Salesforce pays 6.8x revenue for Braze as rivals trade at 3x
Braze grew revenue 26% while lifting operating expenses 6%. Salesforce valued that gap at $5.66bn in cash, roughly double the multiple public investors were paying the day before.
Salesforce is buying Braze for about $5.66bn in enterprise value. Class A holders get $47.50 a share in cash.
That is a 58% premium to Monday's close of $30.04, and roughly 6.8 times Braze's trailing twelve-month revenue of $834m.
The day before the deal, the market priced Braze at 3.7x. The rest of marketing software sat lower still.
HubSpot and Klaviyo were both near 3.1x trailing revenue at Monday's close, growing 20% and 26% respectively. Monday was at 2.3x on 22% growth, Adobe at 3.8x and Sprinklr at 1.1x. Salesforce itself traded at 5.3x.
The number behind the premium is an expense line. Operating expenses rose 6% year on year to $170m while revenue grew 26%.
Free cash flow reached a quarterly record of $21.7m, with $413.9m of cash on hand. Non-GAAP operating margin improved by more than 600 basis points, and management guided to at least another 400.
A 20-point gap between revenue growth and cost growth does not happen by accident. It takes hiring restraint, held for several quarters, and it produces the cash generation an all-cash buyer wants to see.
Public investors were unimpressed. On 8 September, Braze reported quarterly revenue of $227.2m, up 26%, beat consensus revenue by about $6.9m, beat on earnings per share and raised full-year guidance. The stock ended that week down 25.1%.
Six weeks later a strategic buyer paid 58% above the price those investors had settled on.
The underlying business shows where the growth came from. Dollar-based net retention was 110% overall and 112% among large customers, up 100 basis points on the prior quarter.
Customers paying $500,000 or more a year rose to 361 from 282, a 28% increase, while total customers grew about 15% to 2,789 from 2,422. Professional services revenue more than doubled to $19.6m from $8.3m, against subscription revenue of $207.7m. Services went from roughly 5% of revenue to about 9%.
Paid adoption of Braze's AI products reached about a third of large customers, up roughly 900 basis points on the previous quarter. Management described AI monetisation as still early, and the growth rate did not move.
Salesforce plans to attach Braze to Customer 360 and Marketing Cloud, whose strength has been email rather than mobile and in-app messaging. Braze customers include Canva, Instacart, Venmo, Equinox, Urban Outfitters and Dairy Queen.
Bill Magnuson and Jon Hyman founded the company as Appboy in 2011 and are still running it. The $47.50 price is below the $65 IPO price from 2021, so buyers from the listing are down five years on. Salesforce shares fell 2.6% in premarket trading.
For a founder in the same category, the arithmetic is blunt. If your public comparables trade at 3x, a listing prices you at 3x; a buyer who wants your customer base can pay double, and the thing that closed the gap here was cost discipline rather than a new growth story. The deal is targeted to close in Salesforce's fiscal 2028, which begins in early February, leaving competitors a long window to call Braze accounts.
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