Box, a provider of cloud software for file sharing, collaboration and document security, is scheduled to debut on the New York Stock Exchange on January 23, a full 10 months after the Los Altos, California-based company first filed publicly with the Securities and Exchange Commission, CNBC said.
Part of the reason for the delay was that the stock market hit multiple rough patches in the months that followed the prospectus filing. More troublesome though were Box’s financials. The company was coming off a quarter in which it lost more money ($43.4 million) than it generated in revenue ($38.8 million), the report said.
The company’s still losing money, but the trendlines have changed. Sales in the period ended Oct. 31 jumped 70 percent to $57 million from a year earlier, while Box’s net loss narrowed to $45.4 million from $51.4 million. Box has over 44, 000 customers, including General Electric, which is in the process of rolling the product out to 300, 000 employees, according to CNBC.
Aaron Levie is the public face of Box, but at the company’s online IPO roadshow, the more important commentary came from the lesser-known co-founder Dylan Smith. The 29-year-old chief financial officer is responsible for telling investors how the business, which has been burning capital at a high rate even by Silicon Valley standards, can eventually turn profitable, the report said.
At the end of October, Box had $165.3 million in cash, up from $108.9 million at the end of January 2014. Speedy revenue growth, shrinking losses and improving cash flow allowed CFO Smith to tell Wall Street what it wanted to hear, CNBC said.
“We feel confident that our cash position will more than cover our cash needs through profitability, ” he said in the recorded roadshow.
Box last week filed to raise as much as $186.9 million in a share sale that would value the company at up to $1.55 billion, the report said.
Customers initially cost money to attract, but they become more profitable over time, especially if they renew their contracts and add more licenses. Box says that 95 percent of its customers renew, and enough of them increase spending that the company’s retention rate, which factors in the higher amount of money that retained customers spend, is effectively around 130 percent, CNBC said.
“We make significant upfront investments to acquire new customers, because once customers adopt our solution, our strong customer retention and expansion rates” lead to better margins, Smith said.
Box’s gross margin, or the profit that’s left after subtracting the costs of goods sold, was 78 percent in the latest quarter, compared with 70 percent for Salesforce and 65 percent for Workday, according to the report.
Levie, 29, and Smith co-founded the company in 2005 as college students. Smith graduated from Duke University, while Levie left the University of Southern California after starting Box, CNBC said.
Even with its improving financial outlook, Box is by no means in the clear. It faces stout competition from large business software vendors like Microsoft and Citrix as well as from consumer file-sharing service Dropbox. Box has over 1, 100 employees, including high-priced enterprise salespeople, so costs will continue to be lofty, especially in Silicon Valley, the report said.
Box’s initial IPO price range is $11 to $13 a share., CNBC said.