Summary
Braze reported revenue of $86.1 million for its fiscal second quarter of 2023, up 54.5% from $55.8 million in the prior-year quarter. Gross profit increased to $58.8 million from $37.0 million, and gross margin improved to 68.2% from 66.4%. The company said the top line benefited from new customers, upsells and renewals. Remaining performance obligations were $410.5 million as of July 31, 2022, up 53.1% from $268.2 million a year earlier. Deferred revenue, current portion only, was $135.8 million. Dollar-based net retention for all customers was 126% for the trailing 12 months ended July 31, 2022, compared with 125% for the trailing 12 months ended July 31, 2021.
The bottom line showed the cost of that growth. Operating loss widened to $35.1 million from $12.2 million in the prior-year quarter. Operating margin fell to negative 40.8% from negative 21.8%. Net loss attributable to Braze widened to $32.9 million from $12.2 million a year earlier. Diluted EPS was negative $0.35, compared with negative $0.60, so the per-share loss narrowed. On a non-GAAP basis, gross margin was 69.3% compared with 66.7%, operating loss was $17.5 million compared with $6.5 million, and net loss per diluted share was $0.16 compared with $0.32. Stock-based compensation accounted for $17.1 million of the quarterly operating loss, and the company donated Class A shares valued at $4.3 million year to date.
Cash flow was mixed. Net cash used in operating activities was $16.3 million in the quarter, compared with $4.6 million used in the prior-year quarter, as the outflow deepened. For the six months ended July 31, 2022, operating cash flow improved to positive $1.6 million from negative $8.4 million a year earlier. Capital expenditures were $7.9 million in the quarter, up from $0.46 million, and $9.8 million year to date, up from $0.76 million. Free cash flow, a non-GAAP measure, was negative $24.7 million compared with negative $5.7 million. Customer metrics expanded. Total customers rose to 1,599 from 1,119. Customers with ARR of $500,000 or more increased to 139 from 82, though their dollar-based net retention slipped to 130% from 135%. Monthly active users reached 4.1 billion as of July 31, 2022, up from 3.7 billion as of January 31, 2022. New business wins included Roku, TelevisaUnivision, IBM and Pizza Hut Australia, and Braze launched Canvas Flow, its next-generation customer journey builder. Headcount grew by nearly 100 employees in the quarter to more than 1,350.
Guidance points to continued spending. Braze initiated an outlook for the fiscal third quarter ending October 31, 2022 and updated its outlook for the full fiscal year ending January 31, 2023. For the third quarter, the company guided to a non-GAAP operating loss of $23.0 million to $24.0 million, a non-GAAP net loss of $21.0 million to $22.0 million, and a non-GAAP net loss per share of $0.22 to $0.23. For the full fiscal year, it guided to a non-GAAP operating loss of $76.0 million to $78.0 million, a non-GAAP net loss of $74.0 million to $76.0 million, and a non-GAAP net loss per share of $0.77 to $0.79. Weighted average shares outstanding are expected to reach 97.4 million in the third quarter and 96.4 million for the full year. The company also set an investor event for October 13, 2022 alongside its Forge 2022 customer conference.
Risks remain substantial. Braze has a history of operating losses, and the GAAP operating loss widened sharply in the quarter. Management cited macroeconomic headwinds and the challenges they present while expressing confidence in the durability of the business. The company faces intense competition, reliance on third-party cloud infrastructure, evolving cybersecurity and data privacy risks, and exposure to the ongoing COVID-19 pandemic and the conflict between Russia and Ukraine. Braze will cease to qualify as an emerging growth company as of the end of the fiscal year ending January 31, 2023, which brings added reporting requirements. Seasonality can also swing cost of revenue, since messaging volume and compute requirements typically peak in the fourth quarter because of holiday activity.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $86.1M | $77.5M | +11.1% | — | — |
| Gross profit | $58.8M | $51.6M | +13.9% | — | — |
| Gross margin | 68.2% | 66.6% | +1.7 pp | — | — |
| Research & development | $23.3M | $21.6M | +7.9% | — | — |
| Sales & marketing | $50.0M | $46.0M | +8.6% | — | — |
| General & administrative | $20.5M | $23.6M | -12.9% | — | — |
| Total operating expenses | $93.9M | $91.2M | +2.9% | — | — |
| Operating income (loss) | -$35.1M | -$39.6M | +11.5% | — | — |
| Operating margin | -40.8% | -51.2% | +10.4 pp | — | — |
| Net income (loss) | -$33.4M | -$39.6M | +15.7% | — | — |
| Net margin | -38.8% | -51.1% | +12.4 pp | — | — |
| Diluted EPS | -$0.35 | -$0.42 | +$0.07 | — | — |
| Customers | 1,599 | 1,503 | +6.4% | — | — |
| Net retention rate | 126.0% | 127.0% | -1.0 pp | — | — |
Risks
Risk factors emphasize inflation, higher interest rates, supply-chain disruption and the Russia-Ukraine conflict, which could reduce customer engagement technology spending and extend sales cycles. The filing states any significant increases in inflation or continued economic volatility could have a material adverse effect on business, financial condition and results of operations.
Braze identified three material weaknesses in internal control over financial reporting as of the six months ended July 31, 2022, including controls related to revenue recognition and information technology. Remediation is ongoing and may not be sufficient to prevent material misstatements or timely financial reporting.
Net loss was $73.0 million for the six months ended July 31, 2022 compared with $25.8 million for the prior-year period, and accumulated deficit was $287.1 million as of July 31, 2022. The company expects costs and expenses to increase in future periods, which could negatively affect future results if revenue does not continue to increase.
Dollar-based net retention rate for customers with ARR of $500,000 or more declined to 130% for the trailing twelve months ended July 31, 2022 from 135% for the prior comparable period, even as total customers grew to 1,599. The filing warns revenue depends on renewals and expanded use, and a sustained downturn could reduce customer spending.
Large enterprise sales cycles generally run three to six months and can exceed 12 months, with macroeconomic pressure potentially extending cycles or reducing win rates. Sales and marketing expense increased 81.9% in the three months ended July 31, 2022, raising the risk of delayed revenue relative to spending.
The filing cites intense competition from legacy marketing clouds like Adobe and Salesforce and point solutions like Airship, Iterable and MailChimp, which may bundle products or offer pricing advantages. Competitive pressure may reduce prices, sales, revenue and gross margins.
International revenue increased 64% in the three months ended July 31, 2022 and represented 42% of revenue for the six months ended July 31, 2022, exposing Braze to currency, regulatory, tax and geopolitical risks as it expands in Europe and Asia-Pacific.
In September 2022 Braze implemented a hybrid work model and has a large remote workforce, with limited operating history under this model and uncertain impact on culture, attrition and regulatory nexus. The filing warns this could harm product development and business growth.
Braze will cease to qualify as an emerging growth company as of the end of the fiscal year ended January 31, 2023, which will increase legal and financial compliance costs and make financial reporting more time-consuming.
SaaS KPIs
All quarters →Monthly Active Users
Total Customers
Current Remaining Performance Obligations
Remaining Performance Obligations
Free Cash Flow
Non-GAAP Gross Margin
Non-GAAP Operating Loss
Summary, forecast, risks and KPIs are extracted from Braze, Inc.'s SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.