Summary

• Braze, Inc. provides cross-channel marketing solutions, data analytics, and personalized experiences for brands and consumers.
• Braze Inc. was founded in 2011, and its headquarters is located in New York, NY, USA.
• The company has one operating segment, which is the business of cloud-based customer engagement platform subscriptions.
• The 52-week price range of Braze is 25.76 to 58.67, and the trailing PE ratio is -137.35 due to negative EPS as of 31 October 2023. The gross margin is 70.66%, the operating margin is  -28.34%, the net margin is -24.99%, and the return on assets is -4.6% as of 31 October 2023.
• Net revenues for the year ended on 31 January 2023 were $355.43 million, increased by 49% compared with the prior year's revenue ended on 31 January 2022, which amounted to $238.04 million, resulting in an increase in the net revenue by $117.4 million.

Brief Company Overview

Braze, Inc. (NASDAQ: BRZE) is a leading comprehensive customer engagement platform that powers customer-centric interactions between consumers and brands. The company provides cross-channel marketing solutions, data analytics, and personalised experiences for brands and consumers. Braze Inc. was founded in 2011, and its headquarters is located in New York, NY, USA.¹ It also has ten other offices around the world, including London, San Francisco, Singapore, Chicago, Tokyo, Austin, Berlin, Toronto, Paris, and Sydney. Braze Inc. has over 2,000 customers across various industries, such as media, entertainment, retail, e-commerce, travel, hospitality, and more. Some of the well-known brands that use Braze Inc. to power their customer engagement are Burger King UK, Pegipegi, Jumbo, U.S Soccer, Uber, Fiverr, DraftKings, American Cancer Society, Tim Hortons, Canva, Grubhub, Bloom & Wild, Pizza Hut, EverWash, KFC Ecuador, Dafiti, Quizlet, and HBO Max.

Braze Inc.'s first overseas expansion was in 2016 when it opened in London. It has since added offices in Singapore, Chicago, Tokyo, and Berlin in 2018 and in Toronto, Paris, and Sydney in 2019. In 2021, Braze Inc. announced its presence in Canada and France by establishing subsidiaries. The company established a joint venture, Braze KK, in Japan. Braze Inc. also has a network of over 45 integration partners, such as Segment, mParticle, and Amplitude, that enhance its customer engagement capabilities. The company has one operating segment, which is the business of cloud-based customer engagement platform subscriptions.

The CEO of Braze Inc. is Bill Magnuson, who is also the company's co-founder.² He has been leading Braze Inc. since its inception in 2011 and oversees its vision, strategy, and growth. As of January 31, 2023, the company had a total of 1,501 full-time employees. As of 31 October 2023, the company had 31,321,234 shares outstanding, and the company did not pay any dividends. The company has 265 institutional shareholders, and ICONIQ Capital, LLC is the largest shareholder with 8.27% shareholding. The 52-week price range of Braze is 25.76 to 58.67, and the trailing PE ratio is -137.35 due to negative EPS as of 31 October 2023. The earnings per share of the company are -0.31 for the quarter that ended on 31 October 2023; the gross margin is 70.66%, the operating margin is  -28.34%, the net margin is -24.99% and the return on assets is -4.6% as on 31 October 2023.

Recent Business Developments

• On 16 October 2023, Braze listed itself in AWS Marketplace, signalling a deepening relationship between Braze and AWS and making it easier for Braze customers and prospects to enjoy the simplified procurement that AWS Marketplace offers.³
• On 06 September 2023, Braze introduced new data integration innovations to help brands create personalised, cross-channel campaigns caster by its Cloud Data Ingestion offering integrations with Amazon Redshift from Amazon Web Services (AWS), Databricks’ Lakehouse Platform, and Google BigQuery, making it easier for marketers to access data in Braze directly.⁴
• On 27 June 2023, Braze launched the Braze Instant Insights, a suite of Snowflake Native Apps on Snowflake Marketplace, which is a collection of Analytics Apps built using the Snowflake Native Application Framework and will enable joint customers to unlock and drive the value of their data.
• On 01 June 2023, Braze successfully completed its previously announced acquisition of North Star, its exclusive reseller in Australia and New Zealand (ANZ) and moving forward, the entity will do business as Braze Australia.
• On 27 June 2023, Braze unveiled Sage AI to power new capabilities that help marketers quickly bring creative brilliance to life with automation, personalisation, and predictive capabilities.

Recent Financing Activities

• As of 31 October 2023, for the nine months ended Braze financed $5.9 million from stock options exercised by investors and proceeds are utilised in business acquisitions and purchase of marketable securities.⁵
• As of 31 October 2023, for the nine months ended Braze financed $3.2 million from a stock purchase plan by employees and proceeds are utilised in business acquisitions and the purchase of marketable securities.⁶

Financial Performance Highlights

Q3  Performance Highlights

Net revenues for the third quarter of the 2023-24 fiscal year, as of 31 October 2023, were $123.96 million, increased by 33% compared with the prior year's third quarter revenue, which amounted to $93.13 million. The net revenue increased by $30.83 million. The company reported a 33.1% increase in revenue for the three months ending October 31, 2023, primarily due to a 33.0% increase in subscription revenue. This growth was primarily driven by existing customers, with 51.0% of the increase coming from monthly active users and expansion across channels. The remaining 49.0% was attributed to new customers. The total number of customers increased to 2,011 from 1,715 in October 2022. Professional services revenue increased by 35.4%, primarily due to increased deliverability services, technical account management, and support engagement services. However, the growth was partially offset by the accelerated engagement of new customers with third-party partner-led onboarding for configuration services.

Gross Profit for the third quarter of the 2023-24 fiscal year, as of 31 October 2023, was $87.59 million, increased by 37% compared with the prior year's third quarter gross profit, which amounted to $63.99 million, resulting in an increase in gross profit by $23.59 million. Gross margin for the third quarter of the 2023-24 fiscal year, as of 31 October 2023, was 70.66%, improved by 1.94% compared with the prior year's third quarter gross margin, which amounted to 68.71%, resulting in an improvement in profitability. These increases were due primarily to improved personnel efficiencies, economies of scale, and the optimisation of tech stack costs as the infrastructure costs to support revenue growth did not increase at the same pace as revenue.

Operating margin for the third quarter of the 2023-24 fiscal year, as of 31 October 2023, was -28.34%, improved by 11.24% compared with the prior year's third quarter operating margin, which amounted to -39.59%, resulting in an improvement in profitability. Net margin for the third quarter of the 2023-24 fiscal year, as of 31 October 2023, was -24.99%, increased by 11.40% compared with the prior year's third quarter net margin, which amounted to -36.39%, resulting in an improvement in profitability. Earnings Per Share (EPS) for the third quarter of the 2023-24 fiscal year, as of 31 October 2023, was -0.31, an increase of 11% compared with the prior year's third quarter EPS, which amounted to -0.35, resulting in an increase in profitability from investment. The company did not pay any dividends.

Annual Performance Highlights

Net revenues for the year ended on 31 January 2023 were $355.43 million, increased by 49% compared with the prior year's revenue ended on 31 January 2022, which amounted to $238.04 million, resulting in an increase in the net revenue by $117.4 million. The company reported a 49.3% revenue increase, primarily due to a 53% increase in subscription revenue. The growth was primarily from existing customers, with 72.5% of the increase coming from new customers. The total number of customers increased to 1,770 as of January 31, 2023. Professional services revenue also increased by 4%, driven by an increase in premium deliverability service fees. The company's international revenue increased by $55.1 million in the fiscal year ending January 31, 2023, as it expanded market penetration in Europe and Asia-Pacific regions.

Gross Profit for the year ended on 31 January 2023 was $239.61 million, increased by 50% compared with the prior year's gross profit ended on 31 January 2022, which amounted to $159.5 million, resulting in an increase in the gross profit by $80 million. The Gross Margin for the year ended on 31 January 2023 was 67.41%, which increased by 0.40% compared with the prior year's gross margin that ended on 31 January 2022, which amounted to 67.02%, resulting in an improvement in profitability. These increases were due primarily to economies of scale as the infrastructure costs to support the revenue growth did not increase at the same pace as revenue; the increases were partially offset by a one-time vendor charge. In addition, Braze has undertaken initiatives to optimize the costs of the tech stack and drive personnel efficiencies related to customer support functions.

Operating Loss for the year ended on 31 January 2023 was $148.14 million, an increase of 89% compared with the prior year's operating loss ended on 31 January 2022, which amounted to $78.21 million, resulting in an increase in the operating loss by $69.93 million. The Operating Margin for the year ended on 31 January 2023 was -41.68%, which declined by 8.82% compared with the prior year's operating margin that ended on 31 January 2022, which amounted to 32.86%, resulting in a decline in profitability.  Net Loss for the year ended on 31 January 2023 was $140.16 million, increased by 79% compared with the prior year's net loss ended on 31 January 2022, which amounted to $78.17 million, resulting in an increase in the net loss by $61.99 million. The Net Margin for the year ended on 31 January 2023 was -39.44%, which declined by 6.60% compared with the prior year's net margin that ended on 31 January 2022, which amounted to -32.84%, resulting in a decline in profitability. Earnings Per Share (EPS) for the year ended on 31 January 2023 was -$1.47, a decline of 33% compared with the prior year's EPS ended on 31 January 2022, which amounted to -$2.2 resulting in a decline in the EPS by $0.73. The company did not pay any dividends. The Company currently operates in the cloud-based customer engagement platform segment and views its operations as one operating segment as the CODM reviews financial information on a consolidated basis in making decisions regarding resource allocations and assessing performance.

The company's net cash used in operating activities for the fiscal year ending January 31, 2023, was $22.3 million, primarily due to a net loss of $140.7 million, adjusted for non-cash charges of $109.0 million, and net changes in operating assets and liabilities of $9.4 million. Non-cash adjustments included stock-based compensation of $72.2 million, amortization of deferred contract costs of $23.6 million, depreciation and amortisation expense of $4.6 million, and expense associated with the donation of Class A common stock to a charitable donor-advised fund of $4.3 million. Cash inflows were primarily due to an increase in deferred revenue of $39.9 million, offset by cash outflows from an increase in deferred contract costs of $30.5 million. Net cash used in investing activities was $398.5 million for the fiscal year ended January 31, 2023, primarily consisting of purchases of marketable securities of $638.2 million, partially offset by maturities of marketable securities of $256.4 million. Net cash provided by financing activities was $11.3 million for the fiscal year ended January 31, 2023, consisting solely of proceeds from the exercise of common stock options.

Business Overview

Braze is a leading comprehensive customer engagement platform that powers customer-centric interactions between consumers and brands. Customer Engagement is an emerging category of business activity and software, which Braze defines as the full set of activities that companies use to build and maintain direct, meaningful relationships with their customers. The platform empowers brands to listen to their customers better, understand them more deeply, and act on that understanding in a way that is human and personal. As of January 2023, 1,770 customers around the world trusted Braze to power their cross-channel customer engagement strategies. In January 2023, The platform enabled interactions with 4.8 billion monthly active users via its customers' apps, websites, and other digital interfaces, up from 3.7 billion in January 2022.

Braze offers a single, vertically integrated platform that encompasses the major functionalities, or layers, required for modern customer engagement: data ingestion, classification, orchestration, personalization, and action. For Data Ingestion, Braze Offers Braze SDKs, REST API, Partner Cohort Syncing and Braze Cloud Data Ingestion. For Classification, Braze offers Segmentation, Segment Insight, and Predictive Suite. For Orchestration, Braze offers Canvas Flow, Campaigns, Event and API Triggering, Frequency Capping and Rate Limiting, Intelligent Selection, Personalized Variant and Reporting and Analytics. For Personalization, Braze offers  Event and API Triggering, Frequency Capping and Rate Limiting, Intelligent Selection, Personalized Variant, Reporting and Analytics, Liquid Templating, Connected Content, Content Blocks, Intelligent Timing and Promotion Codes. For Action, Braze offers In-Product Messaging, Out-of-Product Messaging, Webhooks, Transactional Messaging, Braze Currents, Snowflake Data Sharing, Activity Logs, Media Library and User Permissions.

The company has one operating segment, which is the business of cloud-based customer engagement platform subscriptions.

Segmental (Cloud-based Customer Engagement) Analysis

The customer engagement operation is the key source of revenue for Braze Inc. Braze's platform empowers brands to listen to their customers better, understand them more deeply, and act on that understanding in a human and personal way. As of January 2023, 1,770 customers worldwide trusted Braze for their cross-channel customer engagement strategies, with the platform enabling interactions with 4.8 billion monthly active users via apps, websites, and other digital interfaces. Using this platform, brands ingest and process customer data in real time and orchestrate and optimize contextually relevant marketing campaigns across multiple channels. The cloud-based platform is designed so that interactions between brands and consumers have the same relevance and cross-channel continuity as human interactions. The customers include many established global enterprises and leading technology innovators and span a wide variety of sizes and industries, including retail, eCommerce, media, entertainment, and on-demand services.

Revenue from this segment is derived from two primary sources: (1) subscription services and (2) professional services and others. Subscription Services provide access to a customer engagement platform and customer support, with customers signing up for committed contractual entitlements. Excess usage is charged, or customers can choose to purchase an incremental volume tier. Revenue from platform subscriptions is recognized over the contract term, consistent with the period of services provided. Fees for excess usage and incremental volume are also considered subscription revenue. Professional Services and Revenue include fees for training and assisting customers in configuring Braze's platform, typically recognized over six months from providing access to the platform. This segment also offers platform and feature enhancement and optimization services, as well as additional services for customers upon initial contract or purchase of new products.

The cloud-based segment of Braze uses a land-and-expand business model, offering easy-to-adopt products with quick value. The company expands its reach by adding new channels, subscription products, engagement strategies, and business units. Pricing is based on customer reach and message volume, allowing the company to grow as customers expand. This model ensures quick value for customers.

The segment experienced a 49.3% increase in revenue for the fiscal year ending January 31, 2023, primarily due to a 53% increase in subscription revenue. This growth was primarily driven by existing customers expanding their contractual entitlements and features, while new customers contributed 27.5%. The total customers grew to 1,770 as of January 31, 2023, from 1,375 as of January 31, 2022. Professional services revenue also increased by 4%, driven by an increase in premium deliverability service fees. International revenue increased by $55.1 million in the same year, driven by Braze's expansion in Europe and Asia-Pacific regions. The segment experienced significant growth, generating revenue of $355.4 million, $238.0 million, and $150.2 million in the fiscal years ending January 31, 2023, 2022, and 2021, respectively. However, the company experienced net losses of $140.7 million, $78.2 million, and $32.0 million in the same years.

Other Information

Braze has experienced seasonality in its cost of revenue as a result of the customers' increased usage of its platform based on their business demands. The company typically experiences the highest sequential increase in overall messaging volume and compute and storage requirements during the fourth quarter due to the increased activity related to the holiday season and general customer engagement efforts around the end of the calendar year.

Braze’s revenue has increased significantly due to its growth strategy. For example, On September 14, 2020, Braze, along with Japan Cloud Computing Co., Ltd. and M30 LLC (the "Investors"), entered into an agreement to expand its business in the Japanese market further.  For the fiscal years ended January 31, 2023, 2022, and 2021, approximately 42%, 40%, and 40% of its revenue was generated outside of the United States, respectively. For distribution, Braze uses a cross-channel strategy that leverages the ideal mix of channels to reach customers in a complementary, cohesive way, with an eye toward making the most of each channel’s strengths. Braze also partners with other industry-leading technology providers, such as WPP, to deliver innovative customer experiences at scale.

The market for Braze's customer engagement solutions is evolving and highly competitive. There are several established and emerging competitors that address specific aspects of customer engagement. The company faces intense competition from software companies that offer marketing solutions, such as legacy marketing clouds like Adobe and Salesforce, and point solutions like Airship, Iterable, Leanplum (Clevertap), MailChimp (Intuit), and MoEngage. Many of its existing competitors have, and its potential competitors could have, substantial competitive advantages, such as greater name recognition, longer operating histories, larger sales and marketing budgets and resources, greater customer support resources, lower labor and development costs, larger and more mature intellectual property portfolios and substantially greater financial, technical and other resources. Recently, there has been significant merger and acquisition activity among its competitors, including the acquisition of MailChimp by Intuit and the acquisition of Leanplum by CleverTap. Continued merger and acquisition activity in the technology industry could increase the likelihood that Braze competes with other large technology companies. This could harm its ability to increase sales, maintain or increase subscription renewals, and maintain prices. Conditions in the market could change rapidly and significantly as a result of technological advancements, partnering among competitors, or continuing market consolidation.

The growth of Braze's business and its results may be negatively affected by unfavorable economic conditions in the United States and abroad. Global macroeconomic events like the COVID-19 pandemic, international conflicts like the Russia-Ukraine conflict, and macroeconomic trends like supply chain risks, inflation, interest rate increases, and consumer confidence have led to economic uncertainty. The rapid collapse of Silicon Valley Bank and Signature Bank has raised questions about the stability of other U.S. banks. While such events have not materially impacted Braze, a similar crisis could potentially impact its liquidity or the liquidity of its customers.

Company History

In 2011, Bill Magnuson, Jon Hyman, and Mark Ghermezian co-founded Braze as Appboy.⁷ The trio got together following Magnuson and Hyman's victory at the 2011 NYC Disrupt Hackathon for Gilt-ii. The three of them raised $3 million from investors to launch the business. Braze released the iOS SDK and email in 2012. Android SDK was introduced by Braze in 2013 along with a $7.6 million Series A funding round. Additionally, the business hired more than 50 people worldwide and created an office in San Francisco. Braze secured $15 million in Series B investment in 2014. Braze debuted webhooks, action and time-based campaigns, and API in 2015. The company introduced Canvas (Cross Channel Journey Management) in 2016, which enables marketers to reward consumers with prizes while also personalizing and automating messages to users. The business obtained $50 million in Series D Financing in August of 2017, and Appboy changed its name to Braze, Inc. later that year. In 2018, the company introduced Braze Alloys, a network of more than 45 integration apps with businesses such as Amplitude, mParticle, and Segment. In addition, the company launched an office in Singapore and raised $80 million in Series E capital, valued at $850 million. In 2019, Braze achieved $100 million in yearly recurring revenue and integrated Google AMP for email. In Gartner's Magic Quadrant for Mobile Marketing Platforms, the business was ranked as a leader. Additionally in 2019, Forbes included Braze on its Cloud 100 list and Inc. named Braze one of the Best Places to Work.Regarding Facebook's content moderation policies, Braze boycotted the platform in 2020 and urged other companies to follow suit. Through the Tech for Black Founders program, the company partnered with multiple other marketing technology companies to provide technology grants to Black-owned businesses. At this point, Braze had raised over $175 million in funding and was sending over 100 billion messages monthly. Inc. named Braze one of the Best Workplaces for a second year in that same year. Also, Braze commissioned the Data Privacy Report, which offers information on customers' privacy issues. Braze released the Ready for Takeoff 2021 Travel Industry Trends, Insights and Strategies along with Skyscanner and Apptopia. Braze brought Shopify and Snowflake integrations. The business was once again listed on Forbes' Cloud 100 list. Additionally, Braze was identified as a leader in the 2021 Forrester CCCM Wave.  Braze filed to go public in October of 2021.

Braze raised $520 million in its first public offering (IPO) on November 17, 2021, and was valued at $5.9 billion.⁸ The second annual Global Customer contact Review, which describes how merchants handle customer contact, was published by Braze in 2022. North Star, Braze's sole reseller in the ANZ region, was acquired by Braze in 2023. Braze Australia has replaced North Star. In 2023, Braze upgraded its machine learning and artificial intelligence capabilities, which are now referred to as Sage AI by Braze. These features are integrated into the Braze platform, data flows, and execution stack. Braze announced its listing on the AWS Marketplace on October 16, 2023, indicating a strengthening of the partnership between the two companies and facilitating the use of AWS Marketplace's streamlined procurement process by Braze's clients and potential clients.  With its Cloud Data Ingestion offering integrations with Amazon Redshift from Amazon Web Services (AWS), Databricks’ Lakehouse Platform, and Google BigQuery, Braze introduced new data integration innovations on September 06, 2023, to help brands create personalized, cross-channel campaigns. This made it easier for marketers to access data directly in Braze. In order to help the clients unlock and maximize the value of their data, Braze launched the Braze Instant Insights suite of Snowflake Native Apps on the Snowflake Marketplace on June 27, 2023. These Analytics Apps were created utilizing the Snowflake Native Application Framework.

References

1. ^ https://finance.yahoo.com/quote/BRZE/profile/
2. ^ https://www.braze.com/resources/articles/a-letter-from-william-magnuson-chief-executive-officer-and-cofounder-of-braze
3. ^ https://www.nasdaq.com/press-release/braze-customer-engagement-platform-now-available-in-aws-marketplace-2023-10-16
4. ^ https://finance.yahoo.com/news/braze-introduces-data-integration-innovations-130000517.html
5. ^ https://investors.braze.com/news/news-details/2023/Braze-Reports-Fiscal-Third-Quarter-2024-Results/default.aspx
6. ^ https://investors.braze.com/news/news-details/2023/Braze-Reports-Fiscal-Third-Quarter-2024-Results/default.aspx
7. ^ https://www.forbes.com/sites/alexkonrad/2016/12/07/marketing-tech-startup-appboy-names-new-ceo/
8. ^ https://www.barrons.com/articles/braze-ipo-pricing-51637142208