Braze, Inc. (BRZE) Reports a 31.3% Revenue Increase in Q1 Highlighting Strong Subscription Service Growth

Overview of Financial Growth

In its latest quarterly report, Braze, Inc. (Ticker: BRZE), a leading cloud-based customer engagement platform, revealed substantial growth with a 31.3% year-over-year increase in revenue. For the three months ended April 30, 2023, the company’s revenue climbed from the previous year’s figures of $77.495 million to $101.780 million. This significant uptick in revenue can be largely attributed to a marked increase in subscription service revenue, demonstrating Braze’s solid foothold and expanding influence in the customer engagement solutions market.

Subscription Revenue as Growth Driver

Subscription revenue, which primarily consists of access to the Braze platform and related customer support, emerged as the driving force behind the financial gains, surging by 33.4% to contribute $97.146 million out of the total $101.780 million revenue for the quarter. The other segment constituting Braze’s revenue, professional services, and other services, however, remained fairly constant, indicating a shift in consumer preference towards the company’s subscription offerings.

Customer Base and Revenue Expansion

This growth trajectory is not only a reflection of a growing customer base, which scaled up to 1,866 customers but also mirrors the company’s robust capacity to increase sales through existing customer bases – a strategic move encapsulated in their land-and-expand business model. Notably, existing customers contributed approximately 49.0% to the expanded subscription revenue, supplemented by a strong inflow of new clients making up the remaining 51.0% of revenue growth. The positive revenue outcomes resonate with the company’s strategic initiatives, including customer base expansion, geographic outreach, and innovative technological development.

Revenue Gains and Net Losses

Despite witnessing a hike in revenue, Braze reported net losses amounting to $38.826 million for this quarter. Although reported losses are marginally lower than the previous year’s figure of $39.633 million, the company maintains an accumulated deficit of $392.4 million as of April 30, 2023. Nonetheless, this did not impede the overall financial health as the company reported net cash provided by operating activities at $22.549 million, an increment from the prior year’s $17.921 million.

Increasing Costs in Line with Growth

The cost of revenue observed an upward trend, escalating by 26.2% to $32.687 million, driven mainly by amplified investments in hosting, infrastructure, and third-party fees associated with delivering the platform, rising SMS and new channel offerings, alongside higher personnel costs and overheads. This increase in cost correlated with the company’s proactive steps to accommodate overall revenue growth and its commitment to enhanced service delivery.

Detailed Analysis of Operating Expenses

Operating expenses showcased a mixed pattern. Sales and marketing witnessed a 24.4% increase, primarily fueled by headcount growth and augmented sales activities. Research and development expenses surged by 37.6%, reflective of Braze’s robust investment in scaling up its technological infrastructure. Conversely, general and administrative costs posted a marginal rise of 1.7%, excluding a $4.3 million expense related to Class A common stock donation in 2022 — a manifestation of the company’s rationalized spend in administrative functions and increased focus on efficiency and cost-effectiveness.

Global Reach and Market Penetration

As a global technology player, Braze’s financials further highlight its geographical penetration with international revenue contributing approximately 43% to the total revenue, indicating successful globalization efforts and strong international market acceptance.

Organizational Resilience and Strategic Momentum

This comprehensive financial performance underlines the organizational resilience of Braze, Inc. in a dynamic business environment. With innovative customer engagement solutions rapidly becoming the spine of business strategies across industries, Braze, Inc.’s financial report is an affirmation of its strategic momentum, technological leadership, and enduring market relevance. This trend is especially notable as the company continues to lead in an increasingly competitive landscape, underpinned by its land-and-expand model, strategic customer acquisitions, and unwavering diligence in innovation and growth.

Income Statement

Financials in millions USD. Fiscal year is February – January. source

Year 2022 2021 2020 2019
0 Revenue 355.43 238.04 150.19 96.36
1 Revenue Growth (YoY) 49.32% 58.49% 55.86%
2 Cost of Revenue 115.82 78.51 54.51 35.69
3 Gross Profit 239.61 159.52 95.68 60.68
4 Selling, General & Admin 290.46 178.7 98.62 73.87
5 Research & Development 97.29 59.03 29.21 20.34
6 Operating Expenses 387.75 237.74 127.83 94.21
7 Operating Income -148.14 -78.21 -32.15 -33.53
8 Other Expense / Income -9.76 -1.33 -0.94 -2.18
9 Pretax Income -138.38 -76.88 -31.22 -31.36
10 Income Tax 0.58 -0.17 0.54 0.45
11 Net Income -138.97 -76.72 -31.75 -31.81
12 Shares Outstanding (Basic) 95 35 18 16
13 Shares Outstanding (Diluted) 95 35 18 16
14 Shares Change 170.99% 94.17% 11.01%
15 EPS (Basic) -1.47 -2.20 -1.77 -1.96
16 EPS (Diluted) -1.47 -2.20 -1.77 -1.96
17 Free Cash Flow -39.01 -39.77 -10.43 -9.92
18 Free Cash Flow Per Share -0.41 -1.14 -0.58 -0.61
19 Gross Margin 67.41% 67.02% 63.71% 62.97%
20 Operating Margin -41.68% -32.86% -21.41% -34.80%
21 Profit Margin -39.10% -32.23% -21.14% -33.01%
22 Free Cash Flow Margin -10.98% -16.71% -6.95% -10.29%
23 EBITDA -133.77 -74.11 -29.63 -30.71
24 EBITDA Margin -37.64% -31.13% -19.73% -31.87%
25 Depreciation & Amortization 4.62 2.77 1.59 0.65
26 EBIT -138.38 -76.88 -31.22 -31.36
27 EBIT Margin -38.93% -32.30% -20.78% -32.54%

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