Braze Reports Fiscal Second Quarter 2023 Results

Second quarter revenue grew 54.5% year-over-year to $86.1 million

Achieved dollar-based net retention of 126% for the trailing 12 months

Braze (Nasdaq: BRZE) a leading comprehensive customer engagement platform that powers interactions between consumers and brands they love, today announced results for its fiscal quarter ended July 31, 2022.

“We delivered a strong quarter of 55% revenue growth while continuing to provide best-in-class omni-channel customer engagement for our customers,” said Bill Magnuson, cofounder and CEO of Braze. “We continue to execute on our long-term strategy, introducing new, enhanced and differentiated products, and expanding our engineering and go-to-market presence. Despite macroeconomic headwinds and the challenges they present, we remain confident in the durability of our business and the overall promise of our customer engagement platform and a massive addressable market.”

Fiscal Second Quarter 2023 Financial Highlights

• Revenue was $86.1 million compared to $55.8 million in the second quarter of the fiscal year ended January 31, 2022, up 54.5% year-over year, driven primarily by new customers, upsells and renewals.
• Subscription revenue in the quarter was $81.7 million compared to $51.7 million in the second quarter of the fiscal year ended January 31, 2022, and professional services and other revenue was $4.4 million compared to $4.0 million in the second quarter of the fiscal year ended January 31, 2022.
• Remaining performance obligations as of July 31, 2022 was $410.5 million, of which $274.2 million is current, which we define as less than one year.
• GAAP Gross Margin was 68.2% compared to 66.4% in the second quarter of the fiscal year ended January 31, 2022.
• Non-GAAP Gross Margin was 69.3% compared to 66.7% in the second quarter of the fiscal year ended January 31, 2022.
• Dollar-based net retention for all customers for the trailing 12 months ended July 31, 2022 and July 31, 2021 was 126% and 125%, respectively; dollar-based net retention for customers with annual recurring revenue (ARR) of $500,000 or more was 130% compared to 135% in the second quarter of the fiscal year ended January 31, 2022.
• Total customers increased to 1,599 as of July 31, 2022 from 1,119 as of July 31, 2021; 139 of our customers had ARR of $500,000 or more as of July 31, 2022, compared to 82 customers as of July 31, 2021.
• GAAP operating loss was $35.1 million compared to an operating loss of $12.2 million in the second quarter of the fiscal year ended January 31, 2022. Operating loss in the quarter included $17.1 million of stock compensation expense.
• Non-GAAP operating loss was $17.5 million compared to a loss of $6.5 million in the second quarter of the fiscal year ended January 31, 2022.
• GAAP net loss per basic and diluted share attributable to Braze common stockholders was $(0.35) compared to $(0.60) in the second quarter of the fiscal year ended January 31, 2022.
• Non-GAAP net loss per basic and diluted share attributable to Braze common stockholders was $(0.16) compared to $(0.32) in the second quarter of the fiscal year ended January 31, 2022.
• Net cash used in operating activities was $16.3 million compared to net cash used in operating activities of $4.6 million in the second quarter of the fiscal year ended January 31, 2022.
• Free cash flow was $(24.7) million compared to $(5.7) million in the second quarter of the fiscal year end January 31, 2022.
• Total cash and cash equivalents, restricted cash, and marketable securities was $510.7 million as of July 31, 2022 compared to $518.1 million as of January 31, 2022.

Recent Business Highlights

• Notable new business wins and upsells in the quarter included Roku, TelevisaUnivision, IBM, and Pizza Hut Australia.
• Launched Canvas Flow, our next generation, best-in-class customer journey builder, strengthening our core product offering.
• Continued to add talent to the team, increasing headcount nearly 100 employees in Q2 bringing the total Braze team to over 1,350.

Investor Event at Forge 2022

• At 12:30 pm EDT on the afternoon of October 13, 2022, Braze will host an investor event in tandem with its Forge 2022 Customer Conference at Pier 59, Chelsea Piers in New York City.
• The event will be video cast live and archived on the company’s Investor site at investors.braze.com.

Financial Outlook

Braze is initiating guidance for the fiscal third quarter ending October 31, 2022 and updating guidance for the fiscal year ending January 31, 2023.

Braze has not reconciled its guidance as to non-GAAP operating loss, non-GAAP net loss or non-GAAP net loss per share to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in Braze’s stock price. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to Braze’s results calculated in accordance with GAAP.

Conference Call Information:

What: Braze Second Quarter Fiscal Year 2023 Financial Results Conference Call

When: Monday, September 12th at 5:00 pm EDT / 2:00 pm PDT

Webcast & Supplemental Data: investors.braze.com

Replay: A webcast replay will be available on Braze’s investor site at investors.braze.com.

Supplemental and Other Financial Information

Supplemental information, including an accompanying financial presentation and other information can be accessed through Braze’s investor website at investors.braze.com.

Non-GAAP Financial Measures

This press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP gross profit and margin, non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP operating loss, non-GAAP net loss, non-GAAP net loss per share, basic and diluted, and non-GAAP free cash flow. Braze defines non-GAAP gross profit and margin, non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP operating loss and non-GAAP net loss as the respective GAAP balances, adjusted for stock-based compensation expense, employer taxes related to stock-based compensation and charitable contribution expense. Prior to the first quarter of the fiscal year ended January 31, 2023, Braze did not adjust non-GAAP gross profit and margin, non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP operating loss or non-GAAP net loss for employer taxes related to stock-based compensation or charitable contribution expense, because these amounts were immaterial in prior periods. Braze defines non-GAAP free cash flow as net cash used in operating activities, minus purchases of property and equipment and minus capitalized internal-use software costs. Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

Braze uses this non-GAAP financial information internally in analyzing its financial results and believes that this non-GAAP financial information, when taken collectively with GAAP financial measures, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles in the United States (GAAP), and may be different from similarly-titled non-GAAP measures used by other companies.

The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded in Braze’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by Braze’s management about which expenses are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below in the financial statement tables included below in this press release for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.

Braze encourages investors to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, which it includes in press releases announcing quarterly and fiscal year financial results, including this press release, and not to rely on any single financial measure to evaluate Braze’s business.

Definition of Other Business Metrics

Customer: Braze defines a customer, as of period end, as the separate and distinct, ultimate parent-level entity that has an active subscription with Braze to use its products. A single organization could have multiple distinct contracting divisions or subsidiaries, all of which together would be considered a single customer.

Annual Recurring Revenue (ARR): Braze defines ARR as the annualized value of customer subscription contracts, including certain premium professional services that are subject to contractual subscription terms, as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms (including contracts for which Braze is negotiating a renewal). Braze’s calculation of ARR is not adjusted for the impact of any known or projected future events (such as customer cancellations, expansion or contraction of existing customers relationships or price increases or decreases) that may cause any such contract not to be renewed on its existing terms. ARR may decline or fluctuate as a result of a number of factors, including customers’ satisfaction or dissatisfaction with Braze’s products and professional services, pricing, competitive offerings, economic conditions or overall changes in Braze’s customers’ spending levels. ARR should be viewed independently of revenue and does not represent Braze’s GAAP revenue on an annualized basis or a forecast of revenue, as it is an operating metric that can be impacted by contract start and end dates and renewal rates.

Dollar-Based Net Retention Rate: Braze calculates dollar-based net retention rate as of a period end by starting with the ARR from a cohort of customers as of the as of 12 months prior to such period-end (the Prior Period ARR). Braze then calculates the ARR from the same cohort of customers as of the end of the current period (the Current Period ARR). Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months, but excludes ARR from new customers in the current period. Braze then divides the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. Braze then calculates the weighted average point-in-time dollar-based net retention rates as of the last day of each month in the current trailing 12-month period to arrive at the dollar-based net retention rate.

Remaining Performance Obligations: The transaction price allocated to remaining performance obligations represents amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, the timing of service delivery and contract terms. Unbilled portions of the remaining performance obligation are subject to future economic risks including bankruptcies, regulatory changes and other market factors.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding Braze’s financial outlook for the third quarter of and full fiscal year ended January 31, 2023. These forward-looking statements are based on current expectations, estimates, forecasts and projections. Words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “hope,” “intend,” “may,” might,” “potential,” “predict,” “project,” “shall,” “should,” “target,” “will” “and variations of these terms and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements contain these identifying words.

Forward-looking statements are based on Braze’s current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause Braze’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, risks and uncertainties related to: (1) unstable market and economic conditions may have serious adverse consequences on Braze’s business, financial condition and share price; (2) Braze’s recent rapid revenue growth may not be indicative of its future revenue growth; (3) Braze’s history of operating losses; (4) Braze’s limited operating history at its current scale; (5) Braze’s ability to successfully manage its growth; (6) the accuracy of estimates of market opportunity and forecasts of market growth and the impact that global macroeconomic uncertainty, including from the ongoing COVID-19 pandemic and ongoing conflict between Russia and Ukraine, and general market, political, economic and business conditions could have on Braze’s or its customers’ businesses, financial condition and results of operations; (7) Braze’s ability and the ability of its platform to adapt and respond to changing customer or consumer needs, requirements or preferences; (8) Braze’s ability to attract new customers and renew existing customers; (9) the competitive markets in which Braze participates and the intense competition that it faces; (10) Braze’s ability to adapt and respond effectively to rapidly changing technology, evolving cybersecurity and data privacy risks, evolving industry standards or changing regulations; and (11) Braze’s reliance on third-party providers of cloud-based infrastructure; as well as other risks and uncertainties discussed in the “Risk Factors” section of Braze’s Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the Securities and Exchange Commission (SEC) on March 31, 2022 and other subsequent filings Braze makes with the SEC from time to time, including Braze’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2022 that will be filed with the SEC. The forward-looking statements included in this press release represent Braze’s views only as of the date of this press release and Braze assumes no obligation, and does not intend to update these forward-looking statements, except as required by law.

About Braze

Braze is a leading comprehensive customer engagement platform that powers interactions between consumers and brands they love. With Braze, global brands can ingest and process customer data in real time, orchestrate and optimize contextually relevant, cross-channel marketing campaigns and continuously evolve their customer engagement strategies. Braze has been recognized as one of Fortune's 2021 Best Workplaces in New York, Fortune's 2021 Best Workplace for Millennials, and 2021 UK Best Workplaces for Women by Great Place to Work. The company is headquartered in New York with offices in Austin, Berlin, Chicago, London, San Francisco, Singapore, and Tokyo. Learn more at braze.com.

Braze uses its Investor website at investors.braze.com as a means of disclosing material non-public information, announcing upcoming investor conferences and for complying with its disclosure obligations under Regulation FD. Accordingly, you should monitor its investor relations website in addition to following its press releases, SEC filings and public conference calls and webcasts.

Selected Financial Data

BRAZE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

⁽¹⁾ Includes stock-based compensation as follows:

⁽²⁾ Includes employer taxes related to stock-based compensation as follows:

⁽³⁾ Includes charitable donation expense as follows:

BRAZE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)

BRAZE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

BRAZE, INC.

U.S. GAAP RECONCILIATION OF NON-GAAP ADJUSTED RESULTS

(in thousands, except per share amounts)

The following tables reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure:

⁽¹⁾ Assumes no tax impact due to the Company’s net loss position and deferred tax assets.

Braze is a registered trademark of Braze, Inc.

All product and company names herein may be trademarks of their registered owners.

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