Core Insights - Jack in the Box Inc. has been trading at a low valuation, prompting an investigation into the reasons behind this trend [1] Company Analysis - The company is perceived as a long-term investment opportunity, with a typical investment horizon of 5-10 years [1] - The investment strategy focuses on a balanced portfolio that includes growth, value, and dividend-paying stocks, with a particular emphasis on value stocks [1] Market Position - The current market sentiment towards Jack in the Box Inc. suggests potential undervaluation, which may present investment opportunities for value-focused investors [1]

Core Viewpoint - Box reported a decline in non-GAAP earnings for Q1 fiscal 2026, but total revenues exceeded expectations, driven by strong demand for its Suite offerings and new product introductions [1][2][3]. Financial Performance - Non-GAAP earnings for Q1 fiscal 2026 were 30 cents per share, a 23.1% decline year over year, but exceeded the Zacks Consensus Estimate by 20% [1] - Total revenues reached $276.3 million, surpassing the consensus mark by 0.67%, with a year-over-year increase of 4.4% on a reported basis and 5% on a constant-currency basis [1] - Billings for the quarter were $242.3 million, reflecting a 27% year-over-year increase (17% growth on a constant-currency basis) [3] - The company’s net retention rate improved to 102%, up 100 basis points year over year [4] Product and Service Developments - The revenue growth was primarily driven by the strong momentum of Box Suites, which bundle multiple products and services [2] - Box introduced a new Box AI Agent for Microsoft 365 Copilot, enhancing customer capabilities to interact with Box content [4] Operating Metrics - Non-GAAP gross margin for Q1 fiscal 2026 was 80.5%, an increase of 30 basis points year over year [6] - Operating expenses rose to $209.3 million, an 11.1% increase year over year, leading to an operating margin of 25.3%, which contracted by 130 basis points [6] Balance Sheet and Cash Flow - As of April 30, 2025, cash and cash equivalents were $689.7 million, up from $624.6 million at the end of January 2025 [7] - The company generated $127.1 million in cash from operations, an increase from $102.2 million in the previous quarter [8] - Non-GAAP free cash flow for the quarter was $118.3 million, with $50 million spent on share repurchases [9] Guidance - For Q2 fiscal 2026, Box expects revenues between $290 million and $291 million, indicating an 8% rise year over year [10] - For fiscal 2026, the revenue guidance is set between $1.16 billion and $1.17 billion, suggesting a 7% year-over-year increase [11]

Core Insights - Box Inc and Okta Inc reported earnings that exceeded estimates for the first quarter, but their market reactions diverged significantly due to differing guidance and outlooks [1] Box Inc (NYSE:BOX) - Box Inc's stock surged by 17.3%, trading at $36.88, and reached a record high of $37, marking its largest single-day percentage gain since March 2020 [2] - The company raised its profit and revenue guidance for 2026, which contributed to the positive market reaction [1] - Box's shares have increased by 15.4% year-to-date in 2025 [2] - The options market is highly active for Box, with trading volume at 40 times the intraday average, and the most active contract being the June 40 call [4] Okta Inc (NASDAQ:OKTA) - Okta Inc's stock fell by 13.6% to $108.43, indicating its worst performance since August, following eight price-target cuts, including a reduction by Barclays from $135 to $120 [3] - Despite the decline, Okta's shares are still up 38.1% for the year, having previously reached a three-year high of $127.57 on May 16 [3] - The options market for Okta is also seeing increased activity, with trading volume at 16 times the usual level, and the most active contract being the June 117 call [4]

Market Overview - The stock market is currently experiencing high volatility, with major indices fluctuating based on various tariff-related news [1] - There is significant dispersion between individual assets, indicating that stock pickers may find opportunities in this environment [1] Analyst Background - Gary Alexander has extensive experience in covering technology companies on Wall Street and has worked in Silicon Valley [1] - He has been an outside adviser to several seed-round startups, providing insights into current industry trends [1] - Alexander has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications [1]

Financial Performance - Revenue for Q1 FY26 reached $276 million[7], driven by Suites momentum[6] - Total Remaining Performance Obligations (RPO) increased by 21% year-over-year to $1469 million[9, 10] - Long-term RPO increased by 32% year-over-year[10] - Billings increased by 27% year-over-year to $242 million[13] - Non-GAAP gross margin was 80.5%, up 30 bps year-over-year[15] - Non-GAAP operating margin was 25.3%, down 130 bps year-over-year[20] Cash Flow and Share Repurchase - The company repurchased approximately 1.6 million shares for approximately $50 million in Q1[26] - As of April 30, 2025, the company had approximately $152 million remaining for share repurchases[26] - Cash, cash equivalents, restricted cash, and short-term investments totaled $792 million[23] Guidance and Customer Metrics - Q2 FY26 revenue is projected to be $290 to $291 million, representing a year-over-year growth of 8%[30] - FY26 revenue is projected to be $1.165 to $1.170 billion, representing a year-over-year growth of 7%[30] - Net retention rate remained stable at 102%[37, 38] - 61% of total revenue came from Suites[41] - The number of customers paying more than $100k annually grew by 8% year-over-year to 1,940[43, 44]

Core Viewpoint - The self-regulation of the loot box industry in the UK has failed, leading to widespread noncompliance and lack of enforcement, particularly affecting consumer protection for children [2][4][5] Group 1: Industry Self-Regulation - The previous Conservative UK government encouraged the gaming industry, represented by Ukie, to self-regulate instead of imposing legislation [1] - A study published in Royal Society Open Science indicates that compliance with self-regulation is very poor, with only 23.5% of the top 100 iPhone games disclosing the presence of loot boxes in their marketing [2] - Only 8.6% of these games consistently disclosed the probabilities of obtaining different rewards, highlighting a significant lack of transparency [2] Group 2: Enforcement Issues - Noncompliant games were reported to Ukie and the UK government over six months ago, yet no enforcement actions have been taken, allowing these games to remain available for download [3] - Ukie had previously promised that noncompliant games would face "severe fines" and "delisting" from app stores, but these promises have not been fulfilled [3] Group 3: Consumer Protection - The current state of noncompliance and lack of enforcement fails to protect consumers, especially children, as initially promised by the industry [4] - Companies are not only breaching self-regulation but also advertising regulations and consumer laws, indicating a need for more proactive enforcement by other regulators [4]

Market Overview - The pause on EU tariffs significantly influenced market activity, with the Dow gaining +740 points (+1.78%), S&P 500 up +118 points (+2.05%), Nasdaq increasing by +461 points (+2.47%), and Russell 2000 rising +50 points (+2.48%) [1] Company News - Salesforce announced its intention to acquire Informatica for $8 billion, resulting in stock gains for both companies [2] - Box reported Q1 earnings of 30 cents per share, exceeding estimates by 5 cents, with revenues of $276 million surpassing the $274.4 million forecast, leading to an 11% increase in its stock [5] - Okta's Q1 earnings of 86 cents per share on $688 million in sales beat estimates but the stock fell by 10% due to lower full-year revenue guidance and concerns about the economic environment [5] Consumer Confidence - The May Consumer Confidence report showed a headline index of +98.0, up +12.3 points from April, with the Present Situation index at 135.9 (+4.8 points) and the Expectations Index at 72.8 (+17.4 points) [3] Investor Sentiment - 44% of investors believe the stock market will be higher in the next 12 months, indicating a positive sentiment shift since the tariff delays [4] Upcoming Earnings - Anticipation surrounds NVIDIA's Q1 earnings report, with shares up +3% and a 44% increase since April 4, as the "AI trade" gains momentum [6] - Earnings reports from Macy's and Salesforce are expected, along with the minutes from the recent Federal Open Market Committee meeting [7]

Group 1: Earnings Performance - Box reported quarterly earnings of $0.30 per share, exceeding the Zacks Consensus Estimate of $0.25 per share, but down from $0.39 per share a year ago, representing an earnings surprise of 20% [1] - The company posted revenues of $276.27 million for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 0.67% and up from $264.66 million year-over-year [2] - Over the last four quarters, Box has consistently surpassed consensus EPS and revenue estimates [2] Group 2: Stock Performance and Outlook - Box shares have declined approximately 1.6% since the beginning of the year, compared to a decline of 1.3% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.28 on revenues of $283.88 million, and for the current fiscal year, it is $1.19 on revenues of $1.15 billion [7] - The estimate revisions trend for Box is currently unfavorable, resulting in a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Group 3: Industry Context - The Internet - Software industry, to which Box belongs, is currently ranked in the top 26% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Box's stock performance [5]

Financial Data and Key Metrics Changes - In Q1 FY 2026, revenue grew 4% year over year, or 5% in constant currency, reaching $276 million [8][24] - Remaining Performance Obligations (RPO) increased by 21% year over year to $1.5 billion [8][25] - Billings rose 27% year over year to $242 million, exceeding expectations [26] - Operating margin was 25.3%, down from 26.6% year over year, but adjusted for certain factors, it would have increased by 90 basis points [28] - Gross margin improved to 80.5%, up 30 basis points year over year [27] Business Line Data and Key Metrics Changes - Suite customers now represent 61% of total revenue, up from 56% a year ago, driven by strong demand for AI capabilities [25] - The company saw strong momentum in customer adoption of Enterprise Advanced, particularly in sectors like healthcare and financial services [9][19] Market Data and Key Metrics Changes - Approximately 65% of international revenue comes from Japan, indicating a strong market presence in that region [30] - The company is experiencing a shift in customer conversations towards AI-driven workflows, with over half of surveyed IT leaders expecting transformation from AI in the next two years [10][11] Company Strategy and Development Direction - The company is focused on building an intelligent content management platform that integrates AI capabilities to enhance enterprise workflows [12][20] - Partnerships with major AI providers like OpenAI and IBM are being leveraged to enhance product offerings and customer engagement [15][16] - The company aims to drive pricing improvements in the range of 20% to 40% for Enterprise Advanced deals [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong customer demand for Box AI, despite macroeconomic uncertainties [32] - The company anticipates a revenue range of $1.165 billion to $1.170 billion for FY 2026, reflecting a 7% year-over-year growth [33] - Management remains prudent in their outlook, considering potential impacts on IT spending due to the macroeconomic environment [32] Other Important Information - The company received FedRAMP high authorization, allowing U.S. government agencies to utilize its platform for sensitive data [19] - The first state of AI in the enterprise survey indicated that nearly 90% of IT leaders are already using AI agents in some capacity [10] Q&A Session Summary Question: Demand picture and guidance prudence - Management noted healthy customer conversations and strong momentum heading into Q2, while remaining prudent due to the dynamic macro environment [42][43] Question: Billings and RPO growth vs. revenue guidance - Management explained that the strong billings growth was influenced by early renewals, which would impact Q2 [44][45] Question: Seat growth trends - Management indicated that pricing improvements are driving growth more than seat expansion, with a focus on Enterprise Advanced [50][52] Question: Early renewals and AI adoption - Management highlighted that early renewals were primarily driven by customers adopting AI capabilities, with expectations for continued higher volumes [56][57] Question: AI cost and margin impact - Management expressed optimism about the decreasing costs of AI inference and its potential to remain margin neutral [60][63] Question: Customer migration from legacy ECM providers - Management reported an uptick in customers migrating to modern platforms, aided by partnerships with system integrators [69][70] Question: Platform revenue and AI unit consumption - Management acknowledged early traction in AI unit consumption, with a focus on data extraction use cases across various industries [82][83]

Financial Data and Key Metrics Changes - In Q1 FY 2026, revenue grew by 4% year over year, or 5% in constant currency, reaching $276 million [7][24] - Remaining Performance Obligations (RPO) increased by 21% year over year to $1.5 billion [7][25] - Billings rose by 27% year over year to $242 million, exceeding expectations [26] - Operating margin was reported at 25.3%, slightly down from 26.6% year over year [28] - Earnings per share (EPS) was $0.30, exceeding guidance by $0.04 [28] Business Line Data and Key Metrics Changes - Suite customers now represent 61% of total revenue, up from 56% a year ago, driven by strong demand for AI capabilities [25] - The company saw strong momentum in customer adoption of Enterprise Advanced, particularly in Q1 [7][17] Market Data and Key Metrics Changes - The company reported a net retention rate of 102%, up from 101% year over year [26] - The annualized full churn rate remained at 3%, indicating continued customer stickiness [26] Company Strategy and Development Direction - The company is focused on building an intelligent content management platform that integrates AI capabilities to enhance enterprise workflows [12][20] - Partnerships with major AI providers like OpenAI and IBM are being leveraged to enhance product offerings and customer engagement [15][70] - The company aims to drive pricing improvements in the range of 20% to 40% for Enterprise Advanced deals [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about customer demand for AI-driven solutions, noting robust conversations with clients [42] - Despite strong Q1 results, management remains cautious about macroeconomic uncertainties impacting IT spending [32] - The company expects revenue growth of approximately 7% year over year for FY 2026, with guidance adjusted to $1.165 billion to $1.170 billion [32][36] Other Important Information - The company received FedRAMP high authorization, allowing U.S. government agencies to utilize its platform for sensitive data [19] - The company is committed to a disciplined capital allocation strategy, including ongoing stock repurchase programs [29] Q&A Session Summary Question: Demand picture and guidance prudence - Management reported healthy customer conversations and strong momentum heading into Q2, while remaining prudent due to the macro environment [41][43] Question: Billings and RPO growth vs. revenue guidance - The difference in growth rates is attributed to timing, with early renewals impacting Q1 results [45][46] Question: Seat growth and down-sell trends - Seat growth is occurring, but pricing increases are the primary driver of revenue expansion [50][51] Question: Early renewals and their impact - Early renewals were driven by customers adopting AI capabilities, with expectations for continued but moderated early renewals [58][86] Question: AI adoption and customer engagement - The company is seeing a mix of early adopters and broader deployments of AI capabilities across various industries [61][82] Question: Integration with AI partners and monetization - The company aims to provide seamless integration with various AI platforms while monetizing through user seats and AI unit volume [90][98]