Hi everyone,
I've been diving into investing seriously for about a year now, and so far, it's been going well-l've managed to grow my portfolio by 40% year over year. While I know keeping up this rate for the next five years might be a tall order, my strategy has been pretty solid. I usually evaluate companies based on their product niche, a strong and passionate management team, and the industry they're in.
I like to think of companies as a boat. The boat's quality and strength represent the product. The people rowing the boat are like the management team, and the industry is the current. No matter how well you row or how sturdy your boat is, if the current is against you, you won't make much progress or might not move at all.
Lately, l've been researching a bunch of companies over the past three months, but none of them really seemed like great investment opportunities, except for the big names like the “Magnificent 7,” Palantir, and Shopify. But then I stumbled upon Braze, and after digging into it, I think it could be a great investment for the next decade.
- Product
Braze is known for its powerful customer engagement platform, which helps brands connect with their customers in meaningful ways. Here’s a closer look:
• Core Offerings: Braze’s platform offers a variety of tools like mobile and web notifications, in-app messaging, and email marketing. It uses AI and machine learning to enhance these interactions, making them more personalized and effective.
• Innovation: They continuously innovate with features like Canvas, which helps map out customer journeys, and Sage AI, which provides predictive analytics to improve engagement outcomes.
• Client Base: Braze serves over 1,000 clients, including big names like HBO, Urban Outfitters, and Grubhub. This wide adoption shows the platform’s scalability and effectiveness across different industries.
• Financial Performance: In fiscal year 2024, Braze reported revenues of $471.80 million, marking a 33% increase compared to the previous year.
- Management Team
The success of Braze can be attributed to its strong leadership team:
• William Magnuson (CEO and Co-Founder): William has been steering Braze since its early days. His focus on innovation and market expansion has made Braze a leader in customer engagement technology.
• Myles Kleeger (President and Chief Commercial Officer): Myles has extensive experience in scaling operations and expanding market reach, which has been crucial for Braze’s growth.
• Jonathan Hyman (Co-Founder and CTO): Jonathan’s technical expertise ensures that Braze’s platform remains at the forefront of technological advancements.
• Isabelle Winkles (CFO): Isabelle has a strong background in financial management. She has helped Braze improve its cash flow and significantly reduce its losses, from $28.1 million to $5.9 million recently.
- Industry
Braze operates in the SaaS sector, particularly focusing on customer engagement and marketing technology. Here’s why this industry is promising:
• Market Growth: The market for customer engagement solutions is growing rapidly, driven by digital transformation and the increasing need for personalized customer interactions. This market was valued at $17.76 billion in 2020 and is expected to grow at an annual rate of 11.5% from 2021 to 2028.
• Competitive Position: Despite facing competition from big players like Salesforce Marketing Cloud and Adobe Experience Cloud, Braze’s innovative features and strong client base give it a competitive edge.
• SaaS Industry Metrics: SaaS companies typically enjoy high gross margins, often between 65% and 80%. Braze’s gross margin is around 68.73%, which is in line with industry standards.
• Rule of 40: This rule combines a company’s revenue growth rate and profit margin to evaluate its performance. Braze’s 33% growth rate and improving financials indicate a strong performance, even though it is not yet profitable.
Path to Profitability
Braze has been transparent about its path to profitability. In their financial reports and earnings calls, the management has discussed their strategic initiatives to achieve positive operating margins. They have focused on improving free cash flow and carefully managing expenses. Recently, CFO Isabelle Winkles highlighted the significant improvements in cash flow and reductions in operating losses, indicating that the company is on the right track towards profitability.
Conclusion
Braze’s innovative product, experienced management team, and strong position in a growing industry make it a promising investment. The company’s robust platform, impressive revenue growth, and strategic leadership suggest significant potential for future returns, even though it is currently unprofitable.
Position
I get payed next week.
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