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Why Is Box (BOX) Down 1.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Box (BOX). Shares have lost about 1.8% 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 drivers.

Box Q2 Earnings and Revenues Top Estimates

Box reported second-quarter fiscal 2022 earnings per share of 21 cents, which surpassed the Zacks Consensus Estimate by 23.5%. Further, the figure surged 16.7% from both the year-ago period and fiscal first-quarter 2022.

Total revenues were $214.5 million, surpassing the consensus mark by 0.9%. Also, the top line increased 12% year over year and 5.9% from fiscal first-quarter 2022.

Growing adoption of Box’s Content Cloud drove top-line growth.

Further, it closed 74 deals during the fiscal second quarter, up 16% year over year.

Additionally, the company saw a record 73% attach rate of its suites due to increasing demand for multi-product suite offerings.

Box’s net retention rate was 106% at fiscal second quarter-end, up 300 basis points (bps) from the prior quarter. The increase was driven by strength in customer expansion and retention.

Notably, increasing work-from-home and learning online trends as well as rising demand for cloud applications as a result of the ongoing coronavirus pandemic are likely to continue benefiting the company in the upcoming period.

Billings and Deferred Revenues

Billings were $213.1 million for the reported quarter, which increased 13% year over year. This improvement was due to increase in sales from both Enterprise and SMB.

Deferred revenues were $422 million, improving 16% from the prior-year quarter.

Quarter in Detail

Box witnessed several wins and expansions with companies like Arc’teryx, Live Nation, Pan-American Life Insurance Group, the Reserve Bank of New Zealand, Tokyo Electron Ltd., and the U.S. Small Business Administration in the reported quarter.

The company rolled out e-signature capability, Box Sign, to help businesses in digitizing and modernizing agreements, which is worth mentioning.

Additionally, its integration with Service Now’s Legal Service Delivery application was made generally available in the reported quarter.

Further, Box’s deepening partnership with BT for organizing, managing and distributing digital assets supported the quarterly results.

Operating Results

Non-GAAP gross profit for the fiscal second quarter was $159.8 million, up 13% year over year. As a percentage of revenues, the figure expanded 100 bps from the prior-year quarter.

Box’s operating expenses of $159.8 million increased 10.6% year over year. As a percentage of revenues, the figure contracted 62 bps from the year-ago quarter.

On a non-GAAP basis, the company recorded operating margin of 21%, which expanded 500 bps from the prior-year quarter.

Balance Sheet and Cash Flow

As of Jul 31, 2021, cash and cash equivalents were $779.4 million compared with $561.5 million on Apr 30, 2021. Also, its short-term investments amounted to $50 million, flat with the previous quarter.

Accounts receivables amounted to $134.4 million at fiscal second quarter-end, which increased from $112.3 million at prior quarter-end.

Further, the company generated $44.8 million of cash from operations in the reported quarter, down from $94.8 million in the previous quarter. Additionally, it generated free cash flow of $29.8 million in the fiscal second quarter.

Guidance

For third-quarter fiscal 2022, Box expects revenues between $218 million and $219 million. On a non-GAAP basis, the company projects earnings per share of 20-21 cents.

For fiscal 2022, Box has raised its revenue guidance from $845-$853 million to $856-$860 million. On a non-GAAP basis, the company projects earnings per share of 79-81 cents.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -60% due to these changes.

VGM Scores

At this time, Box has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 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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