BOX's steady and consistent performance relative to the Street's expectations continues on. That's the good news. The not-so-good news is that it also provided Q3 guidance that came up a bit short. Specifically, it guided for Q3 EPS of ($0.08)-($0.07) vs. the ($0.06) consensus with revenue in-line at $154-$155 mln. Obviously, that is not a catastrophic miss for BOX, so there could be a couple other factors at play here contributing the stock’s weakness in morning trade.
For instance, while the stock has basically traded in a sideways, consolidative fashion since mid-May, shares were edging back toward the upper end of this $24-$28 range ahead of the results. So momentum-based traders that recently hopped on board ahead of the print, hoping for a beat-and-raise type of quarter, may now be heading for the exits.
Additionally, from a fundamental perspective, one other blemish -- besides the downside Q3 EPS guidance -- was that free cash flow came in at a negative ($10.3) mln for the quarter. While that is an improvement from the year ago period, when cash burn hit ($15.0) mln, BOX did generate positive free cash flow of $7.3 mln last quarter. Therefore, it is disappointing that the company wasn't able to build off of that and post positive cash flow in this sequential quarter as well.
Drilling down on its Q2 results further, EPS came in at ($0.05), a penny better than consensus expectations, and a significant improvement from 2Q17's loss per share of ($0.11). Revenue was up 21% to $148.2 mln while billings increased by 17% to $162.8 mln, matching last quarter's growth rates. Billings is perhaps a better measure of current demand than revenue as it reflects new sales and sales expansions to customers only in that given quarter, rather than sales generated from contracts originated in prior quarters.
Both revenue growth and billings growth have been steadily tapering off over the past couple of years, but this has not been unexpected for the company and has been reflected in its guidance. So it wouldn't seem entirely fitting to judge that today's sell-off is being driven by disappointment over slower top-line growth.
In any event, the stock is currently lower by nearly 10% as of this report and is testing support at the lower end of the aforementioned $24-$28 trading range. The results themselves don't seem to be as disastrous as the stock action would suggest, but again, some short-term momentum money exiting positions could be exacerbating the weakness.