Braze, Inc.

Welcome to the BRAZE Fiscal Third Quarter Fiscal 2023 Earnings Conference Call. My name is Layla, and I'll be your operator for today's call. At this time, all participants are in listen-only mode. After the speaker's presentation, we will conduct a question and answer session. I'll now turn the call over to Christopher Farris, Head of BRAZE Investor Relations.

Thank you, operator. Good afternoon and thank you for joining us today to review Braze's results for the fiscal third quarter 2023. I'm joined by our co-founder and chief executive officer, Bill Magnuson, and our chief financial officer, Isabel Winkels. 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 fourth quarter and full fiscal year ended January 31, 2023 and for our fiscal year ended January 31, 2024, 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 Investors 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 third 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 third quarter, generating $93.1 million in revenue, up 46% versus the prior year and 8% compared to the prior quarter. For the first nine months of the year, we've grown revenue 53% compared to the same period last year, demonstrating the high ROI and long-term value of the Braze solution. We also realized solid customer growth, increasing our total customer count by 116 sequentially and by 38% in the last 12 months, while our number of large customers, which is defined as those generating at least $500,000 in ARR, increased 53% year-over-year. Notable recent new business wins and upsells include FanDuel, Panera, and Vizio, among others. For Panera Bread, a North American fast casual bakery cafe concept with over 2100 locations will be powering email and mobile campaigns for their award winning app and industry leading MyPanera loyalty program that has over 50 million members. Additionally, Panera will be leveraging content cards to build a personalized messaging inbox spanning web, mobile, and in restaurant kiosks. We also signed a multi-year cross-channel deal with a large global brand in travel and hospitality, again demonstrating our ability to land with some of the largest enterprises in the world and power best-in-class omnichannel engagement across verticals and geographies. Travel and hospitality is a category where we continue to make great strides, and we look forward to updating you on our progress in this important vertical in the coming quarters. I also want to highlight an American multinational fast food chain with tens of thousands of global locations that has renewed and meaningfully grown its seven-figure investment in Braze. We're excited to expand our footprint with this customer across new use cases, channels, and geographies. This recent upsell means Braze will soon be powering marketing, promotional, and loyalty campaigns across email and mobile in all of their lead global markets. Continuing our tour of some of Braze's important verticals, Cyber Week is a critical time of year for many retail and e-commerce brands, and this was reflected in our messaging volumes over the period this year. From Black Friday to Cyber Monday, we executed over 31 billion total messages across our many channels, up 43% from the same period last year. More importantly, we again achieved 100% global uptime through this year's Cyber Week, notwithstanding record high volumes. In our view, this robust messaging growth is a proof point the customer engagement remains an imperative for today's businesses. In fact, we continue to see signs that first-party engagement is rising in importance for brands as both rapid time to value and robust return on investment are prioritized during this period of economic uncertainty. That said, we did continue to see some of the macroeconomic headwinds reported by many of our software peers, including elongated deal cycles and increased scrutiny on software investments, particularly with new business. In contrast, upsells were particularly strong, achieving a new high watermark in the quarter, led by success with our global strategic accounts. And despite the challenging environment, our pipeline is robust and demand for customer engagement solutions remains strong. As we continue to experience these success stories, both with new and existing customers, we remain relentlessly focused on the continuous improvement of our products and services. At our recent Forge customer conference, we outlined our start anywhere, go everywhere framework. in which we recognized that Braze customers exist across the full spectrum from small prelaunch startups up to the world's largest multinational enterprises. And that we are committed to meeting our next generation of customers wherever they are in the transformation of their customer engagement practice, getting them up and running quickly and helping them rapidly realize high ROI. The brands and teams that use Braze range from ambitious small businesses that may only have a single dashboard user through a diverse array of rapidly scaling companies with agile interdisciplinary teams All the way up to complex multinational enterprises with marketing and engagement teams that span across hundreds of people and they're all leveraging the same brace software. Some customers even start by simply migrating their existing email or push notification strategies into brace. But once those early campaigns are live rapid results build the case for further expansion and brace is built to help teams quickly leap forward and sophistication will expanding across new channels and use cases. all while enhancing the customer experience of their products and building first-party relationship assets. Meeting the distinct needs of this diverse set of customers requires ongoing innovation and nimble, efficient execution. With the Braze philosophy of start anywhere, go everywhere, we are committed to ensuring there are accessible starting points into Braze paired with a smooth on-ramp to get up and running quickly, while also investing to promote the continued growth and maturation of our customers' usage of Braze over the long term. The start anywhere go everywhere mentality also informs the evolution of our addressable market in tandem with that of the profession of marketing and customer engagement. Many of the job titles and teams that rely on brace today we're not around when we were founded in 2011. And their continued rise and prominence is an important indicator that braces moat extends into our customer community and is reinforced by the mutual evolution of our product, along with the maturing skill sets in our space that continue pushing customer engagement strategies to new heights. As businesses evolve to better serve their customers, who then reward them with stronger first-party data and more valuable relationships, we will continue to see brands progress the maturity and sophistication of their customer engagement practices. We further believe this strategy could expand our total addressable market in the long term through adoption among data engineers, product teams, and creative groups, and we are investing in R&D accordingly. To illustrate the impact of our R&D, I'd like to briefly highlight recent product innovations and integrations that we announced at our Forge events in New York and London in October and November, respectively. We introduced a number of updates to help customers more quickly bring new data sources into Braze and efficiently use them over time. A great example is cloud data ingestion, which allows customers to directly connect their data warehouse into Braze quickly importing and activating customer data with just a few clicks. Customers are already unlocking new use cases and solving difficult problems like identity resolution by syncing audiences into Braze that are created from queries in their data warehouse. For example, a quick service restaurant might want to message all users who ordered special menu items in a promotion from a previous year but haven't sent that data to Braze. Or a financial services company might want to message users with low account balances but need sensitive account balance details to stay on-prem. Early access customers report significant weekly reductions of developer hours, which can now be redirected to product improvements. By greatly reducing the operational requirements of managing data pipelines, these efficiencies can also improve relationships between the marketing teams that use Braze and the engineering teams they often rely on to help bring new ideas to life. Early examples of customer case studies include a streaming service running a multitude of data sinks for everything from account updates originating in their backend to targeting based on sensitive information such as credit cards. And a gaming company that is aggregating all of their purchase data from different channels in-store, online, and platform marketplaces and syncing it with Braze via cloud data ingestion for targeted messaging to recent purchasers and their biggest spenders. Snowflake is our first partner for this turnkey integration and we plan to expand to the other major data warehouse partners, Redshift and BigQuery, enhancing the data flexibility of Braze for our customers. Just as we are working to improve the ease with which data and engineering team members interact with Braze on behalf of their marketing teams, we are also building features and interfaces for them to use directly. One recent example is the introduction of feature flags, which enable customers to easily launch and test new features with limited audiences or within targeted geographies before committing to a broader rollout. We also launched a programmatic API for our existing data feature, Catalogs, which enables our customers to co-locate new data sets within the Braze infrastructure, making it easily available for real-time personalization use cases within Canvas. And by leveraging a broader data architecture built on Snowflake, MongoDB, Kafka, and others, Braze provides businesses with the most flexible customer engagement platform for data activation. We believe these product innovations help build on the value generated by the ever-closer collaboration between product developers and marketing experts in service of a better customer experience. A central tenet of our product vision at Braze is that we help our customers reach their users on the channels that they care about most. This is why we built our product to be omnichannel, and as customer behavior evolves, we continue to expand the breadth of Braze's vertically integrated channel set. As such, we also recently announced native channel support for WhatsApp, a platform used by over 2 billion users in 180 countries, which is currently in early access with a handful of customers. Once early access is concluded in early 2023, marketers around the world will be able to create, orchestrate, and send WhatsApp campaigns directly from the brace dashboard to strengthen customer relationships with content-rich messaging. Braids is directly integrated with the latest version of Meta's recently overhauled WhatsApp Cloud APIs, and our solution is designed to be marketer-friendly, allowing customers to build WhatsApp campaigns in a native composer and manage the channel similarly to how they use SMS. In addition to the usability benefits afforded by our direct integration or whatsapp offering is further differentiated by its seamless integration into the brace platforms orchestration capabilities. With canvas flow our visual development environment for customer engagement programs customers can harness all of the power and sophistication of brace to seamlessly incorporate whatsapp messaging into their marketing mix and easily orchestrate two way whatsapp conversations with end users. For another example of channel expansion, we looked at Braze Audience Sync, which helps customers drive efficiency and reduce costs in the ad buying ecosystem by allowing them to leverage the real-time first-party data flow managed by Braze to optimize their usage of expensive advertising channels through enhanced targeting, suppression, and lookalike audience development. Customers have historically seen strong success with Audience Sync integrations through Facebook and Google. So at our Forge event in London last month, we were excited to announce early access for Audience Sync with TikTok. This integration will enable brands to dynamically and securely sync first party user data from Braze directly to TikTok for audience classification. Brands can send custom audiences to TikTok for fine grained ad targeting alongside first party messaging, as well as optimize their ad spend through precise real time suppression lists and versatile lookalike audience creation. Lifesum, a digital health company in EMEA, is currently using the beta version of tick tock sync to target tick tock ads to new users and convert them into paying Members will suppressing ads to active premium users. It took them just one day to get up and running and the integration has proven very valuable and extending their paid social reach, while improving cost efficiencies. Before turning the call over to Isabel, I'd like to take a few moments to highlight our inaugural environmental, social, and governance report published last month. As I've stressed on past earnings calls, BRACE believes its responsibility as global citizens and technology leaders is to be a positive force for our employees, communities, and shareholders. This report was the product of our social impact department and includes our first greenhouse emissions audit, first materiality assessment, and it outlines our inclusion-first approach to diversity, equity, and inclusion. the report can be found under the governance section of our investor website. Thank you again for your continued interest in and support of Brace. We remain committed to delivering industry-leading engagement solutions for our customers and efficient growth at scale for our shareholders. And we look forward to continuing this journey to become the de facto standard for customer engagement with you over the coming months and years. And now I'll turn the call over to Isabel.