A month has gone by since the last earnings report for Box (BOX Quick QuoteBOX - Free Report) . Shares have lost about 10% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Box due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Box Q2 Earnings Top Estimates

Box reported second-quarter fiscal 2024 non-GAAP earnings per share of 36 cents, which surpassed the Zacks Consensus Estimate by 2.9%. The figure jumped 28.6% year over year.

Total revenues of $261.43 million beat the consensus mark of $261.03 million. The top line increased 6% year over year (9% growth on a constant currency basis).

Solid momentum in the Content Cloud platform and the growing adoption of Enterprise Plus Suites drove top-line growth.

Moreover, continuous product enhancements and the growing momentum of Box AI were a positive.

However, macro concerns continue to impact the customers’ IT spending negatively.

Quarter in Detail

Billings were $232.5 million for the reported quarter, decreasing 1% year over year (1% growth on a constant currency basis).

Deferred revenues were $479 million in the fiscal second quarter, increasing 5% from the prior fiscal-year quarter’s reading (8% growth on a constant currency basis).

BOX saw a 78% attach rate for its Suites, up 600 basis points (bps) year over year.

Further, Box’s net retention rate was 103% at the end of the fiscal second quarter, down 900 bps year over year.

The remaining performance obligations for the reported quarter were $1.14 billion, up 8% on a year-over-year basis (11% growth on a constant currency basis).

Operating Results

Non-GAAP gross margin was 76.9%, expanding 70 bps from the same-quarter level in the previous year.

Box’s operating expenses of $184.5 million increased 3.7% year over year. As a percentage of revenues, the figure contracted 180 bps from the year-ago quarter’s level to 70.6%.

On a non-GAAP basis, the company recorded an operating margin of 24.8%, which expanded 310 bps from the prior-year quarter’s level.

Balance Sheet & Cash Flow

As of Jul 31, 2023, cash and cash equivalents were $395.97 million, down from $481.4 million as of Apr 30, 2023. BOX’s short-term investments amounted to $49.4 million, up from $35.6 million in the previous fiscal quarter.

Accounts receivables amounted to $165.4 million at the end of the fiscal second quarter, which increased from $132.7 million at the end of the prior fiscal quarter.

Non-current debt was pegged at $369.82 million at the reported quarter’s end, which remained flat in comparison with the previous quarter’s level.

Box generated $32.7 million in cash from operations in the fiscal second quarter, down from $124.9 million in the previous fiscal quarter.

Additionally, BOX generated a free cash flow of $20.6 million in the fiscal second quarter.

Guidance

For third-quarter fiscal 2024, Box expects revenues between $261 million and $263 million, suggesting a 5% rise at the high end of the range from the prior fiscal year’s reported figure. Further, the constant currency growth rate is pegged at 7%.

On a non-GAAP basis, BOX projects earnings per share in the range of 37 cents to 38 cents. The guidance includes an expected foreign exchange headwind of 4 cents.

The non-GAAP operating margin for the fiscal third quarter is expected to be 25.5%.

For fiscal 2024, the company trimmed its revenue guidance from $1.045-$1.055 billion to $1.040-$1.044 billion, indicating an increase of 5% from the last fiscal year’s reading at the high end of the range. Further, the constant currency growth rate is pegged at 8%.

BOX also updated its guidance for non-GAAP earnings per share, which is now expected in the band of $1.46-$1.50, including an expected foreign exchange headwind of 17 cents. Previous guidance for the same was $1.44-$1.50.

The non-GAAP operating margin for the full fiscal year is expected to be 25.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -54.35% due to these changes.

VGM Scores

Currently, Box has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Box has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Box belongs to the Zacks Internet - Software industry. Another stock from the same industry, Sea Limited Sponsored ADR (SE Quick QuoteSE - Free Report) , has gained 11% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.

Sea Limited Sponsored ADR reported revenues of $3.01 billion in the last reported quarter, representing a year-over-year change of +9.1%. EPS of $0.83 for the same period compares with -$1.03 a year ago.

For the current quarter, Sea Limited Sponsored ADR is expected to post earnings of $0.59 per share, indicating a change of +189.4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Sea Limited Sponsored ADR. Also, the stock has a VGM Score of B.