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Box demonstrates overall business strength offsetting mixed results

Box (NYSE:BOX) shares gained as much as 7% in midday trading on Thursday after the company reported a marginal beat and a small miss for its third quarter profit and revenue.

BOX on Wednesday after the bell posted Q3 non-GAAP EPS of $0.31, beating consensus by just one cent, and revenue of $250 million missed estimates by $1.7 million.

The company also authorized an expansion of the stock repurchase program by $150 million.

Chief financial officer Dylan Smith, during the earnings call, said despite foreign currency and macroeconomic challenges, the company is on track to achieve accelerated annual revenue growth, expanded operating margins and prudent capital allocation.

Third quarter billings were $258 million, up 12% year-over-year, mainly due to increased early renewals and strong payment durations, Box said.

Looking into Q4, the company forecasts full churn to remain at roughly 3% and net retention rate to be ~108%, as it expects net retention to be impacted by lower seat expansion rates.

Fourth quarter revenue is expected to be around $255 million to $257 million and billings growth rate to be roughly 10% on an as-reported basis. Q4 GAAP EPS is expected to be in the range of $0.06 to $0.07 and non-GAAP EPS of $0.34 to $0.35.

BOX raised its FY 2023 non-GAAP EPS to be in the range of $1.16 to $1.17, up from $0.85 in the prior year, and aims to deliver first full year of positive GAAP EPS between two to three cents.

For the full year of FY 2023, Box sees currency headwinds to impact billings growth by ~6 percentage points, billings growth rate to be roughly in line, and a slight lag to revenue growth on an as-reported basis.

The company also warned that redundant public cloud and data center expenses will peak in the first half of FY 2024 and that in Q1 and Q2 next year, it expects gross margins to dip by a couple hundred basis points.

Stock is up nearly 10% year-to-date.