Customer engagement software provider Braze (NASDAQ:BRZE) announced better-than-expected results in the Q4 FY2023 quarter, with revenue up 40.1% year on year to $98.7 million. However, guidance for the next quarter was less impressive, coming in at $99 million at the midpoint, being 1.32% below analyst estimates. Braze made a GAAP loss of $33.8 million, improving on its loss of $43.3 million, in the same quarter last year.
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Braze (BRZE) Q4 FY2023 Highlights:
- Revenue: $98.7 million vs analyst estimates of $95.8 million (3.05% beat)
- EPS (non-GAAP): -$0.14 vs analyst estimates of -$0.19
- Revenue guidance for Q1 2024 is $99 million at the midpoint, below analyst estimates of $100.3 million
- Management's revenue guidance for upcoming financial year 2024 is $435.5 million at the midpoint, missing analyst estimates by 1.21% and predicting 22.5% growth (vs 50.5% in FY2023)
- Free cash flow was negative $1.92 million, compared to negative free cash flow of $28.1 million in previous quarter
- Net Revenue Retention Rate: 124%, in line with previous quarter
- Customers: 1,770, up from 1,715 in previous quarter
- Gross Margin (GAAP): 66.1%, up from 64.8% same quarter last year
“In the past year, we continued to strengthen our position as a market leader by finding the opportunities in change, expanding our customer base by 29% and our revenue by nearly 50%,” 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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As you can see below, Braze's revenue growth has been exceptional over the last two years, growing from quarterly revenue of $42.9 million in Q4 FY2021, to $98.7 million.
And unsurprisingly, this was another great quarter for Braze with revenue up 40.1% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $5.55 million in Q4, compared to $6.99 million in Q3 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 27.8% year on year to $99 million, slowing down from the 61.9% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $435.5 million at the midpoint, growing 22.5% compared to 49.3% increase in FY2023.
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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 124% in Q4. That means even if they didn't win any new customers, Braze would have grown its revenue 24% 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 Q4 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 $3.02 billion and more than $478.7 million in cash, the company has the capacity to continue to prioritise growth over profitability.
We enjoyed seeing Braze’s impressive revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see that Braze's revenue guidance for the full year missed analysts' expectations and the revenue guidance for next year indicates quite a significant slowdown in growth. Overall, this quarter's results were not the best we've seen from Braze. The company is flat on the results and currently trades at $31.55 per share.
Braze may have had a tough quarter, but does that actually create an opportunity to 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.