Box files for IPO but profits remain elusive

<p>Recent market expectations came to pass on Monday (24th March) as US-based, Box, revealed plans to raise up to $250m in an initial public offering […]</p>

Recent market expectations came to pass on Monday (24th March) as US-based, Box, revealed plans to raise up to $250m in an initial public offering (IPO).

The online storage company’s upcoming IPO is widely seen as a prelude to rivals (notably Dropbox) making their own market debut imminently.

The rising trend in online storage is well known, driven by the convenience and efficiency of storing, accessing and sharing data anytime, anywhere and on any device.

And Box is certainly deeply entrenched in that space: offering users the ability to access and work with their content from any internet-enabled device (encompassing PCs and mobile devices). So, it’s no surprise that expectations surrounding Box have been high.

That, of course, means that all eyes are focused on the company’s financials. Here they are…

The company’s top-line growth seems solid enough

The company’s business model centres on encouraging individuals to sign up to its services for free in the hopes that these individuals, having seen the benefits of the company’s services, will encourage their organisations to buy subscriptions. It seems to be working.

As at January this year, the company claimed 25 million registered users from across some 225,000 organisations globally. Of which, 34,000 are paying organisations. And that, according to the company, means that there are plenty of expansion opportunities within its existing customer base.

That has translated into a fast-growing top line over the years. According to Box’s IPO prospectus, for its year ended January 2014, the company took revenue of around $124m – that’s a notable 111% growth over the previous year.

That’s all well and good, but…

Box posted a net loss of around $169m for its year ended January 2014 versus a net loss of $113m the year before.

The widening loss prompts pause for thought but it’s not entirely unusual for relatively new and growing companies to fork out handsomely as they look to lure in new customers (sales and marketing for the period came in at $171m).

But here’s the attention-worthy bit…

According to the company’s prospectus, Box does not expect to be profitable “for the foreseeable future”.

Meanwhile, let’s not forget just who the company’s competitors are – and that it includes Google, Microsoft and Amazon – some of which have enough resources to ramp up competition should they choose, which could hurt Box’s growth ambitions.

Still, the company’s IPO has been much anticipated and will likely garner plenty of investor interest – and an equally frothy valuation – as all things cloud-related continues to excite investors, at least in the short term.

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