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Box, Inc. (BOX)

Seven analysts have increased their EPS estimates for this Cloud company for this year, and eight for next year.

Box, Inc. (BOX)
From Canaccord Genuity Research

BOX remains one, if not our favorite, “bounce back” stock recommendation for 2016. The company saw across-the-board upside results—revenue, operating margins, and billings. It added roughly 3,000 net new customers in the quarter, bringing the total to 57,000paying customers, up from 45,000 last year. Box now counts 59% of the Fortune 500 as customers, up from 50% last year.

Box has seen impressive large deal traction with 66 deals over $100k (57 in Q4/15) and 13 over $500k (9 in Q4/15); Box Governance showed continued early strength, doubling the number of deployments to over 200. The product was only launched in June 2015. The company’s multi-product strategy working as ASPs are seeing 20-30% uplift when KeySafe or Governance is included.

Box reported revenues of $85.0M, representing y-o-y growth of 36%, ahead of our estimate by $3.2M. Non-GAAP operating loss was ($31.1M), for margins of (36.6%), showing a sequential improvement of 1150bps and upside of 675 bps relative to our estimate. Billings were $130.2M, up 59% y-o-y, well ahead of our $107.5M estimate, in part due to $4M of pull forward. Box was operating cash flow positive for the first time in the quarter, and the firm’s FCF loss of($20.2M) was roughly half of our expectation—a material upside.

The outlook id upside on the top and bottom lines. Management issued F2017 guidance for revenue and EPS that were both ahead of our expectations. Revenue is expected to be in the $390-394M range, representing 29% growth at midpoint, ahead of our previous$387M estimate. Non-GAAP EPS loss in F2017 is expected to be ($0.85-0.83), while our previous estimate was for ($0.97). The firm reiterated its goal of hitting FCF breakeven inQ4/F17 and we are expecting full-year FCF profitability in F2018.

Richard Davis, David Hynes Jr. and Mark Belcarz, Canaccord Genuity Research, www.canaccordgenuity.com, 617-371-3711, March 9, 2016