Braze, Inc.

Welcome to the Braze Fiscal Second Quarter 2025 Earnings Conference Call. My name is Layla, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. After the speakers' presentations, we will conduct a question-and-answer session. I'll now turn the call over to Christopher Ferris, 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 second quarter 2025. 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 the investor relations section of our 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 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 third quarter ended October 31, 2024, and the fiscal year ended January 31, 2025, the anticipated development, performance, and benefits of our products and features, the potential impact and duration of current macroeconomic trends, our anticipated customer behaviors, including vendor consolidation or replacement trends and their impact on Braze, our potential market opportunity and our ability to effectively execute on such opportunity, the expected effects of our social impact initiatives, and our long-term financial targets and goals. 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 Relations 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 2025 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 section 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 were very pleased with our second quarter results, which again demonstrated the high ROI and long-term value of the Braze customer engagement platform, along with strong execution from our teams around the world. We were encouraged by the new business won in the quarter, the progress made in our product investments, and the continued development of our AI initiatives. We generated $145.5 million of revenue, up 26% year over year, while driving continued efficiency across our business. Non-GAAP gross margin was 70.9%, a rise of 90 basis points compared to the previous year, and we demonstrated strong operating leverage, realizing our first-ever quarter of non-GAAP operating income profitability and non-GAAP net income profitability. We take pride in achieving these milestones and look forward to continuing to grow our business efficiently in the coming quarters and years, generating more meaningful non-GAAP operating income and free cash flow for shareholders while also thoughtfully reinvesting in our business. We've highlighted the legacy vendor replacement cycle and point solution consolidation trends over the last few quarters, and we're excited to see those trends continue as marketers realize that the antiquated technology and siloed architectures of the legacy marketing clouds and email service providers are unsuited for modern customer engagement use cases. Customer growth in the quarter was solid, with our total customer count reaching 2,163, an increase of 61 during the quarter and 205 year-over-year. New business wins and upsells included Asiana Airlines, Bell Media, Gumtree, Loan Depot, N26, Papa John's Pizza, Strawberry Hotels, Supercell, TF1, Zalando, and many others. Q2 also saw the diversification of our customer base on full display as we want new customers around the world and across a range of diverse industries, including a European hotel chain, an American professional sports franchise, a European advertising marketplace, a QSR chain in APAC, a major American media conglomerate, a European TV network, an international food and beverage company, a German neobank, and an American home design company, among many others. In the coming years, we believe that both the legacy replacement cycle and vendor consolidation trends will drive increased share gains for Braze as brands put even greater emphasis on customer engagement strategies and seek to capitalize on new AI-driven advancements. As marketers become increasingly sophisticated and ambitious with their customer engagement efforts, we believe Braze will benefit. And through the growth of our customer community and the successful execution of our product roadmap and global expansion strategy, Braze can position itself as a global category leader in customer engagement. delivering increased relevance and personalization to consumers at scale. Upsell was also strong this quarter, as existing customers continued to grow with Braze, adopting more channels, deploying more use cases, increasing their messaging volumes, and adding new business units and geographies to their Braze deployments. This quarter, we also secured our second and third eight-figure customers, first with the long-tenured global quick service restaurant group, and next with the large technology conglomerate with a strong presence in the gaming space. The realization of continued expansion opportunities with long-term customers such as these is a strong testament to Braze's pace of product innovation, our performance stability and reliability at scale, and our leadership in the customer engagement category. Enterprise remains a strength for Braze, with our $500,000-plus ARR customers growing to 222, up 28% year-over-year. a testament to the strong return on investment available to those brands who invest in first-party data and use sophisticated customer engagement strategies and advanced AI to enhance and enrich their customer relationships at scale. While the macroeconomic environment continues to present challenges, we are effectively navigating them and staying focused on executing against our long-term product, operational, and financial goals. We believe difficult environments present valuable opportunities to create long-term differentiation and separation from our competition, and we are committed to capitalizing on this period to cement our position as a global leader in customer engagement. As such, we are investing in our brand and our business by strengthening our global teams, enhancing our channel offerings, improving system performance, smoothing the on-ramp into Braze for new customers, and elevating our AI offerings. In July, Braze celebrated two important milestones as we observed our 13-year anniversary and introduced the Braze data platform to the world. With more than a decade of experience and focus on customer engagement, we deeply understand the importance of high-performance data activation and flexible governance in order to deliver sophisticated relevance and revenue optimization. especially as the challenge of modern customer engagement has spread across an increasingly ubiquitous set of customer touchpoints. The Braze Data Platform is a comprehensive set of data capabilities and partner integrations designed to streamline data unification, activation, and distribution. Built with flexibility, interoperability, and modularity in mind, the Braze Data Platform helps brands easily integrate and leverage their data regardless of their preferred technologies and workflows. With the Braze Data Platform, Brands can simplify the process of collecting and bringing first-party data together from any source. Recent additions to the Braze data platform include an extension to cloud data ingestion, which allows customers to generate audience segments directly from data warehouse partners like Amazon Redshift, Databricks, and Snowflake, giving brands the flexibility to use zero-copy technology whenever their use cases demand it. And by utilizing existing capabilities such as data transformations, catalogs, our SDKs, and our APIs, brands can strike the right balance of security, performance, and architectural considerations while efficiently organizing their data and empowering marketers to bring their creative ideas to life more quickly while also reducing their dependence on expensive technical teams. We also launched new data management capabilities in our highly flexible catalogs offering. to help customers take advantage of recently integrated AI features while maintaining rapid time to value and a low total cost of ownership. Combining these data features with Braze AI and our robust partner community helps customers test and deliver more personalized experiences to more customers in more places. and do it with confidence. We're very excited to continue building the future of the Braze Data Platform in collaboration with the broader data ecosystem, including our Braze Data Platform launch partners Amperity, Amplitude, Sensus, Hightouch, Amparticle, Rudderstack, Simon Data, Tealium, Treasure Data, and Twilio Segment. As we work toward our goal of becoming the category leader in customer engagement, we will continue investing to expand the size and diversity of our customer community aiming to establish Braze as both the premier skill set for customer engagement practitioners and as the reference architecture for the modern customer engagement technology stack. Just yesterday, we announced two new initiatives to accelerate our customer community growth while also making it easier for teams of all sizes to experience Braze firsthand. The first is Braze for Startups, which supports the next generation of VC-backed startups to power sustainable, customer-centered growth from day one by providing them with exclusive access to the Braze platform, services, and community. The goal of the program is to win the business of the next generation of digital leaders, driving long-term new business opportunities. Startups can grow with confidence knowing that Braze is the only customer engagement platform they'll ever need to buy. Second, we announced a free trial program, allowing brands to test the platform, including our dashboard and APIs, for 14 days without charge. This will provide marketers with the opportunity to dive into special guided walkthroughs, test pre-built campaigns and journey templates, and preview Braze AI features, seeing firsthand how they can drive meaningful engagement and business results. We believe this will help win more business across customer types and expand more quickly into new business units within existing customers. Later this month, we'll be unveiling even more product innovation at our annual flagship customer conference, Forge, which takes place from September 23rd to the 25th in Las Vegas. You'll hear more about our approach to investing in the Braze data platform, data unification, activation and distribution, as well as enhancements to orchestration and AI capabilities designed to make experimentation and content generation easier and more effective at scale. You'll also hear more about how we're increasing the depth and breadth of our channels and helping brands stay ahead of evolving consumer needs. We hope that many of you will join us at Forge to learn about these updates live. and also experience exciting customer engagement innovations through live workshops and hear from some of our outstanding customers and partners. We'll also be hosting an investor event on Monday, September 23rd, before Forge, during which we will share more of our product and market vision, as well as more details about our financial outlook. Finally, I want to update you on our social impact initiatives. In July, we published our third annual ESG report, which summarizes our progress and initiatives related to environmental, social, and governance topics, and demonstrates our commitment to the accountability and transparency of our approach to social impact. We look forward to growing these efforts through continued employee advocacy and participation over time. I encourage all stakeholders to visit our newly launched ESG website for additional information on our efforts. I'll wrap my remarks by reiterating our commitment to driving long-term growth, efficiency, and profitability in our business. Thank you for your interest and support in Braze, and now I'll turn the call over to Isabel.