurostar International Limited, Garmin International, McLarens, Mariner Wealth Advisors, Regions Bank, Warner Music Group and Wasserman Media Group in the reported quarter.
BOX added new features to its e-signature capability Box Sign to help users publish documents online for signature, edit signature requests in flight, and more.
Box made multiple enhancements to Box Shield at BoxWorks 2022 to prevent communication or exchange of sensitive information that could lead to conflicts of interest between groups.
Box made the all-new Box Notes generally available for real-time content collaboration and project management. BOX also made available its Content Insights to increase visibility on how content is accessed and used.
The abovementioned initiatives were key takeaways from the fiscal third quarter.
Operating Results
Non-GAAP gross margin was 76.5%, expanding 180 bps from the same-quarter level in the previous year.
Box’s operating expenses of $172.09 million slightly increased from $172.06 million in the third quarter of fiscal 2022. As a percentage of revenues, the figure contracted 795 bps from the year-ago quarter’s level to 68.9%.
On a non-GAAP basis, BOX recorded an operating margin of 24%, which expanded 330 bps from the prior-year quarter’s level.
Balance Sheet and Cash Flow
As of Oct 31, 2022, cash and cash equivalents were $358.1 million compared with $348.8 million as of Jul 31, 2022. BOX’s short-term investments amounted to $44.6 million compared with $44.7 million in the previous fiscal quarter.
Accounts receivables amounted to $176.6 million at the end of the fiscal third quarter, which increased from $166.6 million at the prior fiscal-quarter end.
Box generated $69.7 million of cash from operations in the reported quarter, up from $28.3 million in the previous fiscal quarter. Additionally, BOX generated a free cash flow of $54.97 million in the fiscal third quarter.
Guidance
For fourth-quarter fiscal 2023, Box expects revenues between $255 million and $257 million, suggesting a 10% rise at the high end of the range from the prior fiscal year’s reported figure.
On a non-GAAP basis, BOX projects earnings per share of 34-35 cents.
The non-GAAP operating margin for the fiscal fourth quarter is expected to be 24.5%.
For fiscal 2023, Box anticipates revenues between $990 million and $992 million, indicating an increase of 13% from the last fiscal year’s reading at the high end of the range.
On a non-GAAP basis, BOX expects earnings per share of $1.16-$1.17.
The non-GAAP operating margin for the full fiscal is expected to be 22.5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 214.29% due to these changes.
VGM Scores
At this time, Box has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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 B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been 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.
Zacks Top 10 Stocks for 2023
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2023? From inception in 2012 through November, the
Zacks Top 10 Stocks
portfolio has tripled the market, gaining an impressive +884.5% versus the S&P 500’s +287.4%.
Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.
Be First to New Top 10 Stocks >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
