Box Is Slowing Down

The updated S1 shows revenue of $57 million in the quarter ended October 31, which is up almost 70% from a year ago.

But in the July quarter it had $51 million in revenue, up 81% from the previous year, and the tale is the same the farther you go back - revenues were up 94% in the April quarter (from a year ago), and were up 97% in the January quarter (from a year ago).

At the same time, the big concern for a lot of potential investors was Box's sales and marketing spend, which on a quarterly basis was higher than its total revenue when the company first filed to go public in March.

That's no longer the case - sales and marketing expenses were only $55 million during the quarter, less than the $57 million in revenue. Overall net loss was $45 million.

The numbers show a pretty typical balancing act for software-as-a-service companies like Box: customer acquisition costs are directly correlated with revenue growth. The big question is whether Box can book enough recurring revenue now, and get customers to continue paying for it over the long run, to make it worth the huge up-front expenditures.

As the company's 29-year-old CEO put it in an interview with Business Insider, "The whole power of this subscription revenue model is that you have a lifetime value of a customer that is very different than the initial annual revenue from the customer and the cost to acquire that customer."

There was some other decent news for Box in the updated filing as well. For instance, now 10% of Box's customers pay it for the service, versus only 7% when it first filed. Retention rates are also looking pretty good - Box said only 5% of its customers chose not to renew their subscriptions in the year ended October 31, which is a "decrease" from the previous year.