Stock Story -
Customer engagement software provider Braze (NASDAQ:BRZE) reported Q3 FY2024 results exceeding Wall Street analysts' expectations, with revenue up 33.1% year on year to $124 million. On top of that, next quarter's revenue guidance ($124.5 million at the midpoint) was surprisingly good and 3.8% above what analysts were expecting. It made a GAAP loss of $0.31 per share, improving from its loss of $0.35 per share in the same quarter last year.
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Braze (BRZE) Q3 FY2024 Highlights:
- Revenue: $124 million vs analyst estimates of $117.3 million (5.7% beat)
- EPS (non-GAAP): -$0.05 vs analyst estimates of -$0.13
- Revenue Guidance for Q4 2024 is $124.5 million at the midpoint, above analyst estimates of $119.9 million
- Free Cash Flow was -$5.91 million compared to -$18.69 million in the previous quarter
- Net Revenue Retention Rate: 118%, in line with the previous quarter
- Customers: 2,011, up from 1,958 in the previous quarter
- Gross Margin (GAAP): 70.7%, up from 68.7% in the same quarter last year
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.
Marketing SoftwareWhether 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.
Sales GrowthAs you can see below, Braze's revenue growth has been impressive over the last two years, growing from $63.97 million in Q3 FY2022 to $124 million this quarter.
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 $8.85 million in Q3 compared to $13.33 million in Q2 2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Next quarter, Braze is guiding for a 20.7% year-on-year revenue decline to $124.5 million, a further deceleration from the 40.1% year-on-year decrease it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 19.6% over the next 12 months before the earnings results announcement.
Customer Growth Braze reported 2,011 customers at the end of the quarter, an increase of 53 from the previous quarter. That's a little slower customer growth than what we've observed in past quarters, suggesting that the company's customer acquisition momentum is slowing.
Key Takeaways from Braze's Q3 Results With a market capitalization of $5.62 billion, Braze is among smaller companies, but its more than $60.47 million in cash on hand, $407 million in marketable securities and near break-even free cash flow margins puts it in a stable financial position.
It was great to see Braze's optimistic guidance and outlook for next quarter, which exceeded analysts' expectations. We were also excited its revenue this quarter outperformed Wall Street's estimates. On the other hand, its customer growth slowed and its net revenue retention decreased. Overall, this quarter's results still seemed fairly positive and shareholders should feel optimistic. The stock is up 2.5% after reporting and currently trades at $57.55 per share.
