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Box Updates IPO Filing, on Track to $225 Million in Revenue

It's looking like early 2015 for that IPO.

Asa Mathat

Cloud storage and collaboration company Box jumped one of the final hurdles on its way to an initial public offering on Wednesday, releasing a fresh set of S-1 financial data that shows it keeping fit as it awaits more hospitable stock market conditions.

The company didn’t specify how many shares it will offer, nor how much it intends to raise. But it did lower the valuation of its common share price to $13.05 a share — down from from an estimate of $17.85 a share in March. Box was valued at north of $2.4 billion when it raised a round of private capital from TPG and Coatue Management in July.

Wednesday’s filing leaves Box ready to pull the trigger on its offering when it is ready, but doesn’t hint as to when that might be. The company still has $165 million in the bank, and earlier this year signaled it might wait until sometime in 2015 before it debuts trading. A Box spokeswoman said, “Our plan continues to be to go public when it makes the most sense for Box and the market.”

Box has been one of the most closely watched — and most delayed — of the pre-IPO cloud software companies of recent years. Its IPO plans ran aground earlier this year when the valuations of numerous publicly traded cloud software companies fell suddenly, just as it filed to go public. The offering was then delayed until the fall, and now is unlikely to be completed until early 2015.

The filing shows that Box grew its revenue by more than 80 percent in the nine-month period ending Oct. 31, to $154 million from $85 million previously. That puts it on track to post about $225 million in revenue for the 2014 fiscal year. The filing also shows that the number of companies paying Box to use its service grew to 44,000 from the 34,000 previously reported.

For the third quarter ended Oct. 31, Box’s revenue was $57 million, up 70 percent from the year-ago period. The company’s gross margin during the quarter was 78 percent. Overall, Box lost $45.4 million in the quarter.

One key factor that has caused some anxiety around Box’s previous filings is the cost of sales and marketing, which includes the cost of carrying free customers that Box hopes to convert into paying ones. In its last filing, Box revealed that marketing expenses amounted to 105 percent of revenue. In other words, the company was spending $1.05 per every dollar of revenue it brought in.

In the third quarter, that ratio shifted to below 97 percent, as marketing expenses — at $55.3 million — came in below revenue for the first time since Box has been reporting its results.

Still, the cost of carrying so-called freemium users is considerable. Box’s total bucket of individual users — both free and paid — totaled 32 million at 275,000 companies. Of those, 90 percent were using the company’s services for free, the company said.

Meanwhile, in a signal that Box intends to continue to spend on growth for the foreseeable future, other costs rose: Research and development costs rose year on year by 43 percent, to $17.2 million. General and administrative costs rose 50 percent to nearly $17 million. Box’s employee headcount rose to 1,131, from 1,016 over the summer.

Update: Specified reduced price estimate was to common shares.

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