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01/11 03:44
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Braze's earnings call reflects strong financial performance with a 21% revenue growth forecast and improved operating margins. The Q&A session highlighted positive trends in customer engagement and AI integration. Despite economic headwinds, there is a normalization in buying patterns, and customers are investing in premium channels. The strategic expansion of AI capabilities and strong upsell momentum in high-value customer segments further support a positive outlook. The market cap suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8% over the next two weeks.
Revenue $191 million, up 25.5% year-over-year and 6% from the prior quarter. Growth driven by existing customer contract expansions, renewals, and new business.
Braze AI Decisioning Studio Revenue Contribution $4.8 million in the quarter. Organic revenue growth rate was 22.3% year-over-year, marking the second sequential quarter of organic revenue growth acceleration.
Subscription Revenue 95% of total revenue, with the remaining 5% from recurring professional services and one-time configuration and onboarding fees.
Customer Count 2,528 customers, up 14% year-over-year (317 new customers) and 106 sequentially. Largest quarter-over-quarter increase in customer count since Q3 FY2023.
Large Customers ($500,000+ ARR) 303 customers, up 29% year-over-year (69 new customers) and 21 sequentially. Contributed 63% to total ARR compared to 61% in the prior year.
Dollar-Based Net Retention (All Customers) 108%, showing stabilization and benefits from investments to moderate downsell activity.
Dollar-Based Net Retention (Large Customers) 110%, indicating strong expansion across industries and geographic regions.
Revenue Outside the U.S. 45% of total revenue, consistent with the prior quarter and year.
Remaining Performance Obligation (RPO) $891 million, up 24% year-over-year and 3% sequentially. Current RPO was $573 million, up 25% year-over-year and 3% sequentially.
Non-GAAP Gross Profit $132 million, representing a non-GAAP gross margin of 69.1%, down from 70.5% in the prior year due to higher premium messaging volume and hosting costs.
Non-GAAP Sales and Marketing Expenses $77 million or 40% of revenue, compared to $65 million or 43% of revenue in the prior year. Reflects investments in headcount for growth and global expansion.
Non-GAAP R&D Expense $28 million or 15% of revenue, up from $22 million or 15% of revenue in the prior year. Driven by increased headcount for expanding offerings and developing new products.
Non-GAAP G&A Expense $22 million or 12% of revenue, consistent with the prior year but improved efficiency due to scaling and strategic headcount expansion.
Non-GAAP Operating Income $5 million or 2.7% of revenue, compared to a non-GAAP operating loss of $2 million or -1.4% of revenue in the prior year.
Non-GAAP Net Income $7 million or $0.06 per share, compared to $2 million or $0.02 per share in the prior year.
Cash and Marketable Securities $387 million at the end of the quarter.
Cash Flow from Operations $21 million, compared to cash used in operations of $11 million in the prior year.
Free Cash Flow $18 million, compared to negative free cash flow of $14 million in the prior year.
Braze AI Decisioning Studio: Contributed $4.8 million in revenue for the quarter, enabling deeper one-on-one personalization and driving significant customer engagement improvements.
ChatGPT SDK Integration: Launched a fully featured SDK for ChatGPT apps, enabling sophisticated customer engagement strategies and rapid support for new platforms.
AI-driven capabilities: Introduced tools like Braze Liquid Assistant, AI copy and image generation, and AI content quality assurance to enhance campaign creation and personalization.
Customer Growth: Added 106 new customers sequentially and 317 year-over-year, reaching a total of 2,528 customers, a 14% increase.
Large Customer Expansion: Grew large customers (spending $500,000+ annually) by 29% year-over-year to 303, contributing 63% of total ARR.
Geographic Expansion: Revenue outside the U.S. contributed 45% of total revenue, showing strong international presence.
Revenue Growth: Achieved $191 million in revenue, a 25.5% year-over-year increase.
Profitability: Generated $18 million in free cash flow and achieved a non-GAAP operating income of $5 million, demonstrating improved efficiency.
Messaging Volume: Delivered 102.5 billion messages during Cyber Week with 100% uptime, showcasing platform reliability and scale.
AI Integration: Focused on leveraging AI for customer engagement, including reinforcement learning and generative AI to enhance personalization and operational efficiency.
Vendor Consolidation: Positioned as a preferred choice for customers migrating from legacy platforms, emphasizing AI-driven omnichannel solutions.
Innovation: Continued investment in AI and SDK development to maintain leadership in customer engagement technology.
Market Conditions: Higher seasonal activity during Q4 is expected to impact gross margins, consistent with historical patterns. This could affect profitability and operational efficiency.
Competitive Pressures: Braze faces competition from legacy marketing clouds and less sophisticated point solutions. While Braze has demonstrated competitive takeaways, the dynamic technical and competitive environment poses ongoing challenges.
Economic Uncertainties: The company’s financial outlook and profitability framework are subject to risks and uncertainties, which could cause actual results to differ materially from expectations.
Supply Chain Disruptions: Higher premium messaging volume and hosting costs have impacted gross margins, indicating potential challenges in managing operational costs.
Strategic Execution Risks: The company’s ability to execute on its AI-driven product advancements and customer engagement strategies is critical. Failure to deliver on these could impact its market position and financial performance.
Financial Outlook for Q4 FY2026: Revenue is expected to be in the range of $197.5 million to $198.5 million, representing a year-over-year growth rate of approximately 23% at the midpoint. Non-GAAP operating income is expected to be in the range of $12 million to $13 million, with a midpoint non-GAAP operating margin of approximately 6%. Non-GAAP net income is projected to be $15 million to $16 million, or $0.13 to $0.14 per share, based on approximately 113 million weighted average diluted shares.
Financial Outlook for FY2026: Total revenue is expected to be in the range of $730.5 million to $731.5 million, representing a year-over-year growth rate of approximately 23% at the midpoint. Non-GAAP operating income is projected to be in the range of $26 million to $27 million, implying a non-GAAP operating margin of 3.5%, a 350 basis point improvement versus FY2025. Non-GAAP net income is expected to be in the range of $46 million to $47 million, or $0.42 to $0.43 per share, based on a full-year weighted average diluted share count of approximately 110 million shares.
Profitability Framework for FY2027: The company expects to return to its profitability framework outlined at the last Investor Day, targeting a non-GAAP operating income margin of 8% for FY2027.
AI-Driven Product Advancements: Braze is rapidly introducing new AI-driven capabilities, including reinforcement learning and generative AI, to enhance customer engagement. These advancements are expected to drive operational efficiency, personalization at scale, and relevance enhancement for customers.
Market Trends and Customer Behavior: The company anticipates continued vendor consolidation and replacement trends, with customers adopting more channels and AI solutions. This is expected to drive further integration of Braze into customer engagement infrastructures.
The selected topic was not discussed during the call.
Braze's earnings call reflects strong financial performance with a 21% revenue growth forecast and improved operating margins. The Q&A session highlighted positive trends in customer engagement and AI integration. Despite economic headwinds, there is a normalization in buying patterns, and customers are investing in premium channels. The strategic expansion of AI capabilities and strong upsell momentum in high-value customer segments further support a positive outlook. The market cap suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8% over the next two weeks.
The earnings call highlights strong customer growth, positive feedback on OfferFit integration, and improved financial metrics. Despite some hesitance in providing specific guidance on DBNRR, the overall sentiment is positive, driven by high competitive win rates, stable retention rates, and promising AI product adoption. The financial guidance and shareholder return plans are optimistic, with expected revenue growth and margin improvements. Given Braze's market cap, these factors suggest a positive stock price movement in the short term, likely in the 2% to 8% range.
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