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Box stock falls as the company says it's no longer cash-flow positive

Key Points
  • Box went two quarters being free cash flow positive, but that streak has ended.
  • The company now has 76,000 paying customers.
Aaron Levie, CEO, Box
Scott Mlyn | CNBC

Cloud file syncing and sharing company Box on Wednesday saw its stock fall by as much as 7 percent after the company released better-than-expected earnings for the second quarter of its 2018 fiscal year, which ended on July 31.

  • EPS: Excluding certain items, a loss of 11 cents per share vs. a loss of 13 cents per share as expected by analysts, according to Thomson Reuters.
  • Revenue: $122.9 million vs. $121.7 million as expected by analysts, according to Thomson Reuters.

Box went two quarters of being free cash-flow positive, but lost that status this quarter -- free cash flow came in at negative $14.7 million, according to Wednesday's earnings statement. The company has never been profitable on a GAAP basis. For Keybanc analysts Rob Owens, Mike Casado and Liz Verity, a bullish scenario would show Box breaking even in the 2018 calendar year.

The company is still aiming to be free cash flow positive for its entire 2018 fiscal year, a spokeswoman told CNBC. In the second quarter of the fiscal year Box faced troubles because of seasonality, but the company expects to be free cash flow positive in the third and fourth quarters, chief financial officer Dylan Smith said on today's earnings call.

The company said it expects a loss of 13-14 cents per share on $128-129 million in revenue for the next quarter. In terms of guidance analysts were expecting a loss of 13 cents per share on $128.9 million in revenue, according to Thomson Reuters.

For the full 2018 fiscal year, the company expects a loss of 44-46 cents per share on $503-506 million in revenue. Analysts were expecting a loss of 46 cents per share on $505.7 million in revenue in terms of full-year guidance.

Box's revenue growth rate for the quarter slipped from 30 percent to 28 percent year over year. The company's non-GAAP operating margin of negative 12 percent came in above analysts' estimate of negative 13.7 percent, according to StreetAccount.

The company also said it now has 76,000 paying business customers, up from 74,000 in May. Brian White of Drexel Hamilton on Monday said he was expecting Box to report a total of roughly 77,000 customers.

Box's competitors include , Dropbox and . In June Box said it would make it possible for customers to use the Box service atop Microsoft's Azure public cloud infrastructure.

Box's operating chief, Dan Levin, announced his resignation in July. Levin's successor is Stephanie Carullo, who previously held executive roles at Apple and Cisco.

Box stock has risen almost 40 percent since the beginning of the year, according to FactSet.

At the company's BoxWorks conference in October, Box will talk about new ways that it will be adding artificial intelligence into its existing technology, "making content more valuable," CEO Aaron Levie said on the earnings call, and changing the way that people interact with it.

When asked about an implied improvement in margin in the second half of the current fiscal year, Levie said Box has recently saved more money than it had expected as it moves applications into public clouds -- "especially now that we're working more closely with Microsoft," he added.

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