Braze Inc (BRZE), a leader in customer engagement solutions, reported its fiscal second quarter earnings for the period ending July 31, 2024. The company demonstrated strong revenue growth, achieved its first non-GAAP profitability, and showcased robust customer acquisition.

Key Insights from Braze Inc.’s Earnings Report:

Below are the key findings from Braze Q2 earnings.

• Revenue: Braze Inc. reported $145.5 million in revenue, a 26.4% year-over-year increase, driven by new customers, upselling, and renewals.
• Subscription Revenue: Subscription revenue was $140 million, reflecting the growing demand for Braze’s customer engagement solutions.
• Non-GAAP Operating Income: The company achieved non-GAAP operating income of $4.2 million, a significant improvement from the $7.6 million loss in the previous year.
• Non-GAAP Net Income: Braze posted non-GAAP net income per share of $0.09, compared to a net loss of $0.04 in the same quarter last year.
• Customer Growth: The customer base expanded, with 222 customers having an annual recurring revenue (ARR) of $500,000 or more, up from 173 customers in the previous year.

Positive Implications for Investors: 

For investors, Braze’s strong revenue growth and its first quarter of non-GAAP profitability are significant milestones. With a 26.4% year-over-year revenue increase and improved gross margins, the company is clearly executing well in a competitive market. The rise in customers, particularly high-value clients with ARR above $500,000, demonstrates the strength of its platform in driving customer engagement for major brands like Papa John’s Pizza and Zalando.

Braze’s solid cash flow position also provides reassurance, with $11.6 million in cash generated from operating activities, compared to a loss of $17.5 million a year prior. Investors who value companies with growing revenues and improving profitability will likely view these results favorably. Additionally, Braze’s launch of new product features and programs such as the Braze Data Platform and Braze for Startups positions the company for future growth.

Negative Implications for Investors: 

Despite these encouraging results, Braze’s stock still has some drawbacks. The company’s GAAP operating loss of $28 million, largely attributed to stock-based compensation, remains a point of concern for investors prioritizing profitability. Braze’s dollar-based net retention rate for high-value customers decreased from 123% to 117%, indicating slower growth in existing customer spending. Additionally, the stock may be considered overpriced, as Stock Target Advisor’s analysis indicates it trades at a high multiple compared to its peers on both price-to-book and price-to-cash flow ratios.

Stock Target Advisor’s Analysis on Braze Inc: 

Stock Target Advisor provides a “Slightly Bearish” rating for Braze Inc., citing two positive signals and three negative signals. Positively, Braze’s high market capitalization makes it a stable player within its sector, and its positive cash flow performance offers promise. However, the company is seen as overpriced on both a book value and cash flow basis. Braze also suffered from negative free cash flow in recent quarters?3†source?. These factors suggest that while Braze offers growth potential, it carries valuation risks.

Conclusion:

Braze’s second-quarter earnings reveal a company making strides in both revenue growth and profitability, underscoring the strength of its customer engagement platform. For investors, the positive revenue growth, customer expansion, and improving financial metrics are promising signs.