• Revenue: $152.1 million, up 23% year over year.
• Committed Annual Recurring Revenue: Exceeded $600 million.
• Non-GAAP Operating Margin: Improved by 580 basis points year over year.
• Non-GAAP Net Income: Positive for the second consecutive quarter.
• Customer Count: Increased by 48 to 2,211, up 200 year over year.
• Large Customers ($500,000+ ARR): Increased to 234, up 24% year over year.
• Dollar-Based Net Retention Rate: 113% overall, 116% for large customers.
• Non-GAAP Gross Margin: 70.5%.
• Non-GAAP Operating Loss: $2.2 million, or negative 1% of revenue.
• Cash and Marketable Securities: $493.1 million.
• Free Cash Flow: Negative $14.2 million.
• Q4 Revenue Guidance: $155 to $156 million, approximately 19% growth at midpoint.
• FY 2025 Revenue Guidance: $588 to $589 million, approximately 25% growth at midpoint.

Release Date: December 09, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Braze Inc (NASDAQ:BRZE) reported a 23% year-over-year increase in revenue, reaching $152.1 million for the third quarter.
• The company achieved a positive non-GAAP net income for the second consecutive quarter, indicating improved financial health.
• Braze Inc (NASDAQ:BRZE) surpassed $600 million in committed annual recurring revenue, showcasing strong demand for its customer engagement platform.
• The company expanded its customer base by 48 during the quarter, bringing the total to 2,211, with significant growth in enterprise customers.
• Braze Inc (NASDAQ:BRZE) introduced innovative AI-driven product features, such as Project Catalyst, aimed at enhancing personalized customer engagement and marketing productivity.

Negative Points

• Despite revenue growth, Braze Inc (NASDAQ:BRZE) experienced a decline in non-GAAP gross margin year-over-year, primarily due to the expansion of premium messaging channels.
• The company continues to face challenges in the SMB sector, with ongoing difficulties in sales capacity and customer acquisition.
• Braze Inc (NASDAQ:BRZE) reported a negative free cash flow of $14.2 million for the quarter, indicating cash management challenges.
• The demand environment remains difficult, with no significant improvement expected in the near term, impacting growth prospects.
• There is ongoing pressure on dollar-based net retention rates, with customers buying closer to their known needs and some right-sizing their contracts.

Q & A Highlights

Q: Can you provide more details about Project Catalyst and its integration with Canvas? Will it be a separate add-on, and how might it impact Braze's results next year? A: Project Catalyst will be integrated into Canvas, ushering in a new era of journey design by allowing marketers to set goals and optimize on a one-on-one basis using AI. It will be a premium feature with flexible pricing options, either through flexible credits or as a new SKU. The focus is on optimizing performance and usability before monetization. - William Magnuson, CEO

Q: How should we think about the dollar-based net retention rate for the third quarter and moving forward? A: The dollar-based net retention rate for Q3 was 113%, rounding up from 112.5%. We anticipate it to be around 110% by year-end, reflecting some ongoing pressure but also stability in the metric. - Isabelle Winkles, CFO

Q: Can you update us on the improvements in go-to-market strategies and sales productivity, particularly regarding flexible credits and customer engagement? A: Over 450 customers have adopted flexible message sending credits, facilitating new channel adoption and speeding up go-to-market processes. We've also completed our global sales leadership transition, enhancing our value framework and partner ecosystem, leading to higher win rates and better onboarding outcomes. - William Magnuson, CEO

Q: How is the competitive landscape evolving with the focus on generative AI, and how does Braze position itself against incumbents like Salesforce and Adobe? A: Salesforce's focus on Agentic AI has led to a perceived neglect of their Marketing Cloud, opening opportunities for Braze. Our integrated AI capabilities and robust data platform position us well to capitalize on these shifts, as we continue to innovate and expand our channel offerings. - William Magnuson, CEO

Q: What are the key factors affecting the net retention rate, and how do marketing budgets impact this metric? A: Customers are purchasing closer to their known needs, impacting upsell sizes. Some are right-sizing contracts at renewal, affecting churn. Marketing budgets as a percentage of revenue have decreased, reflecting broader economic pressures. - Isabelle Winkles, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.