What happened
Shares of Braze (BRZE +6.05%) were down 16.2% as of 12:35 p.m. ET on Tuesday after delivering results for the fiscal second quarter ending July 31.
The company reported stable revenue growth of 55% year over year and slightly raised full-year expectations for revenue. Management now expects a slightly narrower adjusted net loss on the bottom line.
NASDAQ: BRZE
Key Data Points
So what
The stock entered the year trading at a high price-to-sales ratio of over 30. Even after the market correction, Braze still trades at an expensive price-to-sales multiple of 12.5, but management noted some softening in the business that Wall Street is worrying about.
The 55% increase in revenue is down from the 62% reported in the fiscal first quarter. That's not bad, especially considering the stable dollar-based net retention rate of 126%, which is only down one point quarter over quarter.
However, during the earnings call, management mentioned "elongated deal cycles" and explained that some customers are taking a "wait-and-see approach to the economy" before committing to more spending on the company's customer engagement platform.
Now what
Those appear to be minor negatives right now. On the bright side, Braze signed new marketing deals in the quarter, most notably with top streaming platform Roku. Braze's pipeline remains strong, and it continues to see "strong demand for customer engagement solutions," as CFO Isabelle Winkles noted.
This is reflected in guidance, which now calls for revenue to be between $347 million to $350 million for the full year. This is up from previous guidance that called for $345 million to $349 million in revenue. Management expects full-year adjusted net loss per share to land between $0.77 to $0.79.
The market probably didn't like management's third-quarter outlook that calls for revenue growth to decelerate to 41% at the midpoint. Decelerating growth and losses on the bottom line is not the combination investors want to see with a highly valued software stock in this environment.
