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Box ( BOX ) reported a narrower-than-expected fiscal Q4 loss as revenue growth of 36% topped expectations. It sent the online data storage and file-sharing service provider’s stock up 14% in after-hours trading, just after the market close. The company forecast current-quarter revenue above expectations and a narrower-than-expected full-year fiscal 2017 loss. Aaron Levie, co-founder and CEO of Box, said the company closed 13 deals valued at more than $500,000 each in fiscal Q4. “Enterprise IT is experiencing a once-in-a-lifetime shift to the cloud,” he said on the company’s earnings call. Box’s new customers include AIG ( AIG ), Genentech and Home Depot ( HD ). Redwood City, Calif-based Box said revenue for the three months ended Jan. 30 rose 36% to $85 million as corporate customer additions rose, beating views. Box said it lost 26 cents per share minus items. Analysts polled by Thomson Reuters had modeled a loss of 29 cents per share and revenue of $81.77 million. Box said its non-GAAP operating loss in Q4 was $31.1 million (37% of revenue) vs $32.2 million (51% of revenue) a year earlier. For the current quarter, Box forecasts revenue of $88.5 million at the midpoint of its range, vs. analysts’ consensus estimate of $86.9 million. For the fiscal year ending in January 2017, the company expects revenue of about $392 million and a loss of 84 cents at the midpoints of its ranges. Analysts had estimated that Box will report a full-year fiscal 2017 loss of 88 cents with revenue of $392 million. Box stock had closed up 3.7% in regular-session trading in the stock market today , prior to fiscal Q4 results. Box Unfolds Business Strategy Known mainly as an Internet cloud storage provider, Box has evolved from a provider of basic online data storage into selling file sharing and collaborative tools for team projects. It also sells content management software for large companies. The company added 3,000 business customers in the January quarter. It had 57,000 paying business customers as of Jan. 30, up from 54,000 in the October quarter. Box says that its paying customers include 59% of the Fortune 500. Box said fiscal Q4 billings, a sales growth metric, rose 59% to $130 million. Box competes with Microsoft ( MSFT ), though it’s now a partner for Office 365 products as well. It also counts as rivals Alphabet ’s ( GOOGL ) Google, privately-held Dropbox, Amazon.com ( AMZN ) and others. Data storage costs have been falling, owing to the availability of remote data centers packed with computer servers, putting pressure on pricing. One of Box’s challenges, analysts say, is driving average selling prices higher with add-on software modules, such as file-sharing tools, as prices for online data storage continue to fall. Box has been aggressive on pricing to grab market share in the enterprise market, analysts say. It has a strong retention rate among customers. The company’s capital spending jumped in fiscal 2016 as it invested in server capacity and built a new headquarters, but capex is expected to drop sharply in the current fiscal year. “With data center investments nearing the end, 2016 is likely to see significant improvement in free cash flow,” said Rob Owens, a Pacific Crest Securities analyst, in a research report. Profitability Paradox The bearish view is that Box will need to keep buying more servers as it adds customers, making it harder to turn profitable. Box has forecast that it will be free-cash-flow positive starting in fiscal Q4 2017 and FCF positive for the full year in fiscal 2018. Under a “freemium” business model, Box also provides consumers with free personal data storage accounts. Box had 41 million free users as of Oct. 31. Aside from Microsoft, Box has alliances with IBM ( IBM ) and Salesforce.com ( CRM ) in the enterprise market. Box partnered with IBM in June 2015 to develop new applications and jointly market products and services The IBM relationship has enabled Box to target larger business deals, analysts say. At a Morgan Stanley conference last week, Box said it’s developing a new workflow technology with IBM that will use tools from IBM’s “Watson” artificial intelligence program. While competition has been growing in online data storage, Google and Amazon focus mainly on small and medium-size businesses. Box aims to set itself apart by targeting government agencies as well as industries such as health care, retail, and media and entertainment. It acquired MedXT, a provider of cloud-based medical image viewing, in October 2014. Box currently gets a low IBD Composite Rating of 26 out of a possible 99. The company went public in January 2015, with shares priced at 14. The IPO raised $175 million. Box’s stock spiked on its first day of trading and traded above 20 in June but swooned into the end of 2015, and slid more sharply in January. Its stock touched an all-time low of 8.82 on Jan. 20. Shares began an ascent in early February, though short interest also rose significantly. Scalper1 News
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