Box Climbs on Rising Profitability Amid Starboard Scrutiny

(Bloomberg) -- Box Inc. gave an annual earnings forecast that topped Wall Street estimates, suggesting that larger deals and cost cuts are improving profit at the file-sharing company.

Earnings, excluding some expenses, will be 38 cents to 44 cents a share in fiscal 2021, the Redwood City, California-based company said Wednesday in a statement. On average, analysts expected 29 cents a share. Sales in the fiscal first quarter will be as much as $184 million, topping analysts’ projections of $182 million. Shares rose more than 9% in extended trading.

Box Chief Executive Officer Aaron Levie has been under pressure to boost the sales growth and profitability of the software maker he co-founded. Activist Starboard Value LP took a stake in the company in September, becoming its third-largest shareholder and saying the 15-year-old company was undervalued. Box’s growth has lagged behind peers and the company has, at times, missed investors’ earnings expectations over the past year. The forecast, and quarterly results, provided some support to Levie’s promise that new security and collaboration tools, as well as an effort to sell software bundles, will lift the company’s fortunes.

Box’s Shield security tool is “definitely being adopted in a faster-than-expected fashion,” Levie said in an interview. “We’re optimizing all of our expenses across the business and focusing on sales productivity. That has set us up in a good position for Q1 and the rest of the year to drive profitability improvements and growth.”

The company signed 112 deals worth more than $100,000 in the period that ended Jan. 31, compared with 94 such deals a year earlier, Levie said. Box expects to have an operating margin of 9% to 10% this fiscal year, compared with 1% last year, he said.

In the period ended Jan. 31, sales increased 12% to $183.6 million. The company projected revenue of $771 million to $777 million in the fiscal year, compared with analysts’ estimates of $773 million.

Box’s shares hit a high of $16.74 in extended trading after closing at $14.98 in New York. The stock has dropped 38% over the past 12 months.

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Dan Reichl

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