Braze, Inc.

Welcome to the BRAZE Fiscal Fourth Quarter Earnings Conference Call. My name is Hannah, and I will be your operator for today's call. At this time, all participants are in the listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. I will now turn the call over to Christopher Ferris, Head of BRAZE Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, and thank you for joining us today to review Braze's results for the fiscal fourth quarter 2022. I hope you enjoyed today's hold music, which was composed, performed, and provided by Frankie Saxena, a solutions consultant in Braze's London office. Thank you for the wonderful music, Frankie. I'm joined by our co-founder and chief executive officer, Bill Magnuson, and our chief financial officer, Isabel Winkles. We announced the results in a press release issued after the market closed today. Please refer to our investor relations website at investors.braze.com for more information and a supplemental presentation related to today's earnings announcement. During this call, we will make statements related to our business that are forward-looking under the Federal Securities Laws and Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding our financial outlook for the first quarter and full fiscal year ended January 31, 2023, our planned product and feature development, our planned social impact initiatives, our planned investments to maintain or improve our overall unit economics, including ASP, customer payback period, and overall average revenue per customer and our long-term target operating margin. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations and reflect our views only as of today. For a discussion of the material risks and uncertainties that could affect our actual results, please refer to the risks identified in today's press release and our SEC filings, both available on the investor section of our website. I'd also like to remind you that today's call will include certain non-GAAP financial measures used by management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal fourth quarter 2022 performance in addition to the impact these items have on the financial results. Please refer to the reconciliations of our non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with U.S. GAAP included in our earnings release under the investor relations portion of our website. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with U.S. GAAP. And now I'd like to turn the call over to Bill.

Thank you, Chris, and good afternoon, everyone. Before I dive into our results today, let me take a moment to acknowledge the global situation. Our thoughts are with the people of Ukraine who have found themselves forced to fight for the fundamental right to live in peace. When it became apparent that a conflict might begin, we analyzed our data to quickly identify affected customers, enabling our customer success team to proactively offer support and arming our security teams to protect against potential cyber threats. Our direct business exposure in Russia and Ukraine is very limited, and we've currently suspended all new business activity in Russia. we will continue diligent case-by-case assessments as our customer situations evolve. While we have no employees in the region, we have tried to do our part by donating to humanitarian relief efforts, increasing our employee donation match, and extending support to employees who are personally affected by the conflict. And now, let me turn to the quarter. We are very pleased with our fourth quarter performance, which again demonstrated our ability to deliver high growth at scale. We achieved high watermarks for new bookings, renewals, and net retention in the quarter. We generated $70.4 million of revenue, up 64% compared to the same period last year, and 10% compared to the third quarter. We are proud of the strength of our customer relationships, as dollar-based net retention rose to a new high watermark of 128%, reflecting strong renewals and upsells. For customers with 500,000 or more in ARR, dollar-based net retention was 136%, up 300 basis points year-over-year, demonstrating our ability to land and expand with large enterprises across diverse industry verticals globally. This quarter, we also secured our largest single customer land to date, an annual contract value of over $3 million with a European-based video game developer and publisher. All of this caps an incredible fiscal year 2022 at Braze in which we grew total customer count by 54% and revenue by 58%. To give you a sense of the operational scale of our platform, at the end of fiscal 2022, our monthly active user count was approximately 3.7 billion. And in fiscal 2022, we processed over 9 trillion consumer-generated data points and sent over 1.5 trillion messages. And all of this happened with nearly 100% global uptime, a testament to our ability to reliably deliver effective, targeted customer engagement programs for our customers at scale. Customers are recognizing the high ROI that can be achieved through personalized, cross-channel customer engagement enabled by the Braze platform. And as we look to the future, we are focused on executing on our rapidly growing market opportunity. And today, I'm proud to announce that we recently passed $300 million in committed annual recurring revenue, These accomplishments wouldn't have been possible without our amazing and talented team across the globe. Thank you for your tireless efforts and dedication. I'm immensely excited to keep building the future of Braze together. At Braze, our mission is to forge human connections between consumers and the brands they love through relevant and memorable experiences. We were founded over 10 years ago with the dual conviction that new smart businesses we've built to be mobile first and that legacy companies will be driven by changing consumer behavior to transform the way they deliver products and services. To help our customers forge those connections and create those experiences, we have continued to invest and evolve our product offerings to enable them to deliver better customer engagement. As consumers emerge from the pandemic and enter their next normal, Raise is poised to continue to capitalize on their ever-rising expectations for seamless cross-channel brand experiences. And that's why our recent product announcements have focused on helping brands better understand customers and improving platform usability with actionable real-time insights, better personalization, and enhanced audience targeting. Earlier this week, we announced Brace for Commerce, a series of new products and enhancements aimed at allowing retail and e-commerce marketers to create highly personalized campaigns driven by first-party data. Most notable in this launch is Braze Catalog, a new product which enables marketers to streamline message personalization by seamlessly infusing product data into messages across any campaign on any channel. Beautifully branded recommendations can be quickly built from catalog data using our newly enhanced Braze content blocks inside our drag and drop email editing experience. This allows brands to quickly pair individual shoppers with the most relevant products, offers, and updates with clicks, not code. Other new features in Brace for Commerce include our new SMS click tracking, an enhancement of SMS performance metrics for better retargeting, and segment extensions, an advanced segmentation tool that helps brands build a deeper understanding of customers based on behavioral data. As part of the evolution of our overall data strategy, we're also working on expansions to segment extensions that will directly integrate with our customers' data warehouses, decreasing the engineering effort required to integrate and manage data pipelines and ETL processes. To improve real-time insights, we've also been rolling out updates to our report builder, making it easier for brands to quickly gauge campaign performance, spot trends and patterns without leaving the brace platform, and then immediately modify their engagement strategies as needed. This is an important way that we enable brands to tighten the imagine, create, and evolve loop to upgrade their strategies faster. For email specifically, we launched machine opens analytics to help customers understand their email campaign performance by differentiating between user activity and the automatic email open behavior that was introduced in iOS 15. We also added a number of workflow improvements, including adding inbox vision to our recently overhauled drag and drop email composition experience. Finally, I'm excited to share a product addition for our fast growing Japanese market that has also laid important groundwork that we believe will enhance our support for future regional expansion. We began rolling out a translated and localized version of the Braze dashboard, allowing Japanese language focused brands to create best in class customer engagement campaigns in their users native language. Look for us to continue debuting localized versions of the Braze dashboard as part of our global growth plan. As we look to the future, our product roadmap is both focused and ambitious. Today's consumers expect highly relevant, tailored brand experiences, and it's critical that we continually arm our customers with improved functionality within existing channels while also adding new channels and features. While I can't detail our entire roadmap on this call, I can say that our priorities are to drive best-in-class functionality to compete in any channel with legacy marketing clouds and single point solutions, tackling sophisticated use cases in order to empower our customers while driving time to value. One area where we continue to invest is our data ingestion strategy. The data landscape is evolving as customer demands for clean, seamless data integrations are increasing. As most of you know, our SDKs are integrated into the mobile sites and applications of almost all of our customers. And this vertical integration is an important feature that allows Braze to seamlessly deploy differentiated functionality for our customers. As such, we will continue focusing on streamlining the ways in which data can flow into and out of Braze, particularly reinforcing our connections to data systems. We're advancing our Snowflake partnership with more direct connections in Snowflake's data cloud, as well as investing into partnerships with other companies in the data ecosystem. In order to execute on our product roadmap and support our customers, we've continued to expand our team, growing by over 400 people in the last year, bringing our global headcount to over 1,100. During the quarter, we officially opened both our new Austin, Texas location and an expanded office space for our Chicago-based team. We also continued to grow our footprint internationally, announcing plans for new locations in Toronto, Canada, and Paris, France, where hiring is underway. With these expansions, we'll have 10 locations across the globe, servicing customers in over 60 countries. France builds on our presence in EMEA and our successful expansion in the DOC region one year ago, We also look to continue expansion in APAC, our fastest-growing region by ARR, with new partner programs in Thailand and other Southeast Asian countries in order to expand our presence in those markets. Finally, I'll note that we are exploring partnerships with additional resellers in Latin America, another fast-growing market for us. We believe the investment in these new countries will enable Braze to offer localized support for existing customers as well as capitalize on growing opportunities and strategic partnerships in the region. Which brings me to our customer base. where we have seen continued momentum with new and existing customers. This quarter, we saw strength across numerous verticals, including health and lifestyle, financial services, gaming, media, and QSRR. We secured new business and large upsell opportunities with Canva, Course Hero, ESL Gaming, Shake Shack, and Flip, just to name a few. We are excited by the breadth of innovative and creative customer engagement use cases that our expanding base of customers rely on Brace to deliver in the moments that matter most. differentiated power of Braze customer engagement tools. Each of these stories demonstrates how differentiated Braze capabilities such as surveys and content cards are able to live directly inside or alongside a brand's products, going beyond unidirectional messaging to power engagement through a seamless in-app or in-browser experience for the consumer. The first is the fitness company Equinox, who successfully leveraged two of our proprietary tools, Canvas and Content Cards, to deliver an improved customer experience this quarter. Using Canvas, our visual customer journey management tool, Equinox was able to optimize their new customer welcome journey through A-B testing, personalized push messages, in-app messages, and content cards to motivate customers to try a fitness assessment with a personal trainer within 30 days of sign-up. With Canvas, Equinox saw a meaningful improvement in the number of new users booking a class compared to their prior onboarding flow, while generating meaningful upsell revenue. Equinox also leveraged our content cards to feature class offerings to discover the user's fitness preferences and then provide more personalized offerings. Further personalization was realized using our audience paths feature, combining the user's preferences and behaviors across multiple channels with minimal added complexity. This ability to expand the footprint of an engagement strategy without becoming shackled by the complexity associated with multichannel communication is a direct byproduct of Braze's customer-centric design and is a differentiated advantage that we will continue to invest in. The second use case I'd like to highlight is Kickstarter, which employed Braze's recently released in-app message survey tool, allowing them to collect user attributes, insights, and preferences to power their campaign strategies. Surveys represent a way to deliver more sophisticated functionality for customers in a turnkey fashion, again leveraging our customer-centric, vertically integrated stack design. Kickstarter used surveys to assess whether a recent change they made in their checkout flows had improved users' understanding of reward fulfillment. The survey achieved a 74% response rate. Kickstarter realized a considerable uptick in users' knowledge of fulfillment, and it enabled them to continue improving their in-app experience based on the results. Retargeting off of survey results is also a great example of how Braze enables feedback loops to deliver high-quality personalization. We built surveys on top of an overhaul of our in-app and in-browser messaging system, so look for more message types in the future as we continue to leverage the flexible foundation we've created for in-product experience delivery. The third customer use case I'd like to highlight is Ellevest, an investment advisory platform designed primarily for women. In this case, Braze utilized its webhooks and REST APIs to integrate with the company's customer relationship management tool, allowing them to effectively manage email campaigns sent from Braze. In addition, LFS uses Currents to send the engagement data to their Google Cloud Storage as well as their CRM, creating a feedback loop that helps their financial consultants understand their clients and inform future conversations with them. This business was also a competitive takeaway from a legacy marketing cloud and is a great testament to the flexibility of Braze. We look forward to continuing to grow with them. Before I turn it over to Isabel, I wanted to make a few remarks on our DEI and social impact initiatives. As I mentioned on our last call, we recently launched a social impact department charged with driving our diversity, equity, and inclusion program and our corporate social responsibility initiatives. We are making great strides, and last month we put out a call for applications to accept a new cohort of 15 companies into our Tech for Black Founders program, which provides Black-owned startups with a free year of growth. Through our Braze Cares initiative, which focuses on our charitable giving and fostering opportunities for our employees to volunteer in their communities, we've made contributions to 567 organizations, and our employees have also volunteered with numerous organizations worldwide as part of this program in fiscal 2022. And as I mentioned last quarter, Braves has also joined the 1% Pledge, committing a portion of our Class A common stock over the next 10 years to fund our social impact and environmental, social, and governance initiatives. We have taken action on this initiative, signing an agreement with a donor-advised fund provider. The funds will be available for grants later this year. As a technology leader, Braze remains committed to increasing diversity, equity, and inclusion in our industry, and we plan to meaningfully expand our social impact initiatives by reiterating our commitment to helping our customers build strong and lasting customer relationships through great customer engagement. We continue to make progress in this mission around the world, and we look forward to continuing this journey with our customers, team members, and shareholders, and updating you on our progress in the coming quarter.