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Box Posts Q4 Loss, Cites Error By Analyst; Shares Fall

Sales rose 61 percent year on year, but expenses jumped too.

Asa Mathat

Reporting the results for its first quarter as a public company, cloud storage and collaboration company Box posted a quarterly loss amid some confusion over what the consensus view of analysts actually was.

Box’s fiscal Q4 loss of $1.65 per share which was 34 cents better than the $1.99 per-share loss predicted by analysts according to FactSet. Yet shareholders appeared to react to a more widely cited consensus view calling for a $1.17 loss.

In an interview, CEO Aaron Levie said that in the days leading up to its IPO, one analyst estimated Box’s fourth-quarter loss based on an incorrect share count. Consensus estimates are the average of guesses by analysts concerning what a company will report as a per-share profit or loss every quarter. One source of that data, FactSet Research Systems, had the correct figure. Thomson Reuters Analytics, a more widely cited source of consensus estimates, did not.

The end result contributed to a 14 percent drop in Box’s share price after hours as shareholders assumed that Box had posted a loss that was 48 cents a share worse than expected.

“Once we realized this analyst had made the error, we reached out and got it corrected,” Levie said. “The corrected data made it into FactSet but not Thomson Reuters.”

On a conference call, Levie explained the error. “Based on the consensus view as reported by FactSet, which we view as being correct, we beat the consensus view by 34 cents,” he said.

It was Box’s first bump on the road as a public company. Its initial attempts to float the company publicly were delayed by nearly a year because of market conditions.

But there was more than just an analyst’s error to worry about in Box’s results. Its expenses ballooned to $94 million, rising by more than $23 million year-on-year as Box continued to hire aggressively in order to grow its business.

“We’re going after a market that’s worth as much as $25 billion,” Levie said. “And we absolutely want to continue to address it aggressively with increased investment in our sales and marketing teams. As revenue grows, these will get more efficient over time and become smaller as a percentage of revenue.”

That much is true. As revenue grew 61 percent from the year-ago period, one closely watched expense line is marketing costs, which is where the company lumps the cost of the free accounts it gives users in hopes of selling them a paid account in the future. At $55.4 million, marketing spending rose 17 percent but amounted to 88 percent of overall sales, down from 97 percent in Q3.

Other expense lines also increased: Research and development spending rose 33 percent to $18 million. Sales and administrative costs doubled to $20.4 million.

All expenses considered, Box spent $1.49 for every dollar it made in sales.

For the first quarter of its fiscal 2016, Box said it expects revenue in the range of $63 million to $64 million and an operating loss of $35 million to $37 million. For the full year, it expects revenue to come in between $281 million and $285 million and an operating loss in the range of $141 million to $142 million.

Box finished its 2015 fiscal year with $216 million in revenue, up 74 percent from the previous year, and a net loss of $182 million, which works out to $11.48 a share.

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