Box keeps cash flow promise, cuts costs and losses, boosts revenue - and share price drops
- Summary:
- Box promised it would be cash flow positive by the end of fiscal 2017 and it's done just that. But Wall Street's less impressed by the tepid outlook for Q1 2018.
Box made good on a promise to investors that it would become cash-flow positive during the fourth quarter of its 2017 fiscal year and it’s done just that.
All told, the firm’s fourth quarter and full-year numbers left room for some optimism that its turnaround strategy is paying off. Q4 revenues were up 29% year-on-year to $110 million and up 32% to $399 million for the full year. The company is still not turning a profit, but did reduce Q4 losses year-on-year from $50 million to $36 million. Full year losses came to $151.8 million.
On a positive note, the number of paying customers is climbing, up 14,000 for the full year to bring the total to 71,000. New or expanded deployments included deals with Discovery Communications, John Muir Health, Volkswagen Group and Spotify.
Box’s partnership with IBM is resulting in some of the bigger wins, being part of 18 out of 64 deals in Q4 that had a value over $100,000. There are more big deals as well - 16 over $500,000 in the fourth quarter and 8 over $1 million.
Costs have also come under more control. Q4 sales and marketing expenses of $58.8 million still represents 54% of total revenue, but that’s an improvement on the 68% of revenues in the comparable year-ago quarter. Meanwhile R&D costs for the quarter were $21.9 million- that’s 20% of revenue, down from 23% a year ago.
So far, so encouraging, but Wall Street wasn’t impressed with some tepid outlook forecasts for the coming quarter and, like Salesforce and Workday earlier in the week, sent the share price down following the results announcement.
For CEO Aaron Levie, fiscal 2018 is about product and global expansion efforts, including:
advancing our global go-to-market efforts, including enhancing our distributions through a world class partner and channel ecosystems and driving efficiency in scale in our direct sales operations, both online and in-field.
The go-to-market proposition to customers remains one of replacing legacy enterprise content management systems, he added:
One great example this past quarter is, we did a large transaction, seven figure transaction with a financial services firm that is in the process of replacing document, as well as using Box to solve all of their end user file sharing and collaboration use cases.
When you look at the size of our transactions, especially 16 deals above $500,000, eight deals above $1 million, those are the kinds of customers where categorically they’re using Box more as a platform for managing their content, well beyond the use case of file synch and share.
We see this as a multi-year secular shift from legacy enterprise content management solutions and storage technology in the on-premises environment to the cloud.
My take
It’s good to keep a promise! And there are signs of progress, albeit perhaps not at the rates that are going to excite Wall Street. I really want Box to succeed, but I’m not currently seeing the energy of the CEO mirrored in the company. It will be interesting to get a more close-up PoV when the Box World Tour hits London next month.