Braze's (NASDAQ:BRZE) Q2 Sales Top Estimates, Provides Optimistic Full-Year Guidance

Jabin Bastian /
2023/09/07 4:11 pm EDT

Customer engagement software provider Braze (NASDAQ:BRZE) reported Q2 FY2024 results topping analysts' expectations, with revenue up 33.6% year on year to $115.1 million. Guidance for next quarter's revenue was also optimistic at $117 million at the midpoint, 2.32% above analysts' estimates. Turning to EPS, Braze made a GAAP loss of $0.33 per share, improving from its loss of $0.35 per share in the same quarter last year.

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Braze (BRZE) Q2 FY2024 Highlights:

  • Revenue: $115.1 million vs analyst estimates of $108.6 million (5.95% beat)
  • EPS (non-GAAP): -$0.04 vs analyst estimates of -$0.14
  • Revenue Guidance for Q3 2024 is $117 million at the midpoint, above analyst estimates of $114.3 million
  • The company lifted its revenue guidance for the full year from $444.5 million to $453 million at the midpoint, a 1.91% increase
  • Free Cash Flow was -$18.7 million, down from $21.7 million in the previous quarter
  • Net Revenue Retention Rate: 120%, in line with the previous quarter
  • Customers: 1,958, up from 1,866 in the previous quarter
  • Gross Margin (GAAP): 69.2%, up from 68.2% in the same quarter last year

“We delivered another strong quarter, demonstrating strong top-line growth and operating efficiency,” 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 impressive over the last two years, growing from $55.8 million in Q2 FY2022 to $115.1 million this quarter.

Braze Total Revenue

Unsurprisingly, this was another great quarter for Braze with revenue up 33.6% year on year. On top of that, its revenue increased $13.3 million quarter on quarter, a very strong improvement from the $3.11 million increase in Q1 2024. This is a sign of acceleration of growth and great to see.

Next quarter's guidance suggests that Braze is expecting revenue to grow 25.6% year on year to $117 million, slowing down from the 45.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 20.4% over the next 12 months before the earnings results announcement.

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Product Success

One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.

Braze Net Revenue Retention Rate

Braze's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 120% in Q2. This means that even if Braze didn't win any new customers over the last 12 months, it would've grown its revenue by 20%.

Despite falling over the last year, Braze still has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

Key Takeaways from Braze's Q2 Results

With a market capitalization of $4.65 billion, Braze is among smaller companies, but its more than $77.3 million in cash on hand and near break-even free cash flow margins put it in a stable financial position.

We enjoyed seeing Braze exceed analysts' revenue and free cash flow expectations this quarter, driven by better-than-expected subscription revenue. We were also glad it raised its full-year revenue guidance, which came in higher than Wall Street's estimates. On the other hand, its net revenue retention slightly declined, but this is a trend we've observed across the broader software sector. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 1.47% after reporting and currently trades at $48.35 per share.

So should you invest in Braze right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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