Box takes the tape off its IPO, again

Contact: Alan Pelz-Sharpe

Box looks set to hit the IPO market six months after revealing an S1 filing that met with a storm of disapproval.

In the initial filing, the company revealed that it was spending more on sales and marketing than it was generating in revenue – about 2x more. Growth is the central element of Box’s DNA, like most tech companies exiting the startup phase. And Wall Street has been OK with that. But Box’s spending tested the limits, and the filing came amid a slump in SaaS stocks.

In the time since the initial S1, the enterprise file sync and share (EFSS) vendor has tamed its spending and demonstrated a path to profitability – though it’s still far from it. In the most recently reported quarter, its net loss was only 80% of its revenue, compared with a net loss that was 2.5x its sales a year earlier. Revenue nearly doubled across those periods.

Box has a promising compounding revenue renewal model, though it’s hard to articulate. That’s something its new filing goes to greater lengths to illustrate. Now that the company can show a path to profitability and is better at articulating its business model, the offering will likely do well, giving Box the capital and currency it needs to continue to grow.

The Street’s embrace of Box has implications beyond the company’s future. A successful offering would open the door for Dropbox to have an IPO of its own. Just as Box’s stumble on the way to an IPO damped the exit outlook for other EFSS startups (as we noted in an earlier report), its success would brighten the prospects for the entire sector.

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Posted in IPO