Business Overview
Braze, Inc. (NASDAQ:BRZE) is a leading customer engagement platform that empowers brands to deliver personalized, cross-channel experiences to their customers. Founded in 2011, the company has established itself as a key player in the rapidly evolving customer engagement software market, providing a comprehensive suite of tools and capabilities to help businesses build stronger relationships with their customers.
Braze's platform enables brands to listen to their customers, understand them more deeply, and act on that understanding in a human and personal way. The platform allows companies to ingest and process customer data in real-time, orchestrate and optimize contextually relevant marketing campaigns across multiple channels, including push notifications, email, in-product messaging, SMS, and more. Braze's solutions are designed to facilitate seamless and personalized interactions between brands and consumers, fostering greater customer loyalty and engagement.
The company's customer base spans a diverse range of industries, including retail, media and entertainment, restaurants, financial services, travel, and healthcare. Braze's land-and-expand business model has driven strong customer growth, with the total number of customers reaching 2,102 as of the most recent quarter, up 13% year-over-year. The company has also seen success in expanding its relationships with existing customers, as evidenced by a dollar-based net retention rate of 117% for the trailing 12-month period.
Financial Performance
For the fiscal year ended January 31, 2024, Braze reported annual revenue of $471.8 million, a 23% increase from the prior year. However, the company continued to operate at a loss, with a net loss of $129.2 million for the same period. Despite the challenging macroeconomic environment, Braze generated positive operating cash flow of $6.9 million and free cash flow of -$6.5 million for the fiscal year.
In the most recent quarter ended April 30, 2024, Braze reported revenue of $135.5 million, a 33.1% increase compared to the same period in the prior year. The company's subscription revenue, which accounts for the majority of its top line, grew by 34% year-over-year. Braze's gross margin for the quarter was 67.1%, a slight decline from the 67.9% reported in the same quarter of the previous year, primarily due to increased adoption of premium messaging channels and a one-time revenue reserve related to a service outage.
Braze's operating expenses increased during the quarter, with sales and marketing expenses rising 21.9% year-over-year, research and development expenses increasing 15.6%, and general and administrative expenses growing 11.7%. These investments reflect the company's continued focus on driving growth, enhancing its product offerings, and improving its operational efficiency.
The company's non-GAAP operating loss for the quarter was $10 million, an improvement from the $16 million loss reported in the same period last year. Braze's non-GAAP net loss attributable to shareholders was $5.5 million, or $0.05 per share, compared to a loss of $12.6 million, or $0.13 per share, in the prior-year quarter.
Geographical Breakdown
Braze has a global footprint, with a significant portion of its revenue generated outside the United States. In the most recent quarter, international revenue accounted for 44% of the company's total revenue, up from 43% in the same period last year. The company continues to invest in expanding its international presence, with plans to open new offices and data centers in regions such as APAC and LATAM to better serve its growing customer base.
Guidance and Outlook
For the second quarter of fiscal 2025, Braze expects revenue to be in the range of $140.5 million to $141.5 million, representing a year-over-year growth rate of approximately 23% at the midpoint. The company anticipates a non-GAAP operating loss of $6.5 million to $7.5 million for the quarter.
For the full fiscal year 2025, Braze has provided guidance for total revenue to be in the range of $577 million to $581 million, reflecting a year-over-year growth rate of approximately 23% at the midpoint. The company expects a non-GAAP operating loss of $19.5 million to $23.5 million for the full year, a significant improvement from the $29.2 million non-GAAP operating loss reported in fiscal 2024.
Braze remains committed to achieving positive quarterly non-GAAP operating income and positive free cash flow by the fourth quarter of fiscal 2025, as the company continues to focus on driving operational efficiency and profitability alongside its growth initiatives.
Risks and Challenges
Braze operates in a highly competitive market, facing competition from both established marketing clouds and specialized point solutions. The company's ability to maintain its competitive edge and continue to win new customers and expand existing relationships will be crucial to its long-term success.
The macroeconomic environment remains a significant challenge, with Braze reporting continued caution from buyers, longer decision-making cycles, and enhanced scrutiny on budgets and resources. The company's ability to navigate these headwinds and capitalize on opportunities for market share gains and vendor consolidation will be critical.
Additionally, Braze's reliance on third-party providers for cloud infrastructure and messaging channels, such as Apple, Google, and Meta, exposes the company to potential disruptions or changes in these partners' policies, which could impact Braze's operations and financial performance.
Conclusion
Braze has demonstrated resilience in the face of a challenging macroeconomic environment, delivering strong financial results in its most recent quarter. The company's diversified customer base, global footprint, and continued investments in product innovation and operational efficiency position it well to navigate the current market conditions and capitalize on the growing demand for customer engagement solutions.
While the macroeconomic headwinds persist, Braze's focus on driving efficiency, improving profitability, and expanding its international presence suggests the company is taking the necessary steps to strengthen its competitive position and deliver long-term value for its shareholders.