Braze, Inc. — Q1 FY2025 Form 10-Q
Reporting period: Three months ended April 30, 2024. Comparatives are for the three months ended April 30, 2023, unless otherwise noted. Braze provides a cloud-based customer engagement platform, primarily sold through subscriptions. Financial statements are unaudited and prepared under U.S. GAAP.
Financial and operating results
| Metric | Q1 FY2025 | Q1 FY2024 | Change |
|---|---|---|---|
| Revenue | $135.5M | $101.8M | +33.1% |
| Gross profit / margin | $90.9M / 67.1% | $69.1M / 67.9% | Margin down 0.8 percentage points |
| Operating loss | $(40.1)M | $(41.9)M | Loss narrowed |
| Net loss | $(35.7)M | $(38.8)M | Loss narrowed |
| Net loss per share, diluted | $(0.35) | $(0.40) | Improved |
| Operating cash flow | $19.4M | $22.5M | Down $3.2M |
| Non-GAAP free cash flow | $11.4M | $21.7M | Down $10.2M |
Subscription revenue was $130.1M, up 34.0%; professional services and other revenue was $5.3M. U.S. revenue was $75.6M and international revenue was $59.8M, with international revenue representing approximately 44% of the total. Subscription growth reflected both existing-customer expansion and new customers. Customers increased to 2,102 from 1,866 year over year, and monthly active users reached approximately 6.5 billion, up from 6.2 billion at January 31, 2024.
Trailing 12-month dollar-based net retention was 117%, down from 122% a year earlier; for customers with at least $500,000 ARR, it was 119%, versus 124%. The filing reports 212 customers with ARR of at least $500,000, compared with 164 a year earlier. Remaining performance obligations were $657.3M, including $419.8M expected within one year.
Liquidity, balance sheet, and cash flow
At April 30, 2024, cash and cash equivalents were $74.8M and marketable securities were $409.0M, for combined cash, cash equivalents, and marketable securities of $487.7M. Current assets were $598.9M and current liabilities were $305.6M. Deferred revenue was $229.3M current, with total deferred revenue of $229.7M. The company reported no borrowings or debt balance in the presented balance sheet; operating lease liabilities totaled $87.5M. Accumulated deficit was $518.7M.
Operating cash flow was supported by deferred revenue growth of $25.3M and noncash stock-based compensation of $28.6M. Investing activities used $10.6M, including $6.9M of property and equipment purchases; management attributed the lower free cash flow primarily to office-related capital spending, including the New York headquarters. Financing activities used $1.9M, including $2.9M of deferred acquisition consideration payments. Management believes available cash, cash equivalents, and marketable securities will fund working capital and capital expenditure needs for at least the next 12 months.
Non-cancelable business purchase commitments were $210.7M and operating lease obligations were $118.6M as of April 30, 2024. These are contractual obligations, not debt.
Material changes and management commentary
- Revenue increased 33.1%, with approximately 56.3% of subscription revenue growth attributed to existing customers and 43.7% to new customers. Customer count grew about 12.6% year over year.
- Gross margin declined to 67.1%. Management cited higher costs from premium messaging channel adoption and a one-time revenue charge related to an April service disruption. Hosting and infrastructure costs rose $4.7M and third-party messaging fees rose $5.9M.
- Operating expenses increased in dollars, but fell to 97% of revenue from 109%. Stock-based compensation expense, net of amounts capitalized, was $28.3M, up from $24.1M.
- Management plans continued investment in sales and marketing, research and development, infrastructure, AI capabilities, and international expansion. It expects cost of revenue and operating expenses to increase in absolute dollars; no numerical revenue or earnings guidance is provided in this filing.
- Seasonally, customer messaging, compute, and storage usage typically rises most in the fourth quarter. Management expects free cash flow to fluctuate with operating costs and growth investment.
Risks, contingencies, and unusual items
- Key risks include persistent operating losses, possible slowing growth, competition and pricing pressure, customer renewals and expansion, macroeconomic uncertainty, and dependence on third-party cloud hosting and messaging channels.
- Privacy, data protection, cybersecurity, AI-related, and regulatory risks may expose the company to service disruption, liability, fines, or reputational damage. The platform experienced an April service disruption that contributed to a one-time revenue charge; the filing does not specify its amount.
- Indirect-tax contingency liabilities were $1.2M, up from $1.0M at January 31, 2024. The company stated that it did not expect material losses beyond amounts recognized for other legal matters.
- Investment securities had $2.3M of gross unrealized losses at quarter-end, primarily attributed to interest-rate market volatility. The company reported no credit losses and said it did not expect to need to sell the securities before recovery of amortized cost.
- In May 2024, after quarter-end, Braze donated 32,155 Class A shares under its Pledge 1% commitment and recognized approximately $1.3M of operating expense. The company also entered a Sydney office lease commencing in fiscal 2025 and granted additional RSUs.
- Class B shares carry ten votes per share versus one vote for Class A; Class B holders collectively held approximately 75.9% of voting power at April 30, 2024. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether subscription growth and customer expansion can persist as net retention declines and management cautions that historical growth may not predict future performance.
- The amount and duration of the April service-disruption impact, including any credits, refunds, or customer-retention effects; the filing does not quantify the charge.
- Whether gross margin stabilizes as premium messaging and third-party delivery costs rise, and how office-related capital spending affects future free cash flow.
- The sustainability of operating cash generation, including its reliance on advance billings and deferred revenue, alongside continuing GAAP losses and substantial stock-based compensation.
- Progress against contractual commitments, indirect-tax exposures, and the company’s ability to maintain liquidity while funding growth and lease obligations.
- Potential effects of privacy regulation, cybersecurity incidents, platform outages, third-party provider dependence, and concentrated voting control.