Braze (NASDAQ:BRZE) Q1: Beats On Revenue, Stock Soars

Radek Strnad /
2023/06/08 4:16 pm EDT

Customer engagement software provider Braze (NASDAQ:BRZE) reported Q1 FY2024 results that beat analyst expectations, with revenue up 31.3% year on year to $101.8 million. Guidance for next quarter's revenue was $108.5 million at the midpoint, 2.71% above the average of analyst estimates. Braze made a GAAP loss of $38.8 million, improving on its loss of $39.6 million, in the same quarter last year.

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Braze (BRZE) Q1 FY2024 Highlights:

  • Revenue: $101.8 million vs analyst estimates of $99 million (2.81% beat)
  • EPS (non-GAAP): -$0.13 vs analyst estimates of -$0.18
  • Revenue guidance for Q2 2024 is $108.5 million at the midpoint, above analyst estimates of $105.6 million
  • The company lifted revenue guidance for the full year, from $99 million to $444.5 million at the midpoint, a 349% increase
  • Free cash flow of $21.7 million, up from negative free cash flow of $1.92 million in previous quarter
  • Net Revenue Retention Rate: 122%, in line with previous quarter
  • Customers: 1,866, up from 1,770 in previous quarter
  • Gross Margin (GAAP): 67.9%, up from 66.6% same quarter last year

“We are off to a great start to fiscal 2024, delivering impressive results driven by strong demand for the Braze Customer Engagement Platform,” said Bill Magnuson, cofounder and CEO of Braze.

Founded in 2011 after the co-founders met at NYC Disrupt Hackathon, Braze (NASDAQ:BRZE) is a customer engagement software platform that allows brands to connect with customers through data-driven and contextual marketing campaigns.

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Sales Growth

As you can see below, Braze's revenue growth has been exceptional over the last two years, growing from quarterly revenue of $47.9 million in Q1 FY2022, to $101.8 million.

Braze Total Revenue

And unsurprisingly, this was another great quarter for Braze with revenue up 31.3% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $3.11 million in Q1, compared to $5.55 million in Q4 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Braze is expecting revenue to grow 26% year on year to $108.5 million, slowing down from the 54.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 20.9% over the next twelve months.

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Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Braze Net Revenue Retention Rate

Braze's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 122% in Q1. That means even if they didn't win any new customers, Braze would have grown its revenue 22% year on year. Despite it going down over the last year this is still a good retention rate and a proof that Braze's customers are satisfied with their software and are getting more value from it over time. That is good to see.

Key Takeaways from Braze's Q1 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Braze’s balance sheet, but we note that with a market capitalization of $3.29 billion and more than $502.8 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were very impressed by Braze’s very strong acceleration in customer growth this quarter, leading to a beat vs. expectations. Calculated billings saw a nice beat of nearly 10% while revenue and adjusted EPS also exceeded Consensus expectations. We were also glad that the revenue guidance for the next quarter exceeded analysts' expectations while full year guidance was raised to above Consensus. Similarly, non-GAAP operating profit guidance for the next quarter exceeded analysts' expectations while full year guidance was raised to above Consensus. On the other hand, there was a deterioration in revenue retention rate. Overall, we think this was a really good quarter--a classic beat and raise--that should leave shareholders feeling very positive. The company is up 10.5% on the results and currently trades at $37.5 per share.

Braze may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.