Braze, Inc. — Q1 FY2023 Form 10-Q
Reporting period: Three months ended April 30, 2022. Braze provides a cloud-based customer engagement platform; subscription fees are its principal revenue source. Comparisons are with the three months ended April 30, 2021 unless stated otherwise. Amounts below are in U.S. dollars.
Key financial metrics
| Metric | Q1 FY2023 | Prior-year quarter | Change / context |
|---|---|---|---|
| Revenue | $77.5 million | $47.9 million | Up 61.9% |
| Gross profit / margin | $51.6 million / 66.6% | $32.1 million / 67.0% | Margin down 0.4 percentage points |
| Operating loss | $39.6 million | $13.0 million | Loss widened |
| Net loss | $39.6 million | $13.2 million | Loss widened; basic and diluted loss per share was $0.42 versus $0.65 |
| Cash from operations | $17.9 million | $(3.8) million | Improved year over year |
| Non-GAAP free cash flow | $15.7 million | $(4.6) million | Improved; see filing’s reconciliation and definition |
| Cash, cash equivalents and marketable securities | $534.1 million | — | At April 30, 2022 |
At quarter-end, current assets were $598.8 million and current liabilities were $181.0 million. The balance sheet reports no borrowings or debt; liabilities include operating leases. Deferred revenue was $139.4 million, and remaining performance obligations were $390.9 million, including $255.1 million expected within one year. Accumulated deficit was $254.2 million.
Material changes versus the prior-year quarter
- Subscription revenue rose 62.9%; management attributed approximately 47.4% of the increase to expansion among existing customers and 52.6% to new customers. Customer count increased to 1,503 from 1,002.
- International revenue increased to $32.1 million from $19.0 million and represented approximately 41% of revenue, versus 40%.
- Operating expenses rose to $91.2 million from $45.1 million, growing faster than revenue. Sales and marketing increased 89.1%, research and development 83.3%, and general and administrative 163.5%.
- Stock-based compensation expense increased to $17.0 million from $7.0 million. General and administrative expense also included a $4.3 million stock donation under the company’s Pledge 1% commitment.
- Operating cash flow improved, aided by collections and higher deferred revenue. Management said free cash flow benefited from seasonally higher billings in the preceding fourth quarter.
Liquidity, outlook and notable items
- Management said available cash, cash equivalents and marketable securities should cover working capital and capital expenditure needs for at least the next 12 months. It expects free cash flow to fluctuate as operating costs and growth investments change.
- No specific revenue or earnings guidance is provided in the filing. Management expects continued investment in sales and marketing, research and development, infrastructure, and international expansion; these investments may pressure near-term results.
- Non-cancelable business purchase commitments totaled $182.0 million and operating lease obligations were reported at $71.2 million as of April 30, 2022, primarily due over the next five years.
- The company early adopted lease accounting on February 1, 2022, recognizing a $59.6 million right-of-use asset and $61.3 million lease liability at adoption. Period-end operating lease liabilities totaled $57.4 million.
- Marketable securities had $1.2 million of unrealized losses, primarily attributed to market expectations for interest-rate increases; the company reported no credit impairment and did not expect to sell securities before recovery of amortized cost.
- Three material weaknesses in internal control over financial reporting remained unremediated: the financial close process, revenue-recognition controls, and information-technology controls. Management concluded disclosure controls were not effective, while stating the financial statements were fairly stated in all material respects.
- The company reported $1.3 million of accrued indirect-tax contingencies and said it did not expect material losses from legal proceedings beyond amounts recognized. In June 2022, after quarter-end, it granted 0.7 million RSUs with a grant-date fair value of $26.0 million.
Principal risks and investor checks
Risks highlighted include continued operating losses and uncertain profitability; rapid growth in expenses and stock-based compensation; competition, customer renewal and expansion, and pricing pressure; dependence on third-party cloud, messaging, and mobile-platform providers; privacy, data-security, and regulatory obligations; macroeconomic, inflation, interest-rate, and foreign-exchange uncertainty; and the three outstanding material weaknesses. Class B shares carry ten votes per share, concentrating voting power.
- Track remediation and independent testing of the three material weaknesses, especially revenue recognition and IT controls.
- Assess whether revenue growth, renewals, and customer expansion persist, and distinguish recurring operating cash generation from billing seasonality and working-capital movements.
- Monitor operating-expense growth, stock-based compensation, equity dilution, and the additional post-quarter RSU grant.
- Review liquidity against purchase commitments and lease obligations, and monitor interest-rate exposure and marketable-security values.
- Evaluate customer retention and expansion metrics, including the reported 127% dollar-based net retention rate, alongside competitive, privacy, and third-party service risks.