Public Markets

Box’s 19% Dip And What It Says For SaaS Multiples

Morning Report: After its earnings report, shares of Box have fallen sharply. Here’s the new SaaS math.

Box’s status as a good SaaS benchmark is likely fading as the company matures. Its slowing growth rate in percentage terms places it further away from SaaS startups as it scales. But, at least one more time, let’s examine the state of Box and write down the SaaS multiples it kicks off.

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Even largely beat earnings expectations yesterday after the bell, Box is down on dramatically missed forecasts. Investors weighed the latter far more than the former, and so Box shares are off around 19 percent this morning.

From our coverage of the company’s earnings report yesterday, here’s how far the mismatch went:

Why the massive decline? Analysts had expected the company to predict a $0.08, adjusted per-share loss in the next quarter, along with revenue of $144.27 million. Box, in its release, indicates that it expects revenue of $139 to $140 million, which is lower due to “the new revenue recognition standard (‘ASC 606’).” Box notes that it is “adopting […]  beginning with its fiscal year 2019 using the modified retrospective transition method.”

However, the firm notes that without the change in accounting standards, it would have expected revenue of between $142 and $143 million, which would have also fallen short of expectations.

So even Box’s pseudo-adjusted forecast would have fallen short, implying to analysts that their broader growth picture for the company was too rosy. As such, it’s future cashflows are smaller, making it worth less today.

When we wrapped up our look at Box’s results, we tried to figure out its new multiples. But since most public financial information is a bit laggy when it comes to after-hours value swings, we didn’t have confidence in the numerator of any price-sales multiple.

Today, we do. As such, let’s begin:

  • Box last quarter revenue: $136.7 million.
  • Implied ARR: $546.8 million.
  • Box TTM revenue: $506.1 million.
  • Box market cap: $2.63 billion.
  • Box’s ARR multiple: 4.8x.
  • Box trailing revenue multiple: 5.2x.

That’s a dramatic decline. And, as a reminder, we care because the above will impact both startups who investors measure against public comps and Dropbox, which wants to drop the Box comparison but probably won’t be able to. And that comparison just got much worse.

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