Summary
Braze closed its fiscal second quarter with revenue of $115.1 million, up 33.6% from $86.1 million in the same quarter a year earlier. Six-month revenue reached $216.9 million, up 32.6% from $163.6 million. Management attributed the growth to new customers, upsells and renewals. The 10-Q adds detail: about 51.7% of the subscription revenue increase came from existing customers adding monthly active users, channels and committed entitlements, and 48.3% came from new customers. The customer count reached 1,958 as of July 31, 2023, up from 1,599 a year earlier. Monthly active users were 5.5 billion, up from 4.8 billion at January 31, 2023.
Profitability improved at the gross line, while the operating loss widened slightly on a GAAP basis. Gross profit was $79.6 million, up 35.5%, and gross margin rose to 69.2% from 68.2%. The GAAP operating loss was $35.4 million against $35.1 million a year earlier. Operating margin was negative 30.7% compared with negative 40.8%. Net loss attributable to Braze was $31.7 million against $32.9 million, and diluted loss per share was $0.33 against $0.35. Non-GAAP operating loss was $7.6 million compared with $17.5 million, and non-GAAP net loss per share was $0.04 compared with $0.16. Stock-based compensation remains the largest reconciling item between the two sets of numbers.
Cash generation was uneven. The quarter used $17.5 million of operating cash, more than the $16.3 million used a year earlier. Over six months, net cash provided by operating activities was $5.0 million, up from $1.6 million. Free cash flow, a non-GAAP measure, was negative $18.7 million compared with negative $24.7 million. Capital expenditures fell to $0.4 million from $7.9 million. Deferred revenue was $176.8 million, up 30.2% from $135.8 million a year earlier, and remaining performance obligations rose 27.5% to $523.5 million. Dollar-based net retention slipped to 120% for the trailing twelve months ended July 31, 2023 from 126% a year earlier, and to 123% from 130% for customers with annual recurring revenue of $500,000 or more. Customers at that size numbered 173, up from 139.
The quarter's business wins included Miro, the National Basketball Association, Rappi and Stori. Braze unveiled Sage AI, a set of artificial intelligence and machine learning capabilities integrated into the platform, data flows and execution stack. It also launched Instant Insights through Snowflake Native Apps and joined the Russell 3000 Index.
Guidance points to modest sequential growth and a slower path to break-even. For the fiscal third quarter ending October 31, 2023, revenue is guided to $116.5 million to $117.5 million. For the full fiscal year ending January 31, 2024, revenue guidance is $451.5 million to $454.5 million. Third quarter non-GAAP operating loss is guided to $15.5 million to $16.5 million and the full year to $47.0 million to $49.0 million. Non-GAAP net loss per share is guided to $0.13 to $0.14 for the third quarter and $0.37 to $0.39 for the full year. Management reiterated that the non-GAAP operating loss margin should be negative 7% or better in the fourth quarter of the fiscal year ending January 31, 2024.
The guidance comes without a reconciliation to the closest GAAP measures. Named risks include unstable market and economic conditions, a history of operating losses, intense competition, reliance on third-party cloud infrastructure, and evolving cybersecurity and data privacy regulation. The slide in net retention puts more weight on new customer acquisition and expansion. The company also carries non-cancelable purchase commitments of $356.3 million and operating lease obligations of $61.3 million as of July 31, 2023, due mostly over the next four years.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $115.1M | $101.8M | +13.1% | $86.1M | +33.6% |
| Gross profit | $79.6M | $69.1M | +15.3% | $58.8M | +35.5% |
| Gross margin | 69.2% | 67.9% | +1.3 pp | 68.2% | +0.9 pp |
| Research & development | $29.1M | $29.7M | -2.1% | $23.3M | +24.8% |
| Sales & marketing | $60.4M | $57.3M | +5.5% | $50.0M | +20.8% |
| General & administrative | $25.5M | $24.0M | +6.1% | $20.5M | +23.9% |
| Total operating expenses | $115.0M | $111.0M | +3.6% | $93.9M | +22.5% |
| Operating income (loss) | -$35.4M | -$41.9M | +15.6% | -$35.1M | -0.7% |
| Operating margin | -30.7% | -41.2% | +10.4 pp | -40.8% | +10.0 pp |
| Net income (loss) | -$32.0M | -$38.8M | +17.5% | -$33.4M | +4.1% |
| Net margin | -27.8% | -38.1% | +10.3 pp | -38.8% | +10.9 pp |
| Diluted EPS | -$0.33 | -$0.40 | +$0.07 | -$0.35 | +$0.02 |
| Customers | 1,958 | 1,866 | +4.9% | 1,599 | +22.5% |
| Net retention rate | 120.0% | 122.0% | -2.0 pp | 126.0% | -6.0 pp |
Risks
Braze disclosed an unremediated material weakness in internal control over financial reporting related to accounting for revenue recognition under ASC 606 as of July 31, 2023. If not remediated, it could result in material misstatements and affect the accuracy and timing of financial reporting.
Unstable market and economic conditions, including inflation, higher interest rates, banking sector volatility, and geopolitical unrest, may cause customers to delay or reduce customer engagement technology spending, extend sales cycles, and increase pricing pressure. MD&A also highlights these macroeconomic conditions as affecting business and results.
Advances in generative artificial intelligence may significantly disrupt consumer engagement and marketing strategies, and competitors may use AI to offer lower-cost or more efficient products. Braze also notes new legal, ethical, and regulatory challenges as it develops AI and machine learning features.
Braze faces intense competition from legacy marketing clouds such as Adobe and Salesforce and point solutions such as Airship, Iterable, CleverTap, MailChimp, and MoEngage. Competitors may bundle products, lower prices, or consolidate, which could reduce Braze's sales, renewals, pricing, and gross margins.
Braze depends on customer renewals and expansion. Its dollar-based net retention rate was 120% for the trailing 12 months ended July 31, 2023 compared with 126% for the trailing 12 months ended July 31, 2022, and 123% compared with 130% for customers with ARR of $500,000 or more. If renewal or expansion slows, revenue growth could be harmed.
Sales cycles with large enterprise customers are long and unpredictable, generally three to six months but sometimes extending over 12 months. A sustained economic downturn could lengthen cycles or reduce win rates due to budgetary constraints, delaying revenue recognition.
The platform depends on third-party providers for email and SMS/MMS delivery and on Apple and Google services for mobile and web notifications. Policy changes, extended outages, or cybersecurity events affecting these providers could cause customer dissatisfaction, reputational harm, and lost customers.
Braze depends on its senior management team, particularly its chief executive officer, and must attract and retain highly skilled software engineers and senior sales executives. Its hybrid and remote work model adds operational complexity and may affect hiring, training, culture, and retention.
For the six months ended July 31, 2023 and 2022, approximately 43% and 42% of revenue was generated outside the United States, respectively. International expansion exposes Braze to regulatory, tax, currency, political instability, and compliance risks that could disrupt operations.
Braze has a history of operating losses, including a net loss of $70.9 million for the six months ended July 31, 2023, and an accumulated deficit of $424.1 million as of July 31, 2023. It expects costs to increase and may not achieve or sustain profitability.
SaaS KPIs
All quarters →Monthly Active Users
Total Customers
Current Remaining Performance Obligations
Remaining Performance Obligations
Free Cash Flow
Non-GAAP Operating Margin
Summary, forecast, risks and KPIs are extracted from Braze, Inc.'s SEC filings for Q2 FY2024 (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.