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]

Revenue and Financial Performance - Revenue for the fiscal third quarter 2025 was $152.1 million, up 22.7% year-over-year from $124.0 million in the same quarter of the previous fiscal year[3] - Subscription revenue in the quarter was $146.3 million, compared to $118.4 million in the same quarter of the previous fiscal year[3] - Revenue for the three months ended October 31, 2024, was $152.052 million, a 22.7% increase from $123.956 million in the same period in 2023[25] - Revenue for the nine months ended October 31, 2024, was $433.010 million, a 27.0% increase from $340.843 million in the same period in 2023[25] - Braze provided fiscal Q4 2025 revenue guidance of $155.0 million to $156.0 million and full fiscal year 2025 revenue guidance of $588.0 million to $589.0 million[6] Profit and Loss - GAAP operating loss was $32.6 million, compared to a loss of $35.1 million in the same quarter of the previous fiscal year[3] - Non-GAAP operating loss improved to $2.2 million, compared to a loss of $8.9 million in the same quarter of the previous fiscal year[3] - Net loss for the three months ended October 31, 2024, was $27.911 million, an improvement from a net loss of $30.741 million in the same period in 2023[25] - Net loss for the nine months ended October 31, 2024, was $86.551 million, an improvement from a net loss of $100.889 million in the same period in 2023[25] - GAAP operating loss for Q3 2024 was $32.57 million, compared to $35.13 million in Q3 2023, showing a 7.3% improvement[37] - Non-GAAP operating loss for Q3 2024 was $2.18 million, a significant improvement from $8.90 million in Q3 2023, reflecting a 75.5% reduction[37] - Non-GAAP net income for Q3 2024 was $2.48 million, a significant improvement from a loss of $4.50 million in Q3 2023[37] Gross Profit and Margin - Gross profit for the three months ended October 31, 2024, was $106.142 million, up 21.2% from $87.582 million in the same period in 2023[25] - Gross profit for the nine months ended October 31, 2024, was $299.132 million, up 26.6% from $236.308 million in the same period in 2023[25] - Non-GAAP gross margin improved to 70.5% from 71.4% in the previous year, driven by increased gross profit[36] Customer and Subscription Metrics - Total customers increased to 2,211 as of October 31, 2024, from 2,011 as of October 31, 2023, with 234 customers having ARR of $500,000 or more[3] - Remaining performance obligations as of October 31, 2024, were $716.8 million, with $458.2 million classified as current (less than one year)[3] - Deferred revenue grew from $204.3 million to $223.7 million, indicating strong future revenue commitments[31] Stock-Based Compensation - Total stock-based compensation expense for the three months ended October 31, 2024, was $28.318 million, up 17.8% from $24.039 million in the same period in 2023[26] - Total stock-based compensation expense for the nine months ended October 31, 2024, was $86.418 million, up 18.4% from $72.961 million in the same period in 2023[26] - Total employer taxes related to stock-based compensation for the three months ended October 31, 2024, was $636,000, up 14.2% from $557,000 in the same period in 2023[26] - Total employer taxes related to stock-based compensation for the nine months ended October 31, 2024, was $3.193 million, up 93.5% from $1.650 million in the same period in 2023[26] - Stock-based compensation expense for Q3 2024 was $28.32 million, up 17.8% from $24.04 million in Q3 2023[37] Cash Flow and Investments - Net cash provided by operating activities improved significantly to $19.6 million compared to $3.0 million in the previous year[33] - The company invested $12.1 million in property and equipment and $3.0 million in capitalized internal-use software costs[33] - Net cash used in operating activities for Q3 2024 was $11.41 million, compared to $2.00 million in Q3 2023, indicating increased cash outflow[38] - Non-GAAP free cash flow for Q3 2024 was -$14.25 million, compared to -$5.91 million in Q3 2023, reflecting a 141.1% increase in cash outflow[38] - Capitalized internal-use software costs for Q3 2024 were $0.92 million, slightly up from $0.90 million in Q3 2023[38] - Purchases of property and equipment decreased to $1.92 million in Q3 2024 from $3.01 million in Q3 2023, reflecting a 36.2% reduction[38] Balance Sheet and Liabilities - Total assets increased from $810.9 million to $842.0 million, reflecting growth in marketable securities and property and equipment[31] - Cash and cash equivalents decreased from $68.2 million to $61.3 million, while marketable securities increased from $407.9 million to $431.3 million[31] - Total current liabilities increased from $289.4 million to $308.2 million, primarily due to higher deferred revenue[31] - Accumulated deficit grew from $(483.1) million to $(569.6) million, reflecting ongoing investments in growth[31] Operating Expenses - Research and development expenses increased to $32.9 million, with stock-based compensation accounting for $10.3 million of that total[36] - Sales and marketing expenses rose to $74.7 million, with $9.6 million attributed to stock-based compensation[36] Operating Margin - GAAP operating margin improved to -21.4% in Q3 2024 from -28.3% in Q3 2023, while Non-GAAP operating margin improved to -1.4% from -7.2%[37] Share Metrics - Weighted-average shares used to compute diluted net income per share increased to 106,820 in Q3 2024 from 97,880 in Q3 2023[37] Product and Channel Development - BrazeAI agent, codenamed Project Catalyst, was announced as a new development aimed at delivering 1:1 customer engagement[5] - The company expanded its channel offerings to include LINE and RCS Business, along with new WhatsApp features[5] Future Guidance - Non-GAAP net income for fiscal Q4 2025 is projected to be between $5.0 million and $6.0 million[6]

Industry Overview - The technology services industry is mature and thriving in 2024, with revenues, income, and cash flows expected to gradually return to pre-pandemic levels, supporting stable dividend payouts [1] - The industry benefits from robust demand for multi-cloud-enabled software solutions as companies transition from legacy platforms to modern cloud-based infrastructure [3] - Industry players are integrating artificial intelligence and machine learning tools into applications to enhance dynamism and results, driven by elevated demand for enterprise software that boosts productivity and decision-making [4] - The Zacks Defined Technology Services industry has rallied 76.4% over the past year and surged 53.8% year-to-date, ranking within the top 26% of Zacks Ranked Industries, indicating potential market outperformance in the next three to six months [5] Recommended Stocks - Five mid and small-cap technology services stocks with favorable Zacks Rank and significant short-term price upside potential are recommended: MediaAlpha Inc (MAX), Braze Inc (BRZE), Byrna Technologies Inc (BYRN), The Real Brokerage Inc (REAX), and Klaviyo Inc (KVYO) [2][6] MediaAlpha Inc (MAX) - MediaAlpha operates an insurance customer acquisition platform in the US, optimizing customer acquisition in property and casualty insurance, health insurance, and life insurance through a real-time programmatic technology platform [7] - The stock has an average short-term price target representing a 95.6% jump from the last closing price of $12.47, with a maximum upside of 148.6% and no downside [8] - Expected revenue and earnings growth rates exceed 100% for the current year, with the Zacks Consensus Estimate for current-year earnings improving 20% in the last 30 days [8] Braze Inc (BRZE) - Braze provides a comprehensive customer engagement platform, enabling real-time customer data processing and contextually relevant, cross-channel marketing campaigns [10] - The stock has an average short-term price target representing a 53.6% jump from the last closing price of $35.70, with a maximum upside of 110.1% and a maximum downside of 16% [11] - Expected revenue and earnings growth rates are 23.9% and over 100%, respectively, for the current year, with the Zacks Consensus Estimate for current-year earnings improving over 100% in the last 90 days [12] Byrna Technologies Inc (BYRN) - Byrna Technologies develops and sells less-lethal personal security solutions, including handheld devices and shoulder-fired launchers, targeting both consumer and professional security markets [14][16] - The stock has an average short-term price target representing a 24.4% increase from the last closing price of $18.38, with a maximum upside of 36% and no downside [17] - Expected revenue and earnings growth rates are 18.8% and 17.7%, respectively, for the next year, with the Zacks Consensus Estimate for current-year earnings improving 11.1% in the last 60 days [18] The Real Brokerage Inc (REAX) - The Real Brokerage operates as a real estate technology company, offering brokerage, title, and mortgage broker services in the US and Canada [19] - The stock has an average short-term price target representing a 34.2% increase from the last closing price of $5.51, with a maximum upside of 56.9% and no downside [20] - Expected revenue and earnings growth rates are 76.2% and 0.1%, respectively, for the current year, with the Zacks Consensus Estimate for current-year earnings improving 16.7% in the last seven days [21] Klaviyo Inc (KVYO) - Klaviyo provides a cloud-native SaaS platform for data storage, segmentation, campaigns, and messaging infrastructure, offering personalized marketing tools including email, SMS, and push notifications [23][24] - The stock has an average short-term price target representing a 13.3% increase from the last closing price of $36.53, with a maximum upside of 28.7% and a maximum downside of 17.9% [25] - Expected revenue and earnings growth rates are 32.2% and 36.1%, respectively, for the current year, with the Zacks Consensus Estimate for current-year earnings improving 2.1% in the last 30 days [26]

Market Overview - The global braze alloys market was valued at US$ 2.5 billion in 2022 and is expected to reach US$ 3.2 billion by 2031, with a CAGR of 4.3% from 2023 to 2031 [1] - Advances in brazing technology, including improved alloys, are driving market growth as brazed joints become more efficient, stronger, and environmentally friendly [1] Industry Applications - Brazing alloys are widely used in the automotive and aerospace industries for manufacturing radiators and heat exchangers [2] - The demand for brazing alloys is increasing due to the growth of manufacturing and supply chain globalization, as they are essential for joining dissimilar materials [2] - Lightweight materials in aerospace and automotive industries are expected to further increase demand for brazing alloys [3] Environmental and Regulatory Factors - Eco-friendly brazing alloys, such as recyclable or non-toxic alloys, are likely to play a crucial role in driving market growth as industries focus on sustainability [3] - Regulatory bodies and industry associations are setting standards that market players are implementing, increasing the popularity of high-quality and safe brazing alloys [2] Energy and Technology Impact - The energy transition towards renewable sources is expected to increase demand for brazing alloys in the production and storage of energy, including solar panels, wind turbines, and energy storage systems [4] - Industrial 4.0 and digital technologies may also impact the market for brazing alloys [4] Key Players - Prominent players in the braze alloy sector include Johnson Matthey, Voestalpine Bohler Welding, Oerlikon Metco, UMICORE N V, Morgan Advanced Materials, Indian Solders and Braze Alloys, Paras Enterprises, Lucas-Milhaupt Inc, Bellman-Melcor LLC, Aimtek Inc, Harris Products Group, and VB Group [5][6] Growth Drivers - Brazing alloys are critical in producing HVAC, refrigeration, and heating equipment, with growing demand due to energy efficiency and environmental regulations [6] - The electronics and electrical industry relies on brazing alloys for joining components in various devices, with potential growth in semiconductor manufacturing, sensors, and electronic components [6] - Infrastructure projects and construction industries are driving demand for brazing alloys in fabricating pipes, tubes, and structural components [6] Regional Landscape - Asia Pacific is expected to lead the braze alloys market due to industrialization, infrastructure development, and its role as a major manufacturing hub [8] - Japan and South Korea are making technological advances in manufacturing processes and brazing technology, contributing to market growth [8] - Environmental regulations and sustainability concerns in the Asia Pacific region are increasing the prevalence of eco-friendly brazing alloys [8] Market Segmentation - By base metal, the market is segmented into copper, gold, aluminum, silver, nickel, and others (including cobalt, bronze, iron, and cadmium) [9] - By end use, the market is segmented into automotive, electronics and electrical, industrial, and others (including medical, dental, and aerospace) [10] - By region, the market is segmented into North America, Europe, Asia Pacific, Latin America, and MEA [10] Key Developments - In December 2023, Lincoln Electric expanded its operations and was recognized as one of America's Greenest Companies 2024, highlighting its leadership in brazing and soldering alloys [9] Related Markets - The synthetic diamond market is estimated to grow at a CAGR of 6.9% from 2022 to 2031, reaching USD 43.7 billion by 2031 [10] - The metal fabrication market is expected to grow at a CAGR of 3.3% from 2022 to 2031, reaching USD 27.74 billion by 2031 [10] - The solar PV junction box market is projected to advance at a CAGR of 7.9% from 2023 to 2031, reaching US$ 2.4 billion by 2031 [10] - The battery energy storage systems market is expected to grow at a CAGR of 12.7% from 2023 to 2031, reaching US$ 59.6 billion by 2031 [10]

Zacks Rank Upgrade and Earnings Estimate Revisions - Braze Inc (BRZE) has been upgraded to a Zacks Rank 1 (Strong Buy), reflecting an upward trend in earnings estimates, which is a powerful force impacting stock prices [1] - The Zacks rating system tracks the Zacks Consensus Estimate, which is the consensus measure of EPS estimates from sell-side analysts covering the stock for the current and following years [1] - The upgrade to a Zacks Rank 1 positions Braze in the top 5% of Zacks-covered stocks in terms of estimate revisions, indicating potential for market-beating returns in the near term [10] Earnings Estimate Revisions for Braze - For the fiscal year ending January 2025, Braze is expected to earn $0 07 per share, representing a 128% change from the year-ago reported number [8] - Over the past three months, the Zacks Consensus Estimate for Braze has increased by 15 5%, indicating steady upward revisions by analysts [8] Correlation Between Earnings Estimates and Stock Price Movements - Changes in a company's future earnings potential, as reflected in earnings estimate revisions, are strongly correlated with near-term stock price movements [4] - Institutional investors use earnings and earnings estimates to calculate the fair value of a company's shares, and their bulk investment actions lead to price movements [4] - Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements, making it rewarding to track such revisions for investment decisions [6] Zacks Rank System Overview - The Zacks Rank stock-rating system uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank 1 (Strong Buy) to Zacks Rank 5 (Strong Sell) [7] - Zacks Rank 1 stocks have generated an average annual return of +25% since 1988, demonstrating the system's impressive track record [7] - The Zacks rating system maintains an equal proportion of 'buy' and 'sell' ratings for its universe of over 4000 stocks, with only the top 5% receiving a 'Strong Buy' rating [9]

Company Performance - Shares of Braze Inc have lost close to 40% year to date [1] - Shares of Braze declined by 0.30% to $30.78 at the time of publication on Tuesday [2] Analyst Coverage and Rating - Stifel analyst Parker Lane initiated coverage of Braze with a Buy rating and price target of $37 [1] - Braze is well-positioned to capture market share in the customer engagement software segment [1] Market Trends and Opportunities - Consumer expectations are shifting to more personalized brand experiences [1] - Increase in digitally native consumers and gen AI-powered marketing are favoring customer engagement providers [1] - Braze is viewed as a tightly integrated and extensive customer engagement platform compared to larger marketing platforms and point-solution martech vendors [2] Company Strategy and Market Position - Braze has built a leading-edge multi-channel marketing platform that is difficult to replicate [2] - The company has incorporated strategic changes this year that should materially lower customer friction [2] - Braze remains in its early days of capturing its addressable market [2]

Core Insights - Bert Hochfeld has a strong background in economics and business, with degrees from the University of Pennsylvania and Harvard, and has extensive experience in the tech industry [1] - He founded Hochfeld Independent Research Group in 2001, providing research services to major institutions and hedge funds, and managed the Hepplewhite Fund, which was recognized as the best performing small-cap fund for five years ending in 2011 [1] - Hochfeld has published over 500 articles on Seeking Alpha, focusing on information technology companies, and is highly regarded for his investment insights, ranking in the top 0.1% of Tip Ranks analysts for technology stock selections [1] Company Background - Hochfeld has worked for notable companies such as IBM, Memorex/Telex, Raytheon Data Systems, and BMC Software, contributing to his expertise in the tech sector [1] - The Hepplewhite Fund, under Hochfeld's management, specialized in technology investments and achieved significant recognition in the hedge fund industry [1] Legal Issues - In 2012, Hochfeld was convicted of misappropriating funds from the hedge fund he operated, which raises concerns about his past conduct in the investment space [1]

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