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Box posted a whopping 43% jump in second-quarter revenue yesterday, raising its growth forecast for the fiscal year.
Revenue rose to $73.5m from $51.4m, well above analysts’ expectations.
“Q2 was a breakout quarter for Box across multiple dimensions,” said co-founder and CEO Aaron Levie said during a call with analysts. “We feel more confident than ever that we're well positioned to capture the large and growing market for enterprise content management and collaboration.”
It wasn’t all peaches and cream though, as net losses continued to widen. Box’s Achilles heel remains its heavy marketing spend, which continues to outstrip sales. The enterprise cloud storage company reported a net loss of $49.8m (£32.3m), or 42 cents a share. In the year-earlier period, the loss came to $38.3m.
The company’s strategy of aggressively selling, getting people in the door and then hoping they will spend money later down the line is a high risk game - and not one that investors are particularly enthusiastic about. Combine this with the slow burn nature of subscription revenues and you’ve got the Holy Trinity of loss making dynamics.
Wall Street was already aware of the circumstances and so the positive news on top line growth outweighed the negative news of losses. Levy didn’t dare to prognosticate a world in which Box might turn a profit, but did say that the company remained committed to ‘achieving positive free cash flow in the quarter ending January 2017’.
Box has forged a couple of key partnerships in recent months, most notably an agreement with IBM. The two companies are working on a range of integrated solutions and Levy announced during the conference call that IBM was now a fully-fledged Box customer. “When fully rolled out, this will be one of our largest deployments to date,” he said.
The boxmakers have also continued working on tighter integration with the Office 365 suite. As O365 is Microsoft’s fastest-growing corporate product ever, Box has essentially secured a spot on the hottest coattails in town and seems to be riding them into businesses across the globe.
“The over 1bn Office documents currently stored and shared in Box can now easily be opened and edited with Office online and this functionality will soon be available through Office on mobile and desktop experiences,” Levy said.
Although it probably didn’t have a direct impact on the top or bottom line, EMC’s divestiture of Syncplicity was also seen as a win for the Palo Alto-based company. EMC, which bought Syncplicity in 2012 (so that it had some skin in the cloud storage/syncing game) finally decided to let the company go in July and instead focus on its core business.
Box was quick to poach the former CEO and general manager of EMC’s Syncplicity business, Jeetu Patel, who joined Box as Chief Strategy Officer in August. Patel is heading up the Box Developer Edition product, which enables developers to integrate their applications with the Box platform.
Following on from the strong Q2, Box revised its projected revenue for the year to $295-297m, up from $286-290m.
While the share price jumped some 3% in after-hours trading to $14.70, Box is still well below the high of $23.23 that it reached on its opening day.