Q4 Fiscal 2025 Earnings Results March 27, 2025 Braze Financial Highlights $642M QUARTERLY REVENUE RUN RATE 1 22% YoY REVENUE GROWTH 2,296 CUSTOMERS IN OVER 75 COUNTRIES DOLLAR-BASED NET RETENTION 111% RATE 96% SUBSCRIPTION REVENUE $17M GAAP NET LOSS Data as of January 31, 2025 or the three months ended, as applicable 1. Represents quarterly GAAP revenue multiplied by 4 2 Forward Looking Statements and Disclaimer Forward-Looking Statements This presentation contains, and statements made during this presentat ...

Braze (BRZE) Q4 2025 Earnings Call March 27, 2025 04:30 PM ET Company Participants Christopher Ferris - Head - IRBill Magnuson - Co-Founder, Chairman & Chief Executive OfficerIsabelle Winkles - Chief Financial OfficerArjun Bhatia - Co-Group Head - Technology, Media & CommunicationsBrian Peterson - Managing DirectorDerrick Wood - Managing DirectorNicholas Altmann - Director - U.S. Software Equity ResearchScott Berg - Managing DirectorYun Kim - Managing Director Conference Call Participants Ryan MacWilliams - ...

Executive Transition and Termination - Executive will transition duties starting February 1, 2025, with employment terminating on June 1, 2025[4] - During the Transition Period, Executive will continue to receive base salary and participate in employee benefit plans[4] - Executive's termination on June 1, 2025, or earlier, will not entitle him to severance benefits unless specified[5] - Braze will pay Executive a lump sum for accrued but unpaid base salary by the next regular payroll date after the Termination Date[8] - Executive will be eligible for continued participation in the Company's health plan until the end of the month of the Termination Date[8] - Vesting of Executive's equity awards will accelerate if termination occurs due to death or disability before the Termination Date[8] - Effective on the Termination Date, Executive will cease participation in Company benefit plans and is not due any additional compensation beyond what is specified[12] Consulting Agreement - A consulting agreement will be effective from June 2, 2025, contingent on Executive meeting specific conditions[8] - The consulting agreement with Myles Kleeger will commence on June 2, 2025, contingent upon the execution of the Separation Agreement and Second Release[31] - The consultant will provide services as an independent contractor and will not be eligible for employee benefits[31] - Consultant will receive a one-time payment of $17,000 for services rendered[34] - Consultant's equity awards will vest until November 30, 2025, unless terminated earlier[34] - If terminated for cause, Consultant's equity awards will cease vesting immediately[35] - Consultant may be unilaterally terminated with five days' notice, with accelerated vesting of equity awards[35] - Consultant must return all company property upon termination of the agreement[36] Legal and Compliance - Executive waives any claims against Braze and its affiliates related to employment prior to signing the Agreement[7] - Executive agrees not to participate in class action lawsuits against Braze[9] - The Agreement includes a release of claims that will remain effective despite any later discovery of different facts[10] - Executive must comply with restrictive covenants, including non-competition and confidentiality agreements, as a material term of the Agreement[11] - In the event of a material violation of the Restrictive Covenants, Executive shall forfeit benefits described in Section 3(b) and return amounts received, except for $500[11] - Non-competition covenants will remain in effect during the term of the consulting agreement and for one year thereafter[31] - Non-solicitation covenants will remain in effect during the term of the consulting agreement and for 18 months after its termination[31] - The company reserves the right to enforce the terms of the consulting agreement in any appropriate forum[23] - Any breach of specific sections may result in irreparable harm to the company, allowing for injunctions[39] Agreement Execution and Review - Executive has 21 days to review the Agreement and can revoke it within seven days of signing[17] - The Agreement will become effective on the eighth day following its execution unless revoked[17] - The Agreement contains the entire understanding between the Parties regarding the subject matter and cannot be altered except in writing[13] - The agreement is governed by the laws of the State of New York, and disputes will be resolved through binding arbitration[13] - The agreement may be executed in counterparts, constituting one binding agreement[39] Financial Obligations - The company confirms that all amounts due to the consultant, including wages and benefits, have been paid, except for any pending payroll[24] - The company has no obligation to provide additional compensation or benefits beyond the specified payments[34] - Consultant is responsible for reporting and remitting taxes associated with the Consultant Payment[34] - Executive acknowledges that the benefits received under the Agreement exceed any payment or benefit to which Executive would otherwise be entitled[17] - The benefits provided under the agreement exceed any payments or benefits the consultant would otherwise be entitled to[26]

Group 1 - The reverse DCF analysis indicates that Braze (NASDAQ: BRZE) is significantly undervalued using conservative parameters [1] - Braze is focused on enabling and simplifying the trend of personalization, which is becoming increasingly important in the tech industry [1]

Core Insights - The global braze alloys market is experiencing stable growth, driven by increasing applications in various industries such as aerospace, automotive, electronics, and energy [1][2][6] - The market is projected to reach USD 2,899.0 million by 2025 and grow to approximately USD 3,711.0 million by 2035, with a CAGR of 2.5% during the forecast period [2][7] Market Growth Drivers - The demand for lead-free and environmentally friendly brazing materials is rising due to sustainable manufacturing practices and regulatory pressures [2][8] - The growth of electric vehicles (EVs) and renewable energy applications is significantly boosting the demand for braze alloys, particularly in battery technology and power electronics [8] - Intelligent manufacturing and advancements in AI-driven material science are expected to optimize alloy compositions and enhance market growth [5][6] Regional Market Analysis - The United States market is expected to grow at a CAGR of 2.7% from 2025 to 2035, driven by technological advancements and regulatory sustainability initiatives [9][11] - The United Kingdom market is projected to grow at a CAGR of 2.4%, focusing on economic recovery and sustainability [12] - The European Union market is anticipated to grow at a CAGR of 2.6%, supported by strong industrial policies and digitalization efforts [13] Competitive Landscape - Key players in the braze alloys market include Lucas-Milhaupt, Inc., Morgan Advanced Materials, Umicore, Oerlikon Metco, and Harris Products Group, focusing on product innovation and sustainability initiatives [23] - Recent developments include the introduction of next-generation lead-free brazing alloys and increased investments in solutions for electric vehicle battery technology [23]

Market Overview - A fresh rally has overtaken the stock markets in early 2025, but historically high valuations suggest caution is warranted [1] - The focus remains on maintaining exposure to growth stocks, but the field is being narrowed [1] Analyst Background - The analyst has combined experience covering technology companies on Wall Street and working in Silicon Valley [1] - The analyst serves as an outside adviser to several seed-round startups, providing exposure to industry-shaping themes [1] - The analyst has been a regular contributor on Seeking Alpha since 2017 and is quoted in many web publications [1] - The analyst's articles are syndicated to company pages in popular trading apps like Robinhood [1]

Technical Analysis - BRZE's 50-day simple moving average crossed above its 200-day simple moving average, forming a "golden cross," which is a bullish technical signal [1][2] - A golden cross indicates a potential bullish breakout and consists of three stages: price bottoming out, short-term moving average crossing above long-term moving average, and maintaining upward momentum [2][3] - BRZE has rallied 5.1% over the past four weeks, further supporting the bullish technical outlook [4] Earnings Outlook - BRZE has a positive earnings outlook, with no earnings estimate cuts and 7 upward revisions in the past 60 days for the current quarter [4] - The Zacks Consensus Estimate for BRZE has increased, reinforcing the bullish case [4] Investment Potential - The combination of a golden cross, recent price rally, and positive earnings outlook suggests BRZE could be poised for a breakout [4][5] - Investors may want to monitor BRZE for potential gains in the near future [5]

Company Performance - Braze had a solid Q3 with slow growth but still strong at over 22% and 300 basis points, better than consensus forecasts [2] - The core subscription business showed strength, driven by new clients, large clients, upsells, and renewals [2] - Total client count grew by 10%, with large clients (contributing more than $500,000 in ARR) up by 24% [2] - Net retention rate was 113% across the system and 116% among large clients, indicating deepening upselling and service penetration [2] - Adjusted earnings were $0.02, three cents better than expected, with an improvement to guidance [3] - The company forecasted sequential revenue growth for Q4, up 18% compared to last year, and a full-year adjusted EPS of nearly $0.10, nearly double the market outlook [4] Market and Analyst Sentiment - Analysts' response to Braze's Q3 results and guidance is mixed, with some reducing, reiterating, and increasing price targets [5] - More analysts are raising their targets, narrowing the expected range centered on the pre-release consensus target, which assumes more than 30% upside [5] - The growth outlook is positive, with earnings expected to triple in F2025 and double the following year [5] - The market response is mixed, with resistance at a critical level but also support at a critical level, indicating potential for continued rise [6] - Institutional activity shows that institutions have bought Braze stock on balance every quarter this year, owning more than 90% of the stock in Q4 [7] Investment Opportunities - Braze presents significant investment opportunities in 2025, including a potential share price surge and takeover prospects [1] - The stock's reversal is fueled by sustained outperformance, nearing profitability, and favorable analyst sentiment [1] - Potential buyers include Salesforce and Adobe, which could use Braze's platform to bolster cross-channel marketing capabilities [1] - The 12-month stock price forecast is $53.74, with a 27.91% upside, based on 20 analyst ratings [3] - The market could retest critical resistance at $45 as it works toward the analysts' consensus target of $53 [7] Financial Metrics - Braze's gross margin narrowed by 90 bps, with losses persisting due to share-based compensation, reinvestment, and client acquisition costs [3] - Operating losses are narrowing on a GAAP and adjusted basis and are less than expected [3] - The 30 and 50-day EMAs are crossing over each other, indicating potential for a golden crossover and market advancement [7]

Company Analysis - Braze Inc (NASDAQ: BRZE) was previously rated as a buy in September 2024 due to its fallen share price being seen as an attractive entry point [1] - Any slowdown in operating performance was expected to be temporary, making the company a potential investment opportunity [1] Investor Background - The author is an individual investor managing personal capital accumulated over the years [1] - The investor employs a diversified approach including fundamental, technical, and momentum investing strategies [1] - The purpose of writing on Seeking Alpha is to track investment idea performance and connect with like-minded investors [1]

Revenue Growth - Revenue for the three months ended October 31, 2024, was $152.1 million, representing a year-over-year growth of 22.7% compared to $124.0 million in the same period in 2023[152] - Revenue for the nine months ended October 31, 2024, was $433.0 million, up from $340.8 million in the same period in 2023[152] - Revenue increased by $28.1 million (22.7%) for the three months ended October 31, 2024, driven by a $27.9 million (23.6%) increase in subscription revenue, with 52.3% from existing customers and 47.7% from new customers[189] - Revenue increased by $92.2 million (27.0%) for the nine months ended October 31, 2024, primarily due to a $91.2 million (28.0%) increase in subscription revenue, with 68.4% from existing customers and 31.6% from new customers[199] Net Loss and Profitability - Net losses for the three months ended October 31, 2024, were $28.1 million, compared to $31.0 million in the same period in 2023[152] - Net loss decreased to $28.1 million for the three months ended October 31, 2024, compared to $30.9 million for the same period in 2023[186] - Gross profit increased by $18.6 million (21.2%) for the three months ended October 31, 2024, but gross margin decreased by 0.9% to 69.8% due to increased premium messaging channel adoption[192] - Gross profit increased by $62.8 million (26.6%) for the nine months ended October 31, 2024, while gross margin decreased by 0.2% to 69.1% due to increased expenses in premium messaging channels[200][201] Cash Flow and Financial Position - Net cash provided by operating activities for the nine months ended October 31, 2024, was $19.6 million, compared to $3.0 million in the same period in 2023[152] - Non-GAAP free cash flow for the nine months ended October 31, 2024, was $4.4 million, compared to $(2.9) million in the same period in 2023[152] - Net cash provided by operating activities was $19.6 million for the nine months ended October 31, 2024, compared to $3.0 million for the same period in 2023[212][213] - Free cash flow for the nine months ended October 31, 2024 increased to $4.427 million from $(2.946) million in the same period in 2023, primarily due to higher collections from new contracts and renewals[222] - As of October 31, 2024, the company had $493.1 million in cash, cash equivalents, and marketable securities, with deferred revenue of $223.8 million[208][211] - The company had cash, cash equivalents, and marketable securities of $493.1 million as of October 31, 2024, with $431.3 million invested in U.S. government securities, foreign securities, and corporate debt securities[233] Customer Metrics - As of October 31, 2024, the company had approximately 6.9 billion monthly active users, up from approximately 6.2 billion as of January 31, 2024[157] - The dollar-based net retention rate for the trailing 12 months ended October 31, 2024, was 113%, compared to 118% in the same period in 2023[161] - As of October 31, 2024, 234 customers had ARR of $500,000 or more, up from 189 customers as of October 31, 2023[163] - Total customers grew to 2,211 as of October 31, 2024, up from 2,011 as of October 31, 2023[189] - Total customers grew to 2,211 as of October 31, 2024, up from 2,011 as of October 31, 2023[199] International Revenue - Approximately 45% of revenue for the nine months ended October 31, 2024, was generated outside of the United States, compared to 43% in the same period in 2023[165] - International revenue increased by $14.9 million in the three months ended October 31, 2024, driven by market expansion in Europe and Asia-Pacific[189] - International revenue increased by $46.7 million for the nine months ended October 31, 2024, driven by market expansion in Europe and Asia-Pacific[199] Expenses - Cost of revenue increased by $9.5 million (26.2%) for the three months ended October 31, 2024, primarily due to higher hosting, infrastructure, and third-party messaging fees[190] - Sales and marketing expenses increased by $8.3 million (12.4%) for the three months ended October 31, 2024, driven by higher personnel costs and promotional activities[193] - Research and development expenses increased by $3.0 million (10.0%) for the three months ended October 31, 2024, primarily due to higher personnel and software costs[194] - General and administrative expenses increased by $4.8 million (18.0%) for the three months ended October 31, 2024, driven by investments in finance and administrative functions[195] - Sales and marketing expenses increased by $29.0 million (15.7%) for the nine months ended October 31, 2024, primarily due to higher personnel costs and marketing activities[202][204] - Research and development expenses increased by $11.6 million (13.1%) for the nine months ended October 31, 2024, driven by higher personnel and software costs[205] - General and administrative expenses increased by $10.4 million (13.7%) for the nine months ended October 31, 2024, primarily due to higher personnel and professional services costs[206] Investments and Commitments - The company continues to invest in artificial intelligence capabilities and channel expansion to enhance its platform and maintain competitive advantage[166] - Non-cancelable purchase commitments for business operations totaled $170.9 million, and operating lease obligations were $121.6 million as of October 31, 2024[224] Financial Risks - A hypothetical 10% change in interest rates would not have had a material impact on the consolidated financial statements as of October 31, 2024[234] - The company's revenue is not currently subject to significant foreign currency risk, with only sales in Japan denominated in Yen[235] - A hypothetical 10% change in the relative value of the U.S. dollar to other currencies would not have had a material effect on realized and unrealized gains (losses) on foreign exchange transactions[238] Other Income and Compensation - Other income, net increased by $0.8 million (16.6%) for the three months ended October 31, 2024, driven by a $1.3 million increase in investment income from marketable securities[196][197] - Stock-based compensation expense totaled $28.3 million for the three months ended October 31, 2024, up from $24.0 million in the same period in 2023[186]