Box Inc. Declares Mixed Bag Q4 Results for 2015

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Mar 13, 2015

Box Inc. (BOX, Financial) revealed its first quarterly earnings report since the company went public with its IPO in January 2015. The company posted a bigger-than-expected GAAP operating loss of $45.8 million for the fourth quarter of fiscal 2015 compared to a GAAP operating loss of $40.2 million for the prior-year quarter. The company’s net loss attributable to shareholders expanded to $52.9 million or $2.64 per share compared to the year-ago quarter’s $43.5 million or $3.46 cents per share. Consequently, the Box stock tumbled 15% to $16.90 a share in extended trading following the results.

Heavy spending on data security drags earnings

Box Inc., a provider of Cloud-based storage, ended the fourth quarter with over 45,000 paid customers, up slightly from the prior-year quarter’s 44,000 plus subscriptions. The company posted a 61.3% revenue growth to $62.6 million for Q4 2015 compared to $38.8 million in the prior-year quarter. However, operating expenses increased 33% to $93.8 million as the company invested heavily towards strengthening data security on its Cloud platform, introducing a number of key security products such as Box Trust, Box Enterprise Key Management and Box Data Retention Management. Excluding items, Box logged a loss of $1.65 per share, which was better than the consensus estimate figure of $1.99 loss per share on revenue of $58 million.

For the full fiscal 2015, Box reported revenue of $216.4 million, up 74% from the previous year’s $124.2 million. However, operating expenses for the fiscal grew 41% from $174.2 million in 2014 to $246.4 million, resulting in a GAAP operating loss of $166.7 million for FY2015. The company’s GAAP net loss stood at $11.48 per diluted share compared to $14.89 per share loss in the previous fiscal.

Outlook for FY2016

Box, which competes with the privately held DropBox, Microsoft Corporation’s (MSFT, Financial) OneDrive and Google Inc.’s (GOOG, Financial) Google Drive amongst others in the cloud storage market, boasts global customers such as General Electric (GE, Financial), Eli Lilly (LLY, Financial), Gap (GPS, Financial), Astra Zeneca (AZN, Financial), Safeway (SWY, Financial), Warner Music Group (WMG, Financial), eBay (EBAY, Financial), Nationwide (NFS, Financial), Boston Scientific (BSX, Financial) and Toyota (TM).

The company’s guidance for fiscal 2016 includes projected revenues in the $218-$285 million range, with an expected non-GAAP operating loss in the 50% to 52% range as Box continues to invest heavily in its security technology as well as industry-specific products for large enterprises. The company also recently announced plans to acquire Subspace, a developer of software that enables employees to securely work over various devices.

For the first quarter of FY2016, Box foresees revenue of $63-$64 million and non-GAAP operating loss in the 56% to 58% range, percent of revenue in the quarter, which translates into $35.3 million to $37.1 million.

Final thoughts

Box Inc. made a very recent debut with its IPO at $14 per share that rose almost 76% in initial trading. Since then, the company has made efforts to strengthen its offering with new product launches and acquisitions. However, despite the dismal Q42015 performance, experts are upbeat regarding the company’s future growth and project an average annual growth rate of 30% for the company, with an earnings increase of around 85% over the previous fiscal. The Box stock currently carries a "hold" guidance.