Author Archives: Scalper1

Box Stock Vaults 14% As Cloud Storage Firm Beats Q4 Views, Adds Customers

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.

Square Hits Bullseye With First Revenue Scorecard Since IPO

Investors bolstered Square ( SQ ) stock in after-hours trading, after the mobile payments company late Wednesday posted Q4 revenue that safely exceeded Wall Street’s expectations. In its first earnings release since its November IPO, Square reported sales of $374 million, up 49% from $251 million in the year-earlier quarter. The company’s net loss widened to 34 cents per share from 25 cents in Q4 2014, as operating expenses rose 52% to $157 million. The company didn’t release EPS minus items. On that basis, analysts were expecting a 14-cent per-share loss, up from 11 cents. Analysts polled by Thomson Reuters expect Q1 sales of $325 million, up 29% from the year-earlier quarter. Analyst model a per-share loss minus items of 11 cents, improving from a 14-cent loss in Q1 2015. The company guided to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of a $9 million loss to an $11 million loss, before ending 2016 with an adjusted EBITDA profit of $6 million to $12 million. It posted an adjusted EBITDA loss of $6 million in Q4. Gross payment volume — the total volume of payments processed by the company — rose nearly 50% to $10.2 billion in Q4. The company provided only “adjusted revenue” guidance for Q1, calling for $132 million to $137 million, and for $600 million to $620 million for 2016. It posted adjusted revenue of $135 million for Q4, up 64% vs. Q4 2014. Square stock was up more than 1% in after-hours trading, after the company released its earnings. Shares jumped 4.8% in Wednesday’s regular session, to 12.03, still a far cry from its all-time high of 14.78 touched on its first day of trading. The stock has been volatile —  in part, analysts say  — because investors weren’t sure how to value the company before its first earnings release. Square provides digital cash registers and credit card readers — which users affix to their smartphones or tablets — targeting smaller businesses, as well as processing the transactions conducted over its point-of-sale hardware. In addition, Square offers its restaurant clients the Caviar app and delivery service. In 2015, Caviar launched in six new markets and is now in 17 markets across the U.S. Square CEO and co-founder Jack Dorsey also is co-founder and CEO at Twitter ( TWTR ), which has led investors to speculate on his ability to run two high-profile companies with big challenges at the same time. On Square’s earnings conference call, Dorsey said his dual jobs have “been working out really well. I benefit a lot from a consistent schedule and structure.” Dorsey said he has separate four-hour meetings on Monday’s with leaders of both companies, and shorter meetings on Wednesdays and Fridays. He pointed out that both San Francisco-based companies are located practically right across the street from one another. But questions like these also have led to a volatile stock, for a company whose rivals on some levels include major companies such as Apple ( AAPL ), PayPal ( PYPL ) and Alphabet ( GOOGL ). Square also provides transaction services such as peer-to-peer payments and other financial services such as payroll and short-term cash advances to its sellers. Square Capital Advances Accelerate Square said that it extended more than $400 million in cash advances in 2015 through its Square Capital business, including $150 million in Q4 alone. The company says that 90% of sellers who have used Square Capital have asked for a second advance. Square Capital offers short-term cash advances to businesses with more than $250,000 in annual revenue. Square charges a flat rate for the cash advance repayments, which are deducted from each transaction a business processes through Square. The company uses the wealth of transaction data it collects about a company to determine how much cash it is willing to advance to a business. Analysts speculate that Square Capital can be a big opportunity for growth because of its product mix and its ability to keep merchants as Square customers. “Our sellers are our partners,” Dorsey said on the call. “When they grow, we grow.” On the call, CFO Sarah Friar said Square has more than 2 million active sellers and “adds 100,000 active sellers per quarter.” In its Q4 release, Square said its Instant Deposit feature, which send funds from a sale immediate to a seller’s bank account for a 1% charge — normally, Square settles payments the next day — has completed 600,000 such deposits since its August launch. Peer-To-Peer Payments In recent weeks Square has upped the ante in its battle against PayPal. Square Cash — the company’s peer-to-peer payments app — recently added a feature called “Cash Drawer” that lets customers store money in their account, instead of transferring it directly to friends. PayPal offers the same feature. It’s possible Square will attempt to leverage the feature into a mobile wallet, much like the direction PayPal’s own Venmo is heading. Venmo is a free person-to-person payment app. PayPal has opened up its “Buy With Venmo” option to “select” PayPal merchants. Buying from a merchant triggers transaction fees, which PayPal hopes will make the app profitable. Square is taking a similar approach, letting people check out with Square Cash at businesses that use Square’s digital cash register and transaction processing technology — much the way Apple Pay and Android Pay, Google’s version of a digital wallet, do.