Box filed its third quarter S-1 update today, almost nine months after they originally filed the document required for an initial public offering. This time the numbers look a bit better, but there were still enough negatives to continue to raise some red flags. Still, given the improving IPO climate in Silicon Valley, Box appears closer to finally pulling the IPO trigger.
It’s impossible to say of course, and given the quiet period they are restricted from speculating. But we’re not. We think there could be some points in their favor here, but the picture isn’t entirely rosy, either.
First of all, the IPO freeze appears to be ending and perhaps Wall Street is ready for another look. Just this week, two Silicon Valley companies, New Relic and Hortonworks, are ready go public. New Relic, being a cloud company, is the better comparison, and it is not only ready to go, it upped its estimated selling price from $18-20 to $20-22. Against this more favorable backdrop, could Box be getting ready, too?
Since it filed the original S-1, Box had a major customer win in May, landing GE and an impressive 300,000 seats in the process. That gave Box a much-needed lift after it got slammed after filing in March. The GE sale helped in a couple of ways. It showed that a really big enterprise company was interested in Box in spite of the loud criticism they were dealing with, and it gave them some good news to distract the critics with. Yet it was hard to ignore the red ink and the cash burn.
In an interview with TechCrunch last month, Box COO Dan Levin said he was surprised by the heavy criticism of the company after the filing, and defended the spending calling it disciplined.
“We had access to large amounts of inexpensive capital and our market is arbitrarily large and when you have those conditions, money and a big market, the rational behavior is to ramp up as fast as you can. We won’t do it forever. We don’t have to do it forever,” Levin said.
Which brings us to today’s update.
The company had revenue in its fiscal third quarter of $57.05 million. The period, which ended  on October 31, generated losses for the company — on a GAAP basis — of $45.42 million. That figure was up sharply from its fiscal second-quarter loss of $37.56 million. The company saw its GAAP net loss decline from its fiscal third quarter of 2013 through its fiscal second quarter of 2014.
The decline, from $51.39 million in its fiscal third a year ago, to $37.56 million in its fiscal second this year was encouraging. To see the company’s GAAP loss increase on a sequential quarter basis in the most recent three month period is discouraging.
Still, Box posted large revenue growth on a first-three-quarter basis from 2013 to 2014, seeing its top line rise from $85.36 million to $153.80 million. Its net loss, across the same period, only grew by $4 million, from $125.44 million to $129.07 million.
The company remains highly unprofitable, and its revenue is still quite expensive. Box now has a revenue run rate of more than $200 million. Presumably, its annual recurring revenue, or ARR, is a delta higher than that.
The company remains well capitalized. As its new S-1 notes, Box has “cash and cash equivalents of $165.3 million.” In its first three quarters of this fiscal year, the company’s operations burned through $69.31 million. That was roughly unchanged from its year-ago period figure of $69.12 million. The company also lost nearly $30 million on “investing activities,” which appears to be a reduction in its debt load.
Box has sufficient capital for a number of quarters. Its roughly $32 million cash burn in its fiscal quarter puts it at more than a year of float, provided that its losses do not increase.
