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Cloud content storage and management platform Box (NYSE:BOX) reported results in line with analysts’ expectations in Q2 CY2024, with revenue up 3.3% year on year to $270 million. The company expects next quarter’s revenue to be around $275 million, coming in 1.6% above analysts’ estimates. It made a non-GAAP profit of $0.44 per share, improving from its profit of $0.36 per share in the same quarter last year.
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Box (BOX) Q2 CY2024 Highlights:
- Revenue: $270 million vs analyst estimates of $269.2 million (small beat)
- Adjusted Operating Income: $76.69 million vs analyst estimates of $72.74 million (5.4% beat)
- EPS (non-GAAP): $0.44 vs analyst estimates of $0.41 (8.6% beat)
- The company slightly lifted its revenue guidance for the full year to $1.09 billion at the midpoint from $1.08 billion
- EPS (non-GAAP) guidance for the full year is $1.65 at the midpoint, beating analyst estimates by 3.5%
- Gross Margin (GAAP): 79.4%, up from 74.4% in the same quarter last year
- Free Cash Flow Margin: 12.1%, down from 46.6% in the previous quarter
- Billings: $256.4 million at quarter end, up 10.3% year on year
- Market Capitalization: $4.16 billion
Document ManagementThe catch phrase "digital transformation" originally referred to the digitization of documents within enterprises. The growth of digital documents has spurred an explosion of collaboration within and between businesses, which in turn is driving the demand for e-signature and content management platforms.
Sales GrowthAs you can see below, Box’s 9.3% annualized revenue growth over the last three years has been weak, and its sales came in at $270 million this quarter.
Box’s quarterly revenue was only up 3.3% year on year, which might disappoint some shareholders. However, we can see that the company’s revenue grew by $5.38 million quarter on quarter, re-accelerating from $1.78 million in Q1 CY2024.
Next quarter’s guidance suggests that Box is expecting revenue to grow 5.1% year on year to $275 million, improving on the 4.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 4.4% over the next 12 months before the earnings results announcement.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Box has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cash cushion. The company’s free cash flow margin was among the best in the software sector, averaging 28% over the last year.
Box’s free cash flow clocked in at $32.74 million in Q2, equivalent to a 12.1% margin. This quarter’s result was good as its margin was 4.3 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Over the next year, analysts’ consensus estimates show they’re expecting Box’s free cash flow margin of 28% for the last 12 months to remain the same.
Key Takeaways from Box’s Q2 Results We were impressed by how strongly Box blew past analysts’ billings and adjusted operating profit expectations this quarter. We were also glad that the company raised its full year revenue guidance. Overall, we think this was a solid quarter with some key metrics above expectations. The stock traded up 5.4% to $30.41 immediately following the results.
