Braze (BRZE) Research Report: Q1 CY2024 Update

Full Report / June 06, 2024

Customer engagement software provider Braze (NASDAQ:BRZE) reported Q1 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 33.1% year on year to $135.5 million. The company also expects next quarter's revenue to be around $141 million, slightly above analysts' estimates. It made a non-GAAP loss of $0.05 per share, improving from its loss of $0.13 per share in the same quarter last year.

Braze (BRZE) Q1 CY2024 Highlights:

  • Revenue: $135.5 million vs analyst estimates of $131.7 million (2.9% beat)
  • EPS (non-GAAP): -$0.05 vs analyst estimates of -$0.10
  • Revenue Guidance for Q2 CY2024 is $141 million at the midpoint, above analyst estimates of $139.8 million
  • The company lifted its revenue guidance for the full year from $572.5 million to $579 million at the midpoint, a 1.1% increase
  • Gross Margin (GAAP): 67.1%, down from 67.9% in the same quarter last year
  • Free Cash Flow of $11.44 million is up from -$3.54 million in the previous quarter
  • Net Revenue Retention Rate: 117%, in line with the previous quarter
  • Customers: 2,102, up from 2,044 in the previous quarter
  • Billings: $160.7 million at quarter end, up 37.5% year on year
  • Market Capitalization: $3.64 billion

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.

Braze’s co-founders were driven by two core beliefs - that new businesses would be born and built mobile-first and that changing consumer behaviors would force businesses to change how they deliver products and services. The Braze platform aimed to ingest consumer data and create multi-channel marketing campaigns in order to improve customer engagement.

Braze’s software is designed to listen, understand, and act. Listening involves collecting consumer data from websites and applications and building consumer profiles. Understanding involves building detailed audience segments (demographics, past behaviors, etc.) and generating messaging that speaks to these segments. Acting involves executing marketing campaigns across email, SMS, mobile push notifications or embedded content cards in a website or application that are relevant and effective.

Marketing Software

Whether or not companies market their products through social media, all businesses need to meet customers where they are; and increasingly, that is social media. As more and more people use a greater number of social media platforms, social media management software become more valuable to their customers.

Competitors addressing the customer engagement need include scaled platforms such as Adobe (NASDAQ:ADBE) and Salesforce.com (NYSE:CRM) as well as private companies such as Airship, MoEngage, and Leanplum.

Sales Growth

As you can see below, Braze's revenue growth has been impressive over the last three years, growing from $47.88 million in Q1 2022 to $135.5 million this quarter.

Braze Total Revenue

Unsurprisingly, this was another great quarter for Braze with revenue up 33.1% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $4.50 million in Q1 compared to $7.00 million in Q4 CY2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that Braze is expecting revenue to grow 22.5% year on year to $141 million, slowing down from the 33.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 19% over the next 12 months before the earnings results announcement.

Customer Growth

Braze reported 2,102 customers at the end of the quarter, an increase of 58 from the previous quarter. That's a little better customer growth than last quarter but a bit below what we've typically seen over the last year, suggesting that the company may be reinvigorating growth.

Braze Customers

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 117% in Q1. This means that even if Braze didn't win any new customers over the last 12 months, it would've grown its revenue by 17%.

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.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Braze's gross profit margin, an important metric measuring how much money there's left after paying for servers, licenses, technical support, and other necessary running expenses, was 67.1% in Q1.

Braze Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.67 left to spend on developing new products, sales and marketing, and general administrative overhead. Braze's gross margin is poor for a SaaS business and we'd like to see it start improving.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Braze's free cash flow came in at $11.44 million in Q1, down 47.2% year on year.

Braze Free Cash Flow

Braze has burned through $16.7 million of cash over the last 12 months, resulting in a negative 3.3% free cash flow margin. This low FCF margin stems from Braze's constant need to reinvest in its business to stay competitive.

Key Takeaways from Braze's Q1 Results

We were impressed by how strongly Braze blew past analysts' billings expectations this quarter. We were also glad its customer growth accelerated. Lastly, the company raised its revenue guidance for the year, showing that it is doing better than it had thought internally just last quarter. Overall, we think this was still a really good quarter that should please shareholders. The stock is up 14.9% after reporting and currently trades at $42.29 per share.

Is Now The Time?

When considering an investment in Braze, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

We think Braze is a good business. We'd expect growth rates to moderate from here, but its revenue growth has been exceptional over the last three years. And while its growth is coming at the cost of significant cash burn, the good news is its customers are increasing their spending quite quickly, suggesting they love the product. On top of that, its efficient customer acquisition is better than many similar companies.

Given its price-to-sales ratio of 6.2x based on the next 12 months, the market is certainly expecting long-term growth from Braze. There are definitely a lot of things to like about Braze, and looking at the tech landscape right now, it seems to be trading at a reasonable price.

Wall Street analysts covering the company had a one-year price target of $62.24 right before these results (compared to the current share price of $42.29), implying they see short-term upside potential in Braze.

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