Business Overview and History
Braze, Inc. is a leading customer engagement platform that empowers brands to deliver personalized, data-driven experiences across multiple digital channels. Founded in 2011, the company has established itself as a trailblazer in the rapidly evolving customer experience landscape, providing brands with the tools and technology to effectively connect with their audience in an increasingly digital-first world.
Braze was co-founded in 2011 by Bill Magnuson, Jon Hyman, and Mark Ghermezian, who met at the NYC Disrupt Hackathon. Initially, the company was created to process international tuition payments for universities. However, recognizing the growing importance of mobile and digital customer engagement, the founders pivoted their focus to build a platform that would enable brands to effectively leverage data and technology to deliver personalized, cross-channel experiences.
In its early years, Braze faced challenges as it had to educate the market on the value of a data-driven, omni-channel approach to customer engagement, which was still a relatively new concept at the time. The company primarily focused on building out its core platform and establishing a customer base in the retail and e-commerce sectors.
Throughout the 2010s, Braze experienced steady growth, expanding its customer base and broadening its industry reach beyond retail and e-commerce into media, entertainment, travel, and other verticals. The company made strategic investments to enhance its platform capabilities, including acquisitions that brought in new technologies and talent.
By 2015, the company had expanded internationally, opening offices in the United Kingdom and Singapore to better serve its global customer base. Braze's ability to adapt and evolve with the changing market landscape has been a key factor in its sustained success over the past decade.
In 2021, Braze made a significant leap forward, completing a successful initial public offering on the Nasdaq exchange. This milestone provided the company with the capital and resources to further invest in product development, sales and marketing, and international expansion. However, the years following the IPO brought new challenges, as Braze navigated a shifting macroeconomic environment and customer budget pressures. The company responded by doubling down on operational efficiency and cost control measures, while also broadening its go-to-market strategies to reach new customer segments.
Since its IPO, Braze has continued to innovate, introducing a range of new features and capabilities to its platform, including advanced artificial intelligence and machine learning-powered tools to help brands enhance the personalization and optimization of their customer engagement efforts.
Today, Braze serves a diverse customer base of over 2,200 brands, ranging from established enterprises to fast-growing startups. The company's commitment to innovation and customer success has earned it recognition as a leader in the customer engagement software industry, with the company being named a Leader in the Gartner Magic Quadrant for Multichannel Marketing Hubs for two consecutive years.
Financial Performance and Outlook
Braze has reported strong financial results in recent years, demonstrating the growing demand for its customer engagement platform. In the fiscal year ended January 31, 2024, the company generated $471.8 million in revenue, representing a 32.6% year-over-year increase. This topline growth was driven by a combination of new customer acquisitions, expanded relationships with existing clients, and the company's continued success in penetrating international markets, which accounted for 44% of total revenue in fiscal 2024.
The company's focus on operational efficiency has also yielded positive results, with Braze reporting a non-GAAP gross margin of 68.6% in fiscal 2024. However, the company has continued to invest heavily in research and development, sales and marketing, and international expansion, leading to a non-GAAP operating loss of $144.7 million for the year.
Looking ahead, Braze remains optimistic about its growth prospects. In its most recent fiscal quarter ended October 31, 2024, the company reported revenue of $152.1 million, up 23% year-over-year, and a non-GAAP operating loss of $2.2 million, a significant improvement compared to the prior-year period. The company also announced that it had surpassed $600 million in committed annual recurring revenue (ARR) during the quarter, further demonstrating the strong demand for its platform.
For the full fiscal year 2025, Braze has provided guidance for revenue to be in the range of $588 million to $589 million, representing a year-over-year growth of approximately 25% at the midpoint. The company also expects to achieve positive non-GAAP operating income and free cash flow in the fourth quarter of fiscal 2025 and to sustain both on a go-forward basis.
Financials
Braze's financial performance has been characterized by strong revenue growth and improving operational efficiency. The company's revenue has consistently increased year-over-year, with a 32.6% growth rate in fiscal 2024. This growth has been driven by both new customer acquisitions and expanded relationships with existing clients.
For the fiscal year ended January 31, 2024, Braze reported annual revenue of $471.8 million, an annual net loss of $129.2 million, annual operating cash flow of $6.9 million, and annual free cash flow of -$6.5 million. In the most recent quarter ended October 31, 2024, the company reported quarterly revenue of $152.1 million and a quarterly net loss of $27.9 million.
The company's gross margin has remained healthy, with a non-GAAP gross margin of 68.6% in fiscal 2024. This indicates that Braze has been able to scale its operations efficiently while maintaining profitability on a per-unit basis. In the nine months ended October 31, 2024, the company reported a gross margin of 69.1%, a slight decrease from 69.3% in the prior-year period, primarily due to increased expenses associated with the expanded adoption of premium messaging channels and service disruption-related charges.
Braze has continued to invest heavily in research and development, sales and marketing, and international expansion. These investments have resulted in ongoing operating losses, with a non-GAAP operating loss of $144.7 million in fiscal 2024. Despite these losses, the company's improving financial metrics and positive guidance suggest a path towards profitability in the near future.
The company's revenue growth has been driven by both new customer acquisitions and expansion within its existing customer base. In the nine months ended October 31, 2024, Braze reported total revenue of $433.0 million, representing a 27% year-over-year increase. Subscription revenue, which includes platform access and related support, accounted for 96% of total revenue during this period. The remaining revenue comes from professional services, such as onboarding, configuration, and optimization support.
Braze's customer count increased from 2,010 as of October 31, 2023, to 2,210 as of October 31, 2024. The company now serves 234 customers with over $500,000 in annual recurring revenue, up 24% year-over-year.
Geographically, approximately 45% of Braze's revenue was generated outside of the United States in the nine months ended October 31, 2024, up from 43% in the prior year period, as the company continued to expand its international presence, particularly in Europe and Asia-Pacific.
Liquidity
Braze maintains a strong liquidity position, which is crucial for supporting its growth initiatives and operational needs. As of October 31, 2024, the company had $493.1 million in cash, cash equivalents, and marketable securities, with no amounts drawn on its available credit facilities.
The company's successful IPO in 2021 provided a significant infusion of capital, strengthening its financial position. This capital has allowed Braze to invest in product development, expand its sales and marketing efforts, and pursue international growth opportunities without relying heavily on debt financing.
Braze's debt-to-equity ratio stood at 0.20 as of October 31, 2024, indicating a conservative capital structure. The company's current ratio and quick ratio were both 1.99, suggesting a strong ability to meet short-term obligations.
Braze's improving financial performance, particularly its expectation to achieve positive non-GAAP operating income and free cash flow in the fourth quarter of fiscal 2025, suggests that the company is moving towards a more sustainable financial position. This positive trend in cash flow generation will likely further enhance the company's liquidity position in the coming years.
Competitive Landscape and Risks
Braze operates in a highly competitive market, with both established players and emerging startups vying for a share of the customer engagement software market. The company faces competition from larger, more diversified technology firms like Adobe, Salesforce, and Oracle, as well as specialized vendors like Iterable, Klaviyo, and CleverTap.
To maintain its competitive edge, Braze must continue to invest heavily in product innovation, sales and marketing, and international expansion. The company's ability to attract and retain top talent, particularly in the areas of engineering and data science, will be critical to its long-term success.
Additionally, Braze is subject to various risks, including data privacy and security concerns, regulatory changes, and macroeconomic conditions that could impact its customers' spending patterns. The company's reliance on a small number of large customers for a significant portion of its revenue also represents a potential risk factor.
Despite these challenges, Braze's strong market position, innovative product offerings, and growing customer base suggest that the company is well-positioned to capitalize on the ongoing digital transformation and the increasing importance of personalized customer engagement in the years to come.
Product Segment and Industry Trends
Braze operates in a single reportable segment - its customer engagement platform. This cloud-based solution enables brands to deliver personalized, multichannel customer experiences. The platform's key capabilities include:
1. Messaging: Support for various communication channels, including push notifications, email, in-app messaging, SMS, and MMS.
2. Analytics and Audience Segmentation: Collection and analysis of customer data for audience segmentation and tailored messaging.
3. Orchestration and Automation: Creation and automation of sophisticated customer engagement campaigns across multiple channels.
The customer engagement software market is estimated to grow at a CAGR of approximately 15% from 2023 to 2028. This growth is driven by the increasing need for businesses to personalize customer interactions and leverage data-driven insights to improve customer loyalty and retention.
Braze's focus on continuous innovation and enhancement of its platform's functionality and capabilities is evident in its research and development investments. In the nine months ended October 31, 2024, R&D expenses totaled $100.4 million, or 23% of revenue.
Guidance and Future Outlook
Braze has provided guidance for both the fourth quarter and full fiscal year 2025:
For Q4 fiscal 2025: - Revenue is expected to be in the range of $155 million to $156 million, representing a year-over-year growth rate of approximately 19% at the midpoint. - Non-GAAP operating income is expected to be in the range of $2 million to $3 million, implying a non-GAAP operating margin of approximately 1.6%. - Non-GAAP net income is expected to be $5 million to $6 million, with non-GAAP net income per share in the range of $0.05 to $0.06.
For the full fiscal year 2025: - Total revenue is expected to be in the range of $588 million to $589 million, representing a year-over-year growth rate of approximately 25% at the midpoint. - Non-GAAP operating loss is expected to be in the range of $5 million to $6 million, which would be a roughly 750 basis point improvement versus fiscal year 2024. - Non-GAAP net income is expected to be in the range of $11 million to $12 million, with net income per share expected to be $0.10 to $0.11.
These projections reflect Braze's confidence in its ability to continue growing its customer base, expand relationships with existing clients, and improve operational efficiency.
Conclusion
Braze has established itself as a leader in the customer engagement software market, providing brands with a comprehensive platform to deliver personalized, data-driven experiences across multiple digital channels. The company's commitment to innovation, operational efficiency, and international expansion has driven strong financial performance in recent years, and its positive outlook for fiscal 2025 suggests that Braze is poised for continued growth and success.
While the company faces competition from larger, more established players and navigates various risks, its strong market position, talented team, and innovative product offerings position it as a compelling investment opportunity for those seeking exposure to the rapidly evolving customer experience landscape. With a clear path to profitability and a robust liquidity position, Braze appears well-equipped to capitalize on the growing demand for advanced customer engagement solutions in the coming years.