Braze, Inc.

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

Thank you, operator. Good afternoon, and thank you for joining us today to review Braze's results for the fiscal fourth 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 the 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 ended April 30, 2023, and for our fiscal year ended January 31, 2024, our planned product and feature development, and the benefits to us and our customers therefrom, including our AI tools, our anticipated market opportunity, the potential impact of current macroeconomic trends, our anticipated customer behaviors, including vendor consolidation trends and their impact on Braze, our growth plan, our vision, our long-term financial targets and goals, including the anticipated period in which we may generate positive non-GAAP operating income and positive free cash flow. 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 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 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 fourth quarter, generating $98.7 million in revenue, up 40% versus the prior year and 6% compared to the prior quarter, again demonstrating the high ROI and long-term value of the Braze solution. Our results were strong despite a challenging macroeconomic environment that elongated sales cycles, particularly in our commercial segment. We increased our total customer count by 55 sequentially to 1,770, and continue to win against both legacy marketing clouds and point solutions. Notable recent new business wins and upsells include Discovery Communications, Finish Line, McClatchy Media Company, MyFitnessPal, Sonic Drive-In, and Haycar, one of Europe's leading online marketplaces for high-quality used cars, among many others. Customers continue to recognize the high ROI that can be achieved through personalized, cross-channel customer engagement enabled by the Braze platform. Despite market challenges, we remain confident in our ability to execute on our growth plans. Braze's momentum continues in key industries such as retail and e-commerce and media and telecommunications. And as legacy marketing tools come up for renewal, we see traction in newer to Braze industries like travel and hospitality. And today, I'm proud to announce that during Q4, we passed $400 million of committed annual recurring revenue, demonstrating our ability to capitalize on our growing market opportunity to deliver best-in-class customer engagement at scale. Thank you to our dedicated and talented team across the globe who helped make this happen. I'm excited to build on our success with you and march toward our next goal of becoming a $1 billion revenue company. Looking ahead, we are confident that whichever way the macroeconomic winds blow, customer engagement will remain a universal business imperative. In tough times, brands shift their focus to higher return activities like lifecycle optimization and retention. To stand out, marketers need to use powerful customer engagement technology to drive innovation and productivity, all in service to customer value. And we are increasingly seeing a trend towards vendor consolidation, which we think we will benefit from. Specifically, customers come to Braze looking to strengthen their customer engagement suite with a platform that is simultaneously comprehensive while being intuitively integrated and powered by real-time data. These customers are moving from a disparate collection of marketing software, separately sending email, SMS, push notifications, and in-product messaging, all with siloed analytics and complex user data tracking. With Braze, customers ranging in size from small digital startups up to some of the world's largest enterprises can cost-effectively consolidate their customer engagement efforts into one solution, breaking down silos between channels and teams, simplifying their technical architectures, and improving outcomes for customers. In one particular new business win with an athletics retailer this quarter, we replaced three separate vendors, signing a deal across an array of channels, including email, push, web, and content cards. In another case with traditional media company, we replaced a legacy marketing cloud and three other messaging vendors as they modernized their customer engagement platform with Braze. We expect this trend to continue as enterprises with ambition and sophistication consolidate their technology ecosystem with modern omni-channel customer engagement solutions. Removing legacy marketing clouds and point solutions that don't scale, which we believe will provide a tailwind for Braze in the coming years. In another proof point of our leadership in the industry, I'm pleased to highlight that Braze was recently named a leader in the Q1 2023 Forrester wave for cross-channel marketing hubs. Their coverage of Braze should resonate with those who have been listening in on our earnings calls the last few quarters. So let me just read directly from Forrester's report. Braze lives up to its start anywhere, go everywhere product vision via innovative products and expert services to help its clients build human connections with their customers, regardless of size or technical competence. Its superior innovation roadmap reflects these concepts by balancing investments across ease of use, platform depth, and workflow flexibility. They continued by saying that Braze suits organizations looking for a flexible and marketer-friendly cross-channel marketing hub solution to refresh their digital experience strategy. Next, I'd like to briefly highlight our recently announced strategic partnership with WPP, a leading creative transformation and services agency. Together, we'll be partnering on joint product and solution development and integrations aimed at helping brands resolve customer identities at scale and power personalized engagement, alongside coordinated go-to-market efforts to help clients make investments in customer activation, retention, and loyalty. We look forward to partnering with WPP and deepening our relationships with other agencies and GSIs to create better outcomes for our customers. As we look to the future, we will continue to improve our platform and build our competitive moat. Artificial intelligence is a key component of that innovation push. Those that closely follow Braze know we were founded by two engineers, myself and our CTO, John Hyman, and that existing on the cutting edge of technology innovation is in our very DNA. Let me walk you through a few of our existing AI developments and how we plan to leverage AI to drive customer engagement in the future. In 2017, we invested in a dedicated team of data engineers and data scientists focused on using machine learning to build AI into the product, making marketers more effective in engaging their end users by optimizing timing and targeting strategies, inspiring new ideas to enhance relevance for customers, and when possible, automating decisions entirely. In May of 2022, we started investing in generative AI as a marketer co-pilot, building GPT-3 into Braze for AI copywriting, which saves customers time when creating subject lines and messaging for their campaigns. Last December, we integrated DALI into our image library, and customers have been using both very effectively to be more agile, speed creative production, and more easily test and optimize content for different variants. We're very excited about the potential for these tools to enable even small marketing teams to wield an immersive creative vision, while also making it easier for them to take advantage of Braze's sophisticated and differentiated testing capabilities by lowering their creative production burden. We have also already seen examples of ChatGPTs successfully leveraged to generate valid message templating syntax and to speed along integration with source code samples. This is a set of capabilities that can enhance the efficiency of our product support and further accelerate time to value for our customers. We're also experimenting with customizations of GPT-4, which are aware of Braze's support knowledge base and up-to-date documentation, in order to enable a wider swath of Braze users to leverage our most advanced capabilities more quickly. And as we discussed with you in October at our first investor day we've also introduced new machine learning features designed to improve outcomes embrace campaigns and campuses. We introduce personalized variant to automatically determine for each individual message recipient which content variation, they will most likely engage with based on data from consumers with similar behaviors and profiles. And we've expanded our predictive suite to use sophisticated machine learning to identify which users are most likely to churn or make a purchase. This generates models that are customized to each brand's usage fingerprint, a solution that adapts to work effectively across different industries and business models. Finally, we are using machine learning driven predictive models designed to improve our quality of service while lowering our infrastructure costs. Auto scaling is a technique we've used for years to adapt the cloud footprint of our stream processor in response to dynamic messaging workloads. We recently enhanced it to use machine learning to automatically predict upcoming load based on customer usage and a wide array of historical data. Early tests have shown the potential for meaningful reductions in our infrastructure costs as we continue to drive efficiencies in our core tech stack. You can expect that Braze will continue developing AI and ML-driven products and service enhancements throughout the surface area of our platform in the coming months and years. Finally, and before I turn it over to Isabel, I'd like to spend a moment to discuss some exciting news we announced earlier this afternoon. We have entered into an agreement to acquire Northstar, our exclusive reseller of brazed technology in the Australian and New Zealand markets. We have been working with their team for several years and have been impressed by their ability to drive adoption of our industry-leading solution across the region. We estimate this transaction will close in our fiscal second quarter, and we look forward to updating you on the progress in the region in the coming quarters. Thank you for your continued support of Braze. We are very excited about the year ahead and believe the investments in our products, coupled with the strong secular customer engagement tailwinds, will keep Braze on the path to becoming the industry standard for customer engagement. And now I'll turn the call over to Isabel.