Braze, Inc.

Welcome to the Braze Fiscal Third Quarter 2025 Earnings Conference Call. My name is Megan 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 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 third 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 fourth quarter and the fiscal year ended January 31, 2025, the anticipated development, release timing, and performance and benefits of our existing and upcoming products and features, the potential impact and duration of our current macroeconomic trends, our anticipated customer behaviors, including vendor consolidation and 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 identified risks 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 third quarter 2025 performance in addition to the impact these items have on the financial results. Please refer to the reconciliation 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 are pleased with our third quarter results, which again prove the high ROI and long-term value of the Brace customer engagement platform. We generated $152.1 million of revenue, up 23% year over year, while driving continued efficiency across our business and improving non-GAAP operating margins by 580 basis points year over year. I'm also proud to announce that we passed $600 million of committed annual recurring revenue during the quarter, another testament to the strong demand for the ROI delivered by the Braze customer engagement platform. And for the second quarter in a row, we achieved positive non-GAAP net income and expect to maintain positive quarterly net income moving forward. As planned, non-GAAP operating income took a slight step back this quarter due to seasonal investments in marketing. and we remain on track to deliver positive non-gap operating income and free cash flow in the fourth quarter, and to sustain both on a go-forward basis. This is an exciting set of financial milestones on our way to becoming the leading customer engagement platform globally, and we look forward to generating meaningful operating income while also thoughtfully reinvesting to grow our business in the coming quarters and years. During the third quarter, we continued to capitalize on the legacy vendor replacement cycle, securing a diverse set of new business wins where Braze is replacing legacy marketing clouds, including at a gaming company in North America, an airline and a financial planning company in APAC, and a fashion brand in EMEA. We also continue to win against both channel-specific point solutions and homegrown tools across a diverse set of industries, geographies, and use cases. Some notable takeaways included a leading North American party planning application, a QSR in EMEA, and a traditional media company in APAC. We grew our customer count by 48 during the quarter to 2,211, up 200 year over year. New business wins and upsells included Eon Financial Services Company, Burple, Crumble Cookies, Eon Next, Exact Sciences, Hugo Boss, Ipin Digital, Kurt Geiger, Love's Travel Stops and Country Stores, Lush Cosmetics, Rightmove, Smart News, Inc., Telstra, and Weatherbug, along with many others. Enterprise customers were again a strength, with our $500,000-plus ARR customers increasing to 234, up 24% year-over-year, evidence of how customers continue to leverage rich first-party data and advanced artificial intelligence to drive sophisticated cross-channel customer engagement at scale. And in another proof point of the growing Braze customer community, we're excited to see a growing number of new business deals which were accelerated by the presence of marketers who'd previously learned and leveraged Braze in past roles at prior companies. While we haven't seen a meaningful improvement to the demand environment quarter-over-quarter, we remain focused on executing against our long-term product and financial goals while positioning Braze for long-term category leadership. Our path to category leadership requires a range of complementary investments, including the continued elevation of our brand and awareness, strengthening our partner ecosystem globally, enhancing our product and channel offerings, improving system performance, and easing the on-ramp into Braze for new customers. Further, we believe that both the legacy replacement cycle and vendor consolidation trends will lead to share gains for Braze as brands increasingly look to upgrade their customer engagement strategies and deploy new AI-driven advancements to increase their productivity and enhance the relevance of their customer messaging. 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. As brands continue to invest in their customer engagement efforts, it is crucial to find efficient opportunities to initiate new relationships and strengthen existing ones. And the period from Black Friday to Cyber Monday is particularly crucial for many retail and e-commerce brands as they get a jump on the holiday season. This was reflected by both our record-breaking message volumes and the continued rise in sophistication used to orchestrate and enhance the performance of messages sent via Braze. Over the four-day weekend, Braze delivered over 50 billion messages, up 35% year-over-year with 100% uptime. We saw marketers moving even further away from batch-and-blast single-channel campaigns to instead deliver dynamic, data-informed campaigns reaching customers across a variety of channels. We also saw a 46% increase in the messaging volume orchestrated by cross-channel canvases, supported by a 31% increase in the number of unique canvases executed by our real-time stream processing engine. The rise in usage of Canvas reflects a growing conviction that marketers must embrace an experimental, data-driven, and omnichannel approach to customer engagement, driving responsive and sophisticated customer journeys that inspire and connect with consumers. In addition, we saw increased usage of Braze AI features to enhance marketer productivity while amplifying the results of campaigns themselves. And finally, we witnessed increases in premium messaging, including WhatsApp, up 36% year-over-year, and gains for in-product messaging. with content cards volume up 53% year-over-year and in-app messaging increasing 46% year-over-year. Existing at the leading edge of technology is in our DNA and at the core of our innovation roadmap. We foresaw the opportunity presented by the coming wide-scale adoption of mobile more than a decade ago and have since worked relentlessly to seize that opportunity through the use of sophisticated technology, focusing on product innovation that can accelerate the legacy replacement cycle and compel more brands to upgrade their customer engagement practices. At our Forge customer conference in late September, we unveiled new low-code and AI-driven product innovations designed to more effectively personalize brands' customer engagement efforts and drive more agile and productive marketing teams. These included Project Catalyst, a new Braze AI-driven agent, which we are developing to help brands deliver personalized customer engagement by rapidly creating, testing, and optimizing experience variations at a scale that only AI can achieve. We also debuted additional Canvas template and Braze AI assistant features to help marketers more easily get started and deliver sophisticated customer experiences. And we shared upcoming expansions to our channel offerings, including line and RCS business support, and new WhatsApp features such as dynamic images, click tracking, and commerce support. I'd like to take a moment to highlight each of these enhancements, starting with our in-development Braze AI agent codenamed Project Catalyst. As you know, for over a decade, Braze has deployed dedicated teams of engineers and data scientists focused on using machine learning to integrate AI into our product with the multifaceted goal set of optimizing customer journeys, increasing the relevance of message content, improving marketer productivity, and enhancing targeting strategies. Project Catalyst combines our past investments in automated decision-making and experiment optimization with frontier innovation and generative AI to help marketers craft and uncover the best experience for each individual consumer. Marketers using Project Catalyst should benefit from Braze's tightly integrated tech stack, combining its rich data integrations, real-time stream processor, and cross-channel architecture to create relevant experiences across a range of digital touchpoints. With Project Catalyst, marketers can define guardrails for journeys or content, specify their goals, and then allow Braze AI to optimize accordingly. In addition, marketers can combine capabilities across Project Catalyst and Brace Canvas, our no-code journey orchestration solution, to bring together human-inspired experiences with machine-optimized performance and scale. Catalyst is designed to truly break down the limits of experimentation, as the agent can generate a multitude of variants for each component of that experience. the attention-grabbing headline, the tone of the message, the nudges and promotional offers available, the channel mix, optimal timing, and more, combining the best of each component to create an individual, unique experience for each and every consumer, with each one receiving the combination that's best suited for them. And with configurable content controls, optimization levers, experiment automation, and real-time reporting, marketers can ensure they are in control of their engagement, making adjustments, evolving focus areas, and improving their business outcomes over time. Project Catalyst is expected to be available in beta in the first half of next year, helping our customers deliver tailored, one-to-one personalized experiences for their consumers at scale. At Forge, we also unveiled new AI solutions that inspire marketers, improve ease of use, and enable more sophisticated use cases with less training up front. These include our Liquid Assistant, now generally available, and our Message Template Assistant, currently in early access, to extend the power of generative AI beyond copy and image creation. These features help marketers create advanced logic for personalization, as well as sophisticated message templates, all with a simple and interactive plain text prompt. Zooming out a bit, earlier this year, we announced the Braze Data Platform, a comprehensive set of data capabilities and partner integrations designed to streamline data unification, activation, and distribution. The Braze data platform simplifies the process of collecting and organizing first-party data from any source. At Forge in September, we announced multiple enhancements to the Braze data platform, including new cloud data ingestion integrations for AWS S3 and Microsoft Azure, as well as cloud data ingestion segments, which allow marketers to build audiences with a simple-to-use zero-copy process. We also debuted new automated identity resolution capabilities to help marketers maintain accurate customer profiles as consumers engage brands across a variety of digital touchpoints, or they transition from anonymous to identified, an area of increasing importance as the browser cookie landscape continues to evolve. Finally, we launched innovations to help marketers easily access insights that inform their high-level customer engagement strategies, both natively in Bray's reporting and analytics dashboards, as well as through further enhancements to our integrations with third-party business intelligence tools. These innovations illustrate our commitment to furthering marketers' ability to use first-party data and an ever-evolving set of channels to create more valuable customer experiences. And of course, we've continued to expand and deepen those channel offerings to help marketers reach consumers with the most relevant message anytime, anywhere. At Forge, we announced support for Line, the most popular messaging app in Japan that's also widely used in Thailand, Taiwan, and Indonesia. Line has since launched to general availability, and we've already had several existing customers purchase Line upsells. We also previewed enhancements to WhatsApp, including dynamic images, click tracking, and commerce support, scheduled to be generally available soon. And we expanded traditional texting options with support for RCS business messaging to help brands stay at the forefront of mobile innovation. We've already had our first customers send test RCS messages and opened up our RCS early access program to eligible customers earlier today. with more content types scheduled to be supported in the coming months. As I close out, I'm also excited to share that our commitment to innovation and industry leadership was recently highlighted by being named as a leader in the Gartner Magic Quadrant for multi-channel marketing hubs for the second consecutive year. We're proud of this placement, and the recognition reinforces our commitment to helping brands meet evolving customer expectations through continued innovation. Finally, I'd like to update you on an important social impact initiative. We are excited to announce that BRACE successfully submitted its near-term science-based targets to the Science-Based Target Initiative, marketing a significant milestone in our sustainability journey. The Science-Based Target Initiative is a globally recognized organization that helps companies set emissions reduction targets in line with the latest climate science. Submitting our near-term science-based target is a key step towards strengthening our sustainability program. We expect to have an approved target in FY26, aligning us with best-in-class standards for carbon reduction. I'll wrap my remarks by reiterating our confidence in our long-term growth story. We are committed to driving durable revenue growth, operating efficiently, and driving profitability. Thank you for your interest and support in Braze, and now I'll turn the call over to Isabel.