Box Earnings Preview: Watch out for billings and large deals update in Q1

Box (NYSE: BOX) plans to release its first quarter results for the fiscal period 2020 on June 3 after the bell. The SaaS platform’s stock price decreased 25% since last quarter earnings, as the outlook failed to impress the street.

Q1 Expectations

Analysts are expecting sales to improve about 15% to $161.45 million and adjusted loss of 5 cents per share. On the flip side, Box has guided non-GAAP loss per share of 5-6 cents and revenue to be between $161-162 million.

Investors would be expecting the headline numbers to be in line with the outlook on Monday. If the results failed to impress the street, then the stock might nosedive further mimicking the trend from the fourth quarter.

Fiscal Outlook

For the full-year period, the cloud data management provider expects revenue of $700-704 million and adjusted earnings of 3 cent loss to 1 cent profit, indicating that the firm would be profitable by the end of the fiscal year. The street is estimating top line to grow above 15% to $701.9 million and non-GAAP loss of 2 cents per share.

It would be interesting to see how Box reports outlook for the full year. If the outlook is revised upwards or even remains unchanged, shareholders would be happy as the company would be profitable by the end of the fiscal. For now, the company estimates are better than the street estimates.

What to Watch?

Last quarter, billings grew lower than revenues indicating that the company could not add more customers to its sales pipeline. The company has blamed it on the muted performance from the EMEA region and sales cycles are getting longer-than-expected for $1 million deals.

In addition to billings, deferred revenues and retention rate is worth to watch as the company gets most of its revenue from its clients through subscriptions which are paid by them either quarterly or annually depending upon the terms of the contract.

CEO Aaron Levie has agreed last quarter that the slowdown was primarily due to less number of $1 million clients added to its roster. Since closing large deals are complex in nature involving a lot of compliance issues, Box is confident of clinching more seven-figure deals in the current fiscal period.

In the short-term there might be a slowdown in the top line, it’s important for Levie and his team to close more seven-figure deals which would be accretive to earnings in the long run.

Box launched Relay which helps companies to automate the workflow management is available for its clients from June 2019. It also has in the pipeline to launch a threat management tool called Shield helping companies improve their security and risk management. It’d be interesting to know how the new products are going to be received by its clients.

Q4 Rewind         

Revenue increased about 20% to $163.7 million but failed to meet estimates. Adjusted loss per share was 6 cents per share, which exceeded estimates. Deferred revenue and billings grew 17% and 16% respectively. Box paid customers were above 92,000 at the end of the fourth quarter.

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