Box Inc Tumbles On Billings Miss Despite Strong Earnings

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Box released top- and bottom-line results that were better than expected, and at least one firm has raised its estimates for the cloud storage provider. However, investors were not impressed with the company’s billings for the first quarter of fiscal 2017. Shares of Box declined by as much as 11.79% to $11.30 after last night’s earnings report. At least one analyst believes investors misinterpreted the billings miss, while another remains unconvinced that the company is a good cloud play because of the way it now reports billings.

Box’s earnings, revenues beat estimates

Box posted losses of 18 cents per share on $90.2 million in revenue, representing a 37% year over year increase, compared to the consensus estimates of 24 cents per share in losses and $88.7 million in sales. The cloud storage provider saw its strongest quarter ever in terms of customer additions as it added more than 5,000 paying customers during the first quarter to bring its total past 62,000. In the year-ago quarter, it had more than 45,000 paying customers and added more than 2,000 paying customers.

Drexel Hamilton analyst Brian White, who has a Buy rating and $18 per share price target, believes Box’s pipeline is still strong and noted that the company has a number of seven-figure deals “in the works.” He also said, however, they he and the rest of Wall Street underestimated how much of an impact early renewals in the fourth quarter would have on first quarter billings. He also said the company’s move toward annual payment durations instead of multi-year prepayments impacted billings.

Misinterpreting Box’s billings miss?

As a result, Box missed billings estimates, coming in at $75.9 million or a 9% year over year increase. The company missed White’s estimate of $90.7 million, but he believes investors are misinterpreting the billings miss. He continues to believe the cloud storage provider is “one of the more underappreciated and misunderstood cloud plays in the market” but that this will change as momentum continues among enterprise customers. He also likes Box’s growing product portfolio and growing “partnership ecosystem with iconic tech companies such as IBM.”

Management said they expect between $94 million and $95 million in sales for the second quarter, which is fairly light of consensus at $94.81 million. They also upped their fiscal 2017 sales guidance to a range of $391 million to $395 million, compared to their previous outlook of $390 million to $394 million. They now expect losses of 75 cents to 78 cents per share, which is better than their previous outlook of 83 cents to 85 cents per share in losses.

As a result, White has increased his estimates for the company and now expects second quarter sales of $95 million and full-year revenue of $395.2 million. He now expects losses of 73 cents per share, compared to his previous estimate of 85 cents per share in losses. The Street remains at 84 cents per share in losses.

Not all are bullish on Box

Of course wherever there’s a bull on Wall Street, there’s usually a bear lurking there as well, and in this case, it’s Stifel analyst Aaron Rakers, who has a Hold rating on Box. He and his team think it’s unclear how the company’s billings growth should be viewed. Management explained that the gap between revenue growth and adjusted billings growth will narrow throughout the year, but Rakers believes this accounting structure muddies the waters.

He also disagrees with White on the company’s partnership with IBM, emphasizing that it had “immaterial contributions” in the first quarter.

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