Braze, Inc.

Welcome to the Braze fiscal second quarter results 2023 earnings conference call. My name is Luke and I'll be your operator for today's call. At this time, all participants are in a listen only mode. After the speaker's presentation, we will conduct a question and answer session. I'll now turn over the call to Christopher Ferris, head of Braze Investor Relations.

Thank you, operator. Good afternoon, and thank you for joining us today to review Brazen's results for the fiscal second quarter 2023. I'm joined by our co-founder and chief executive officer, Bill Magnuson, and our chief financial officer, Isabel Winkles. We announced our results in a press release issued after the market closed today. Please refer to our investor 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 third quarter and full fiscal year ended January 31, 2023, the impact of our planned sales initiatives, our planned product and feature development, our competitive landscape, and the behavior of our competitors, our anticipated market opportunity, the impact of current macroeconomic trends, our anticipated customer behaviors, our growth plan, our vision, and our long-term financial targets. 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. We assume no obligation to update any such forward-looking statements. 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 second quarter 2023 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. We delivered a strong second quarter, generating $86.1 million in revenue, up 55% versus the prior year and 11% compared to the prior quarter. For the first six months of this fiscal year, we've grown revenue 58%, a testament to the power and scale of the Braze customer engagement platform. We also continued to demonstrate the ROI and stickiness of the Braze solution through an exceptional renewals performance, even during turbulent macroeconomic conditions. Further, we achieved solid customer growth, increasing our total customer count by 96% sequentially, or 43% in the last 12 months, while our number of large customers, which is defined as those generating over $500,000 annually, increased 70% year-over-year. Notable recent new business wins and upsells include Roku, Televisa Univision, IBM, and Pizza Hut Australia, among others. I want to particularly highlight Roku, one of the most widely used streaming platforms in the world, with 63 million monthly active users. We'll be powering critical holiday email efforts, integrating our iOS and Android SDKs to extend their customer reach, and partnering with them to expand their messaging across multiple channels. We believe this speaks to our ability to land large global enterprises even in an uncertain environment, and I'm proud of the efforts made across our organization to deliver these strong results. However, the quarter was not without its challenges. Like many of our software peers, we saw elongated deal cycles and greater scrutiny on customer spend, as some prospective and existing customers took a wait-and-see approach to the economy before committing to new investments. This effect was most acute as the quarter came to a close in July and affected our new customer ACV in the quarter. Notably, this period of rapid evolution in the sales environment overlapped with the ramp period for a large class of account executives hired earlier this year, resulting in sales productivity landing short of where we expected it to be in the quarter. We are adapting quickly, identifying areas where execution faltered, and making appropriate adjustments. In sales, we have returned to in-person training and mentorship while developing skills and presenting new tactics designed to help our account executives better navigate this dynamic environment. Specifically, we have launched new certification programs, engaged in more active competitive training, organized in-person sales boot camps for all new account executives, and are regularly hosting in-person role-playing, demo sessions, and more. These are training opportunities that are far more available to us now that the world has largely reopened, and we are excited to be arming our salespeople with the knowledge required to further differentiate our offerings from those of both our legacy marketing cloud and startup competitors. Over the long term, we believe an enduring focus on customer ROI and product differentiation is the most effective way to beat our competition. But we're also adapting to short-term changes in buyer behavior by increasing the emphasis of Braze's rapid time to value and the outsized ROI of investing in first-party data, with the goal of driving buyer urgency and materializing the opportunity cost of allowing suboptimal status quo solutions to persist. Supporting this message is our enduring differentiated product offering, including our unmatched ability to deliver omnichannel messaging at scale through real-time stream processing and our ever-expanding reporting and analytics capabilities. We believe that our platform and vision is increasingly defining the customer engagement space, that we can become the de facto file format for the space, and that our continued robust investment in R&D and our customer community will drive us forward as a generational brand. Despite the challenges we've recently encountered, we feel good about our pipeline and new opportunity generation was strong in the quarter. Pipeline quality is a function of robust discovery and a strict qualification and inspection process. We continue to refine and improve our qualification criteria and are optimizing our middle of the funnel nurture techniques. We also believe continued progress developing our customer and partner community is helping generate high-quality inbound pipeline with increased deal velocity and higher win rates. This bolsters our faith in our full-year outlook, which Isabel will discuss in more depth later. We also continue to invest heavily in our solutions partner ecosystem, particularly with the marketing agency holding companies and leading global systems integrators, or GSIs. We are deepening these relationships to help us land and expand within enterprises and to better serve our existing customers with complementary strategy, integration, and managed services. As Braze's presence and importance grows across the ecosystem, the GSIs and agencies are motivated to build Braze practices to serve their existing clients and help them compete for new ones. As those practices mature in scale and sophistication, a self-reinforcing flywheel dynamic can take hold that builds complementary value for Braze, our customers, and our partners. This win-win-win speaks volumes about the power of our product, our ability to feed the services ecosystem, and the increasing influence we are achieving with large enterprises around the world. Most importantly, we have continued investing in the evolution of our product to deliver on the promise of world-class customer engagement. This quarter, we launched a major leap forward in the power, usability, and performance of Brazos orchestration capabilities through the release of Canvas Flow. Canvas Flow is the latest generation of our visual programming environment and has been met with positive feedback and rapid adoption by our customer base. With Canvas Flow, even non-technical customer engagement practitioners are able to build incredible experiences for their customers and easily experiment with them over time. We're extremely proud of our track record of simultaneously improving both the usability and power of Canvas through environment upgrades and are excited to see our passionate customer base unleash their creativity and innovative spirit with the new capabilities that Canvas Flow provides. To provide just one example, Everwash, a mobile app that connects drivers with car washes, wanted to create a more valuable onboarding experience in order to maximize customer retention. Prior to Braze, Everwash employed an in-house tool that only supported email. By implementing Braze, they were able to get their data organized and streamed directly into the platform, set up push notifications, developed an SMS strategy, and quickly began creating dynamic customer journeys via Canvas Flow. In addition, they use the Braze Intelligent Timing solution to optimize messaging for when a user is most likely to engage, and they use liquid personalization in most of their campaigns, driving further customization based on each consumer's revealed preferences. In the case of a Holiday Car Wash multi-channel push and email campaign, EverWash experienced an impressive 37% conversion rate. Braze technology is also helping customers drive efficiency and reduce costs in the increasingly scrutinized ad buying ecosystem through our audience sync features, which are integrated with Facebook and Google's advertising tools. These integrations allow our customers to leverage the real-time, first-party data flow managed by Braze to optimize their usage of expensive advertising channels by targeting high-value users via multiple channels, populating real-time suppression lists, and building finely-tuned lookalike audiences. One customer, a European travel and tourism company, has used these Facebook and Google integrations for suppression and lookalike audiences and has seen strong positive results, reducing their typical cost per acquisition by up to 40%. Canvas Flow is just one of the many new product updates and features we recently introduced. Often, R&D organizations succumb to tech debt and experience growing pains as they scale, resulting in slower product velocity and reduced agility over time. In contrast, Braze product development has only accelerated over the past few years through foundational infrastructure investments and nimble organizational design. Transformative features like Canvas Flow are critical to generating differentiated value for our customers and building a moat against competitors while we work to cement Braze's position as the industry's file format for customer engagement. Look for us to debut new features and continued enhancements to our vertically integrated data flow and stream processing system in the coming months, particularly at our Forge customer conferences in New York in October and London in November. Before turning it over to Isabel, let me just reiterate how confident I am in the long-term trajectory of Braze. When we started this company over 11 years ago, my co-founders and I shared a dual conviction about the change that mobile was catalyzing. First, that fast-growing new businesses would be born and built to be mobile first. And second, that generations-old brands would be driven by changing consumer behavior to transform the way they deliver products and services. In the ensuing decade, our opportunity has only grown larger as the field of customer engagement and the brace platform have evolved in complementary support of each other. Recent challenges have not altered that vision, and we remain committed to delivering industry-leading customer engagement solutions for customers and high growth at scale for our shareholders. And with that, I'll turn the call over to Isabel.