Why Box Inc. (NYSE:BOX)’s Losses Are Seen As Profits


Box Inc (NYSE: BOX) may be generating losses from its current operations, but investors seem to believe that it is only a matter of time before those losses translate into profits. The company provided a clue on its prospects with F2Q2017 results that easily topped expectations and improved from a year earlier.

To further give the market much hope about a bright future, Box said that it was seen unprecedented benefit courtesy of its partnership with the International Business Machines Corp. (NYSE: IBM). The two companies last year agreed on a formula to work together, with part of the deal providing for them to explore new product opportunities together. Box is relying on IBM’s sales organization to reach large customers in the U.S. and abroad.

The company said that eight of the 45 largest contracts it inked in the quarter came through IBM channel.

The major challenge that Box Inc (NYSE:BOX) is struggling with currently is that it is consuming more money than it is generating. R&D spending spiked 6.8% compared to the same quarter last year and marketing costs rose 3%. These increases in spending saw Box end F2Q in the red.

F2Q loss narrow

Box posted adjusted EPS loss of $0.14 in F2Q2017, better than EPS loss of $0.28 in the same quarter last year and still better than the consensus estimate of $0.19. Revenue of $95.7 million grew 30% YoY and topped the consensus estimate of $94.7 million.

Box Inc (NYSE: BOX) added thousands of paying organization customers during the latest quarter, though not as much as it did in the prior quarter. However, the gain in the quarter helped push the number of its paying organizations to about 66,000, with total registered paying users climbing to 6.6 million.

F2017 outlook – Box Inc (NYSE: BOX)

Box Inc (NYSE: BOX) boosted guidance for its F2017 such that it now expects revenue in the band of $394 to $396 million, up from prior revenue forecast in the range of $391 to $395 million. The company sees adjusted EPS loss in the band of $0.67 to $0.69. That compares with EPS loss in the range of $0.75 to $0.78 that was previously guided.

For the current quarter, Box is expecting a narrower loss, with EPS loss being guided in the range of $0.19 to $0.20. Analysts see EPS loss for the quarter coming at $0.21.


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