Cloud content management firm Box (BOX 21.12, -0.82 -3.7%) trades firmly lower on Thursday in reaction to the company’s in-line Q3 print and equally tepid guidance for the coming quarter.
At face value, the Q3 report left something to be desired. The Q3 loss of $0.13 per share and the revenue growth of 25.8% to $129.3 million were only in-line with market expectations. Non-GAAP gross margins were 75.5% versus 76.1% a year ago and 75.5% last quarter. The caveat of the report is that the top line technically beat management’s guidance (by about $300K), a point that may be worth noting given BOX’s typically in-line guidance.
Q3 billings were strong, up 26% compared to last year to $141.5 million driven mostly by a few customer-driven prepays. BOX closed 36 deals more than $100K, four deals more than $500K and one deal with a value more than $1 million. These numbers were down across the board, but management noted that while there was some lumpiness in larger enterprise deals in the quarter, there was very strong demand in the commercial business.
On the conference call, management commented that it continues to expect billings growth and revenue growth to track roughly in-line with Q4. Additionally, management sees gross margins coming in roughly at 75% in Q4.
As for the top and bottom lines for Q4, BOX sees revenues between $136-137 million with non-GAAP EPS between ($0.08)-($0.07). The company also adjusted FY18 EPS and revenue guidance as a result of the Q3 print. Management now sees FY18 EPS between ($0.45)-($0.44) from previous ($0.46)-($0.44) and revenues of $505-506 million from previous $503-506 million.
Stepping back a bit, BOX has not been immune to the recent pull-back in the Technology sector. The XLK SPDR shed about 3% yesterday after nabbing all-time highs on Tuesday – and BOX followed suit, having lost about 14% after it too grabbed all-time highs on Monday. While the finger behind the dip since then could be pointed at the broader market, it’s important to note that investors could be employing some all-time high profit-taking in addition to throwing their weight behind the soft quarter/guidance.