Seeking Alpha • Nov 16
Boxed, Inc. Stock: Financial Challenges Not Worth Recycling
Summary
BOXD reported its Q3 earnings with a decline in revenue and widening loss.
A shift towards B2B customers has helped to improve some key performance indicators, although financial fundamentals remain poor.
An outlook for recurring losses and an ongoing cash burn will likely keep shares under pressure.
Boxed, Inc. (BOXD) is approaching its 10th anniversary as an online retailer specializing in household staples and food pantry items. While sales climbed over the last several years amid the e-commerce boom, the company was not been able to translate that momentum into a financially viable model. Indeed, revenues are down this year with a widening loss leaving shares off a disastrous -95% year-to-date in 2022.
The company just reported its latest quarterly result highlighted by some deep financial challenges likely to continue leaving some serious doubt about the long-term sustainability of the business. The only thing we're seeing inside BOXD is the number of red flags that should serve as a warning for investors to stay away.
BOXD Earnings Recap
BOXD Q3 revenue of $41.7 million declined by 15% year-over-year. Within that figure, retail sales increased by 1% from Q3 2021 although the bigger impact was the limited contribution of the software & services segment related to its "Spresso" e-commerce management platform that is licensed to other companies. Management explains that a large $10 million deal in 2021 left a difficult comparison with an understanding that the sales trends feature some quarterly variability. On this point, the expectation is that a new customer engagement will add to some top-line boost going forward.
The company messaging has been to focus on some strong points. The average order value on the site reached a record $150, from $123 in Q3 2021. Similarly, the retail net revenue per active customer increased to $336 from $243. Boxed is also finding some success in serving more business-to-business (B2B) customers, where gross merchandise value climbed by 37% y/y in Q3.
On the other hand, the total number of active customers declined by 21% to 124k compared to 157 in the period last year. The readout is that Boxed is serving fewer customers, but the most loyal shoppers are spending a bit more on regular purchases.
source: company IR
The bigger question is if any improvement from here or the marginally positive silver linings will be enough to fill the hole of the large recurring loss. The challenge is evident looking at the Q3 operating loss that reached -$21.6 million compared to -$5.4 million in Q3 2021. A nearly 86% increase in SG&A following the company's December 2021 SPAC merger added significant expenses. The adjusted EBITDA loss of -$16.3 million also widened from -$3.0 million in the period last year.
source: company IR
The company ended the quarter with $39.4 million in cash including a portion of "restricted cash" against $44 million in long-term debt. There is also a separate $81 million in liabilities related to PIPE convertible notes. All this is in the context of a business that burned about $10.4 million in cash in Q3, meaning liquidity will need to be addressed over the next few quarters likely through another capital raise.
In terms of guidance, management expects full-year revenue in the range of $165 million to $180 million. This implies approximately flat Q4 sales compared to Q3. The expectation is that the 2022 adjusted EBITDA loss ends in the range of -$65 million to -$80 million, compared to -$61 million year to date.
BOXD Stock Price Forecast
We're bearish on BOXD as we just don't see the company picking up the growth momentum necessary to jumpstart a real turnaround. The skepticism we have is whether Boxed offers a compelling shopping proposition to potential customers that are capable of competing with the segment leaders like Amazon.com (AMZN) and Walmart Inc. (WMT) that can offer more value across their ecosystem of services. There's little reason to see why the ongoing decline of active customers at Boxed will reverse or even stabilize.
Based on our estimate and the current gross margin of 12%, retail revenues would need to more than double from the current quarterly level to approach a breakeven adjusted EBITDA. Again, this is a difficult market segment where even Amazon struggles with e-commerce profitability amid current macro headwinds.Seeking Alpha • Aug 10
Boxed: Hold The Stock For Long-Term Growth
It has recently signed a Memorandum of Understanding with AEON's subsidiary AEON Vietnam Company Limited to expand the geographical reach.
It has also won the first US-based company contract of Jeffers Pet which is a key milestone as it opens the door to the new geographical market and potential.
It is trading below its 50-day and 100-day weighted moving average. This reflects that the company has negative technical indicators due to the severe downside since June 2022.
Investment Thesis
Boxed (BOXD) is an e-commerce retailer and provider of e-commerce platform services. It has recently expanded its Spresso business in the USA and Vietnam market, increasing its potential customer base. I believe these expansions can act as a growth factor for the company in the coming years.
About Boxed
The company is an e-commerce retailer and provides e-commerce services. The company offers bulk pantry consumables to corporates and household consumers. It also offers e-commerce platform services to enterprise-level customers through the latest Software & Services business which gives access to its end-to-end technology. The company reports its revenue under two segments. The first segment is Retail, and the second segment is Software & Services. The company's retail business generates 89% of the total revenue, and Software & Services, which is newly established, contributes 11% of the total net sales. According to a recent strategic update, the retail segment of the company has achieved growth of 11.2%, and the Gross Merchandise Value (GMV) has grown by 19.4% YoY in the second quarter of FY2022. GMV has shown strong growth in the last three consecutive quarters. Retail active customers have reached 167 million, which is 9% YoY growth. The company has changed its "MaxDelivery" brand, which it acquired in 2021 as "Boxed Market" to expand into new markets. To expand additional Boxed Market micro-fulfillment centers in Westchester and Brooklyn, New York, Boxed recently acquired new leases. The centers are anticipated to launch fully in the fourth quarter of this year. These expansions can significantly affect the financials in the long term.
Second Quarter Performance (Investor Presentation)
Software & Services business has branded as "Spresso" to create a separate brand value in the market. The company has a strong growth vision for this segment as it has expanded business in the USA and Vietnam. I believe the Software & Services segment has huge growth potential in the coming years as the company has strategic plans to capitalize on the recent commercial momentum by building its broader Boxed ecosystem to offer a wide range of services. I think the recent AEON partnership and the entry into the USA can significantly contribute to the long-term target of positive EBITDA by FY2024 and the company's ecosystem.
Expansion Into New Geographies
The company has recently signed a Memorandum of Understanding (MoU) with AEON's subsidiary AEON Vietnam Company Limited to expand the geographical reach of the end-to-end software and services platform in Vietnam. The company has previously partnered with AEON to expand Boxed's proprietary e-commerce technology in the Malaysian market, which was very successful. I think the previous successful collaboration gives certainty about the synergy of both entities. The company has also announced that after the Vietnam market, it will continue the expansion in Southeast Asia with AEON. I believe this global expansion of the company can positively affect the financials of the company in the long term. It has also won the first US-based company contract of Jeffers Pet which is a key milestone as it opens the door to the new geographical market and potential customer base. I think the company's expansion of the Spresso platform in the USA and Vietnam might act as a primary growth catalyst in the coming period as both expansions have increased the global reach.
What Is The Main Risk Faced By BOXD?
Inflation
Industry-wide inflation that we are currently facing has criticality affected the company's profitability. BOXD is susceptible to the increasing cost of goods as it directly affects the customer demand for the company. BOXD operates in a highly competitive market, and to maintain sales and retain customers, the company has to sell goods at an attractive price. To maintain the selling price of the products, the company has to take a hit on the profit margins. The inflation is likely to continue through FY23, which is not a positive sign for the company.
Technical Analysis & Fundamental Valuation
Technical Analysis of Boxed (Investing.com)
BOXD is trading below its 50-day, and 100-day weighted moving average (WMA). This reflects that the company has negative technical indicators due to the severe downside since June 2022. The stock price is facing resistance at the 50-day WMA level, and unless the stock crosses the 50-day WMA, it's difficult to see momentum in the stock. The RSI indicator, on the other hand, suggests that the stock is consolidating in the 30-50 RSI band range. This range is generally considered a buy zone; however, there is no significant divergence as per the RSI chart to suggest any buying momentum in the stock. As per my analysis, both RSI and WMA indicators don't reflect any buying momentum in the stock, and I would recommend that investors hold the stock for now.