Braze, Inc.

Welcome to the Braze Fiscal First Quarter 2026 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'll conduct a question and answer session. I'll now turn the call over to Christopher Ferris, Vice President of Braze Investor Relations.

Thank you, Operator. Good afternoon and thank you for joining us today to review Braze's results for the fiscal first quarter of 2026. 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 second quarter ended July 31, 2025, and the fiscal year ended January 31, 2026, our ability to integrate and realize the benefits of the acquisition of OfferFit, our anticipated product development and performance, our expectations concerning new customer verticals, 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, 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 first quarter 2026 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 delivered strong first quarter results, generating $162.1 million of revenue, up nearly 20% year over year. That top-line growth continues to be paired with efficiency improvements as we increased our non-GAAP operating margin by over 900 basis points year-over-year and realized our four-straight quarter of non-GAAP net income profitability, achieving over $7 million of net income and nearly $23 million of free cash flow in the quarter. We are proud of our financial success as we continue our mission to become the leading customer engagement platform on a global scale and look forward to achieving sustained profitable growth in the coming quarters and years, while thoughtfully reinvesting in our business and building our competitive moat. Despite an environment that remains noisy and uneven, we continued our momentum from Q4. achieving strong bookings as we got off to a good start in fiscal 2026. Thus far, global trade concerns have yet to materially affect deal cycles, and in the first quarter, we secured a diverse set of new business wins and upsells, including Beyond Inc., Chamberlain Group, Evite, Freshket, Fubo, Lush Cosmetics, Nouchekolo, ThredUp, and many others. Our customer count rose to 2,342, up 46 sequentially, and up 240 versus the prior year. Our large customer additions were again strong, with $500,000-plus ARR customers rising 24% year-over-year to 262, demonstrating the need for enterprises to deploy AI-based solutions and leverage first-party data to drive sophisticated cross-channel customer engagement at scale. We also continue to replace legacy marketing clouds across verticals and around the world, including at a North American fintech, a global luxury retail brand, an EMEA insurance comparison firm, a North American amusement park chain, an EMEA fashion house, an APAC tourism board, a North American clothing marketplace, a U.S. healthcare company, a construction equipment rental firm in APAC, a U.S. gaming company, and an EMEA professional sports organization, among many others. We also continued to win against both channel-specific point solutions and homegrown tools across a diverse set of industries, geographies, and use cases. And it's that diversification which supports our results even as the economic and geopolitical environment remains dynamic. As we continue our substantial and focused investment on our journey to become the recognized leader in customer engagement, we are confident that the legacy replacement cycle and vendor consolidation trends will persist, presenting Braves with opportunities to increase market share as brands increasingly seek to improve their customer engagement strategies and leverage new AI-driven advancements to simultaneously achieve better results and higher levels of productivity. Meanwhile, our legacy competitors continue to stand still, failing to innovate or adapt as the modern customer engagement landscape continues to forge ahead in both scope and sophistication. Braze remains focused and forward-looking as we deploy AI in tandem with first-party data activation, applying leading-edge reinforcement learning and generative AI technology to an ever-evolving set of messaging channels and product interfaces to help our customers deliver more relevant customer experiences and grow their businesses. This multifaceted strategy was on display just a few weeks ago, as we announced the general availability of RCS messaging, in-product banners, and Canvas context. Separately, these are important upgrades to our channel offerings, orchestration environment, and visual programming language. but it's a combination of these capabilities with our increasingly robust Braze AI suite that really makes our product roadmap shine. Whether a brand is orchestrating a dynamic customer journey, initiating an interactive conversational experience, or enhancing core product offerings, the tools and skills of customer engagement are there to help them identify and optimize every one of the moments that matter in the customer journey. As the Braze product races ahead, we also continue to invest heavily in the community of marketers and agencies that are the foundation of the broader Braze ecosystem. And we firmly believe that now is the ideal moment to elevate the craft of customer engagement as marketers leave behind the drudge work of campaign creation and ascend to being a maestro of experience. By combining the accelerated capabilities of reinforcement learning and generative AI, we believe that marketers can ascend to a strategic conductor role responsible for prioritizing and driving business goals as brands unlock new opportunities for growth on the back of their continued investments in first party data and the building of direct to consumer relationships. The enhanced flexibility of data, expansion of communication channels, rapid advance of AI, and rising skill sets of marketers present brands with an unprecedented opportunity to engage with their customers, fostering enduring relationships that are the foundation of efficient brand growth. This goes beyond the conventional notion of delivering the right message to the right channel at the right moment. It involves gaining a deeper understanding of customers, engaging with them more holistically, and reinforcing customer connections by providing seamlessly integrated messages and product experiences. Agentic AI plays a vital role in enhancing relevance and enabling extensive personalization, as these decision-making agents independently test, learn, and provide highly tailored experiences to customers. To accelerate our progress in this area, earlier this week, we successfully closed the acquisition of OfferFit, a leading AI decisioning company that leverages proprietary reinforcement learning to enable brands to deliver highly relevant and personalized customer engagement at scale. OfferFit has spent the last four and a half years building and deploying a leading multi-agent solution that autonomously explores solution spaces across lifecycle marketing campaigns, creating highly customized recommendations for cross-channel campaign content and delivery strategies. By substituting the manual processes of A-B testing with reinforcement learning agents that independently experiment and identify optimal actions, OfferFit's advanced AI decisioning can be utilized across a diverse range of experimentation and optimization scenarios. This approach has been highly successful, enabling OfferFit to quickly land and expand with large enterprises across a diverse set of industry verticals. After years of successful product partnership, we are now working quickly to fully integrate OfferFit's multi-agent decisioning engine into Braze's customer engagement platform. By leveraging the Braze data platform, dashboard infrastructure, and our already scaled event-driven stream processor, we anticipate that OfferFit will be able to simultaneously accelerate their previously independent roadmap, even while we prioritize the many integration tasks that will lay a strong foundation for future innovation and scaling. Together, we believe we can enable brands to leverage cutting-edge technologies in automation and machine learning, transforming customer relationships and creating shared value for both consumers and businesses. In the short term, we anticipate that OfferFit's solution will enable us to increase deal sizes through their distinctive reinforcement learning products and services, while also setting us apart from competitors by offering a broad range of AI-driven optimization capabilities at various price tiers and service levels. In the medium term, similar to our approach with other key components of Braze AI, we plan to integrate OfferFit's agents and machine learning models throughout the Braze platform. This integration will empower us to collaboratively address new use cases and improve existing features, ultimately helping brands achieve higher uplift with lower effort. The integration of OfferFit also complements Braze's Project Catalyst, a native AI agent aimed at helping brands personalize and optimize experiences through highly relevant journeys and content at scale, which is now available in private beta. Finally, we are confident that over the long term, their solution and AI expertise will help Braze accelerate progress on several long-running initiatives in Braze AI and Canvas, reinforcing our position as a leader in AI and customer engagement. We are thrilled to welcome OfferFit's team and technology to Braze, enabling our combined experience in machine learning and AI to enhance our product ecosystem and create exceptional experiences for our customers and their end consumers. We are excited to build the future of customer engagement together and look forward to unveiling more about the OfferFit integration, Braze AI, and our broader roadmap at Forge, our annual flagship customer conference in September. And before I go, I'm excited to share that when we arrive at Forge in September, I'll be joined by the latest addition to our executive team, as Ed McDonald will be starting at Braves as our new chief revenue officer in early July. Ed brings a wealth of experience and qualifications to this role, with a proven track record of building and scaling revenue at leading SaaS organizations. As a former executive vice president and CRO at Salesforce Marketing Cloud, he developed a deep understanding of the customer engagement landscape and successfully scaled a multi-billion dollar marketing technology business. Most recently, he served as CRO at Asana, where he led revenue growth in the work management sector. His transition back to marketing technology underscores his strong belief in Braze's market position and growth potential in the customer engagement space. We are very excited to have Ed joining us soon, rounding out what we believe to be a best-in-class SaaS leadership team here at Braze. Thank you for your continued interest and support, and now I'll turn the call over to Isabel.

Thank you, Bill, and thank you, everyone, for joining us today. As Bill stated, we reported a strong first quarter with revenue increasing 20% year over year to $162 million, driven by a combination of existing customer contract expansions, renewals, and new business. Subscription revenue remains the primary component of our total top line, contributing 96% of our first quarter revenue, while the remaining 4% represents a combination of recurring professional services and one-time configuration and onboarding fees. Total customer count increased 11% year-over-year to 2,342 customers as of April 30, 2025, up 240 from the same period last year and up 46 from the prior quarter. Our total number of large customers, which we define as those spending at least $500,000 annually, grew 24% year-over-year to 262, and as of April 30, 2025, contributed 62% to our total ARR, compared to a 60% contribution as of the same quarter last year. Measured across all customers, dollar-based net retention was 109%, while dollar-based net retention for our large customers was 112%. Expansion was again broadly distributed across industries and geographic regions. Revenue outside the U.S. contributed 46% of our total revenue in the quarter, up from 45% in the fourth quarter of last year, and up from 44% in the prior year quarter. In the first quarter, our total remaining performance obligation was $829.3 million, up 26% year-over-year and up 5% sequentially. Current RPO was $522 million, up 24% year-over-year and up 3% sequentially. The year-over-year increases were driven by contract renewals and upsells and the signing of new customer contracts. Overall, our dollar-weighted contract length remains at just over two years. Non-GAAP gross profit in the quarter was $112 million, representing a non-GAAP gross margin of 69.3%. This compares to a non-GAAP gross profit of $92 million and a non-GAAP gross margin of 67.9% in the first quarter of last year. The increase in year-over-year margin was driven by continued cost optimization of our technology stack with additional benefits from personnel efficiencies partially offset by higher premium messaging volumes. Non-GAAP sales and marketing expenses were $64 million, or 39% of revenue, compared to $60 million, or 44% of revenue in the prior year quarter. While the dollar increase reflects our year-over-year investments in headcount costs to support our ongoing growth and global expansion, the improved efficiency reflects our disciplined investment approach to resource deployment across our go-to-market organizations. Non-GAAP R&D expense was $25 million, or 15% of revenue, compared to $23 million, or 17% of revenue, in the prior year quarter. The dollar increase was primarily driven by increased headcount costs to support the expansion of our existing offerings, as well as to develop new products and features to drive growth. Our R&D expenditures reflect our intentional and disciplined technology investment strategy and are in line with our long-term non-GAAP R&D percent of revenue target of 13% to 15%. Non-GAAP G&A expense was $21 million, or 13% of revenue, compared to $19 million, or 14% of revenue, in the prior year quarter. The dollar increase was driven by investments to support overall company growth and global expansion. Non-GAAP operating income was $3 million, or 2% of revenue, compared to a non-GAAP operating loss of $10 million, or negative 7% of revenue, in the prior year quarter. Non-GAAP net income attributable to raised shareholders in the quarter was $7 million, or $0.07 per share, compared to a loss of $6 million, or a loss of $0.05 per share in the prior year quarter. Now turning to the balance sheet and cash flow statement. We ended the quarter with approximately $540 million in cash, cash equivalents, restricted cash, and marketable securities. Cash provided by operations during the quarter was $24 million, compared to cash provided by operations of $19 million in the prior year quarter. Including the cash impact of capitalized costs, free cash flow in the quarter was $23 million compared to free cash flow of $11 million in the prior year quarter. Free cash flow during Q1 of FY26 includes the impact of approximately $6 million in vendor payments related to the offer fit acquisition during the quarter. We expect our free cash flow to continue to fluctuate from quarter to quarter given the timing of customer and vendor payments. Now turning to guidance. Please note that we closed the offer fit acquisition on June 2nd, and as such, guidance for our second quarter incorporates a nearly two-month impact of owning offer fit, while guidance for the full year incorporates a nearly eight-month impact of the transaction. For the second quarter of fiscal 2026, we expect revenue to be in the range of $171 million to $172 million, which represents a year-over-year growth rate of approximately 18% at the midpoint. Second quarter non-GAAP operating income is expected to be in the range of half a million to $1.5 million. At the midpoint, this implies a non-GAAP operating income margin of approximately 1%. Second quarter non-GAAP net income is expected to be $2.5 million to $3.5 million, and second quarter non-GAAP net income per share is expected to be in the range of $0.02 to $0.03 per share, based on approximately 113 million weighted average diluted shares outstanding during the period. For the full fiscal year 2026, we expect total revenue to be in the range of $702 million to $706 million, which represents a year-over-year growth rate of approximately 19% at the midpoint. Consistent with the commentary we provided during our fourth quarter call, we expect OfferFit to add approximately two percentage points to year-over-year revenue growth for the full fiscal year, which equates to approximately $11 to $12 million. Fiscal year 2026, non-GAAP operating income is expected to be in the range of $5.5 million to $9.5 million. At the midpoint, this implies a non-GAAP operating margin of 1%, roughly a 100 basis point improvement versus fiscal year 2025. As I stated on our last earnings call, the offer fit acquisition will create a temporary departure from the operating income margin framework outlined during our analyst day last September. However, we expect to return to the framework in fiscal 2027. Non-GAAP net income for the full fiscal year is expected to be in the range of $17 million to $21 million, and net income per share is expected to be $0.15 to $0.18 per share, based on a full-year weighted average diluted share count of approximately 115 million shares. To conclude, I'd like to express our excitement for what lies ahead at Braze. We are committed to offering industry-leading customer engagement solutions and driving product innovation as we work towards achieving our long-term financial goals. And with that, we'll now open the call for questions. Operator, please begin the Q&A.

We'll now begin the Q&A session. If you'd like to ask a question, please use the raise hand feature at the bottom of your Zoom window. I'll now wait a moment while the queue assembles. Okay, our first question will come from Gabriella Borges with Goldman Sachs. Your line is now open. Please go ahead.

Hey, good afternoon. Thanks for taking my question. Bill and Isabel, I was hoping to reconcile some of your prepared remarks. On the one hand, the sequential growth in the quarter was lower than what it has been in the last couple of years. You've got the uneven macro. You've got the NRR dynamic. But on the other hand, the CRPO number actually looks pretty good, and it sounds like the competitive environment continues to accrue in your favor. So my question is, when do you think some of these positive company-specific dynamics start to more than offset some of the more uneven macro pieces that you've talked about? And what kind of metrics should we be looking at, whether it's revenue acceleration or maybe the CRPO number? How are you tracking that internally in your business? Thank you.

Yeah, thanks. So I'll address the numbers, then Bill can possibly provide more colors there as well. But specifically on CRPO, recognize that that number is also sensitive to the volume of available renewal dollars and renewed dollars in the quarter, which was high in Q1 in terms of available renewal dollars. And so that number will help move the needle a little bit on that CRPO number as well. And so I don't love the CRPO number as a leading indicator. I would say really look to revenue as the number that we're looking for to accelerate, to really show the indication that the macro has stabilized for us over the longer term.

I would say competitively, we feel really good about the results we continue to see both against the startup competition as well as across the enterprise. We also saw continued great momentum out of Q4 into Q1 and the execution from the teams around the world was great. We saw good results in particular across America and across the Americas and across EMEA. And we saw broad-based strength across the different verticals. And by that, I just mean we didn't necessarily see pockets of weakness. I know that a lot of people have been really focused on retail and consumer goods in particular. I'll remind everyone, as we spoke about last quarter, that we started the year with cross-functional verticalization efforts across both retail and consumer goods and financial services. We're committed to continuing to do both of those throughout the year, despite some of the tariff uncertainty that's obviously hit retail and consumer goods. And we've been happy to see the momentum that has come out of those investments. And so what we also saw in Q1 is, as we mentioned last quarter, was a continuation of some of those elevated churn levels that we had seen through the back half of last year. Because of the seasonality of the enterprise business, a lot of our prior year's Q4 enterprise business closes, which tend to be multi-year, do renew in Q1. And so you see a bit of a hit of that in Q1 that explains some of the DBNR weakness or the slight decline that you saw. in dbnr and q1 as well but we've been really happy with the both seeing the improved health of those poster cohorts as well as the cumulative effects of the last you know call it six quarters of very focused preventative efforts around churn and we're uh we're looking at a forecast through the rest of the year where those turn numbers are going to improve and so um you know obviously still need to see that in the revenue and the dbnr both of which are lagging indicators and you know, we're executing, I think, at a really great level in a macro that has a lot of noise and uncertainty, but the diversification of the business and a lot of the work that we've been doing over the course of the last year to really manage around noise like that has been coming to fruition.

Helpful caller. Thank you.

Yep. Thank you.

Our next question will come from DJ Hines with Canaccord. Your line is now open. Please go ahead.

Hey guys, Bill, I want to ask you one on Project Catalyst and realizing it's still in private beta, but when you see customers that are using Project Catalyst and maybe testing it against more hardwired canvas flows, what does the performance or ROI delta look like, right? And how is that informing your view of what Catalyst adoption may look like over time?

Yeah, so Project Catalyst just recently entered the private beta, so I don't have rigorous uplift case studies for you specifically on Project Catalyst, but I can give some insight into some of the technology that it's using and actually personalized paths, which you've heard me talk about quite a bit in the past is actually using some of the more advanced reinforcement learning techniques that you use. the context around individual users in order to determine individualized path decisions. One of the great results that we actually saw over the course of the last quarter with some customers has been them shifting some of their usage of strategies like that to move up the decision-making stack. And so in this particular example, a customer was trying to optimize delivery cadences for selling either new apartments or promoting the purchase of new homes to people. and they had actually done the segmentation manually, and then they were using the machine learning in order to optimize some of the decision-making after they had done the segmentation. And what they did is they actually switched the strategy and they allowed for the reinforcement learning to go up a level and actually make decisions about whether or not someone's journey is gonna resonate most with renting versus buying based off of other indicators that they had. And that ended up outperforming and was achieving 5X the uplift that the prior, experimentation was doing when it was just looking at cadences. And so I think that's such a great example where, you know, even though we built up a lot of intuition around how we communicate with customers over time, and there's a lot of marketing strategy around things like, you know, segmentation and delivering strategies, delivery strategies, that there's still a lot of uplift for reinforcement learning when we can really hand over control to it to make decisions to deliver to people. And so, We're obviously looking forward to Project Catalyst continuing to combine together generative AI along with these reinforcement learning examples in order to more fully automate the exploration of those different decisions. That example I just provided was one where someone can use a pre-existing Canvas feature, they can use it very quickly, but they do still need to produce those different variants in order to set up that experiment. Obviously, with Project Catalyst, what we're moving toward is the creation of the experiment also becoming more automated and allowing for it to go from making individual content decisions to making multi-message sequencing decisions to different parts of canvases or parts of journey flows. And then, of course, eventually moving all the way up to the level where it's making optimization decisions at a whole strategy level and a whole customer engagement, customer journey level. We obviously anticipate as well that Project Catalyst in the longer term when we get to that point where it's making these very high level decisions that I alluded to as the marketer ascends through these strategic roles to become more of a conductor of the business as different business strategies are being automatically prioritized against each other and then the implementation and the execution on how to optimize those for those strategies is being done by the AI. We think that that's a place where the great collaboration that we're looking forward to with the OfferFit team and their reinforcement learning engine to be able to continue to kind of push ahead that roadmap is really going to come together. Yeah, yeah, super interesting and sounds promising. Thank you for all the color. Yep, absolutely.

And our next question will come from Brent Braceland with Piper Sandler. Your line is now open.

Thank you, and good afternoon. Isabel, I wanted to start with you. Obviously, a pretty strong backlog bill in the quarter. It sounds like maybe there's some renewal activity that helped, but maybe if you could just talk about linearity that you saw, particularly as you think about exiting April, and then one quick follow-up for Bill.

Yeah, so there was nothing special about the linearity that we achieved in the quarter. I think we were very pleased with the pacing that we achieved in terms of like when when the ACB came in, but broad brushstroke. And I think I've disclosed these numbers before we tend to close about. You know, 15 to 20 percent of our business in the first month of the quarter. And then we'll get up to about 50 percent or so by the second month of the quarter. And the balance of that happens in the last month with most of that in the last couple of week in the last sort of week or two of that of that month. There's nothing abnormal about Q1. And we were just generally pleased with the overall performance of that in the quarter.

Great. That's good to hear with all the uncertainty out there, particularly during April. Bill, for you, OfferFit, you've had now three months to kind of understand a little bit more about the product. What's been the early feedback from customers so far? Anything jump out to you? And then what else did you learn in the last three months about OfferFit worth flagging here? Thanks.

Yeah, so a couple of things. First, before we even got deeper into conversations about acquiring OfferFit, we already had the advantage of working alongside them with a large number of mutual customers. As we mentioned when we first signed and announced at the end of last quarter, roughly a third of their existing customers are also customers of Braze. And so we've been getting great feedback, both from those customers that are really excited to hear that we're coming together so that we'll be able to provide a better integrated experience for them, as well as help put more fuel on the fire of the R&D roadmap of OfferFit overall. We've had a ton of incredible interest coming in from customers. We've had OfferFit presenting at a couple of our events over the course of the last couple of months, including most recently at City by City London, which was last week, that conference actually had, excuse me, that was two weeks ago, that conference actually had a higher attendance than Forge did last year because we continue to see incredible year-over-year growth in the size of our customer community. And me and George, the OfferFit CEO, were on stage together. They got a huge number of leads out of that. People are really excited to hear about uh the potential so you know definitely great momentum there i think one of the big learnings especially as we head into integration is that uh we're going to be moving into an environment where offerfit is actually going to be in a very lead-rich environment now and so you know we shift from the go-to-market priority being more around you know being in a lead scarce environment where They had to leverage a lot of the flexibility of their engine to kind of find the right use case for a really huge diverse array of customers. Now, I think the goal for the rest of the year is going to be to continue to qualify the opportunities that are going to be all over the place in the rest of the brace customer base in order to cross sell across our enterprise footprint and our GSA footprint to make sure that we're efficiently able to actually move through those opportunities, deploy them quickly and predictably and help offer fit scale, you know, faster than they were before. Hopefully with the added benefit of the brace community and the brace customer base.

Helpful color. Thank you.

Our next question will come from Arjun Bhatia with William Blair. Your line is now open.

All right, perfect. Thank you all. Maybe one for Isabel, one for Bill. Isabel, first for you. Can you just walk us through what the renewal cadence is like of some of the Zerp Air cohorts through the year? It sounded like Q1 was a heavy renewal quarter. Are there others this year that we should expect to be larger? Or was that the largest one? And then maybe for Bill, you touched on this a little bit, but I'm curious. As the OfferFit cross-sell plays out how you're pricing OfferFit, it sounded like, I don't want to put words in your mouth, but it may sound like it's separate pricing compared with Brazen's AI capabilities today, but moving to a single pricing model over time. If you could just elaborate on that, that would be super helpful. Thank you.

Yeah, so I'll answer the first question on the numbers. So the available renewal dollars were on balance sort of as high in Q1. It's going to drop back down in Q2 and Q3. There'll be another pop in Q4 from an available renewal dollar perspective. What we've not broken out in that commentary has nothing to do with the ZERP cohort specifically. So that ZERP cohort is going to have a mix of renewal periods. And remember, the ZERP cohort is three years' worth of contracts. And so that is going to have a broad-based distribution of renewal dates. So I wouldn't look to the volume to be any kind of indication of the specific risk associated with any of the ZERP cohorts.

Yeah. And then with respect to pricing, I'll remind everyone that the offer fit solution is deployed as a very high end, flexible, customizable reinforcement learning engine and is done so with the pairing of expert services. So we absolutely intend on continuing to sell for the rest of this year, right along the lines of how they've been pricing and packaging throughout their, you know, certainly throughout the last couple of years at the business where They deploy on a per-use case basis, and that has an incremental cost around $250,000 to $300,000 annually, inclusive of the expert services that help with the implementation and then the ongoing maintenance. And so we expect that to be additive on top of the customer contracts that people are purchasing from Braves. There's obviously some question around, you know, potentially some budget capitalization, but we also think and know that there's a lot of additional budget out there for this decisioning layer and for other forms of AI investments as well. And so we certainly hope to be able to capitalize on that in terms of the overall wallet size. And then we further think that, you know, this is obviously a really important part of our competitive motion moving forward and will really help to differentiate, you know, in particular, in cases where customers either have very large user bases, where even small amounts of uplift are worth very large amounts of dollars, or in places, you see these across financial services and a lot of multi-product companies and such, where being able to identify specific high-value actions in the customer journey, like someone going from single product and multi product or them upgrading to, you know, higher tiers of service or that moving into other product categories that are higher margin or higher value. Those are all customer profile transitions that represent high value actions where gaining the absolute best uplift is, you know, very high ROI investment for those customers. And so we'll be looking to, you know, qualify and deploy it into those circumstances with this existing pricing and packaging. And then we've got a lot of optionality for how that evolves over time and into the future. I won't speculate on that too much right now, but we obviously think that there's a lot more potential for the underlying technology, especially when combined with all the strengths of Braze's customer engagement platform.

All right, perfect. Very helpful. Thank you.

Our next question comes from Pendulum Bora with JP Morgan. Your line is now open.

Oh, great. Thank you so much for taking the questions. Congrats on the quarter. Bill, one for you, one for Isabel. We heard from the channel that there are some consternations around pricing of data points within Braze. Do you see an opportunity to change pricing and packaging around how you price data points below kind of the MAU-based pricing? And then, Isabel, is it possible to kind of spit out the impact on EBIT from offer fit to your full year guidance?

Yeah, so great upfront question because just a couple weeks ago, we launched our new pricing and packaging for this fiscal year, and it includes a massive relaxation on data point limits. Data points have been actually one of the highest friction points in our pricing for a long time. And it's always been in our pricing because it's highly correlated with our costs and because our event driven stream processor is expensive to to operate and run with the high levels of performance and the highest delays that we provide to our customers and they demand of us for the. especially for the huge variety of high performance use cases that many of them run. But we, over the last few years, have put huge investment into shifting from data point limits because we of course know that data is also the engine that feeds a lot of the uplift for AI and machine learning. It also allows for customers to more flexibly move across different use cases. And with the continued build out and capabilities of the Braze data platform, the amount of data flowing through Braze and the amount of use cases that people want to accomplish with the Braze data platform continues to expand. And so having a toll gate on the data points as they came into Braze was not only a friction point in sales cycles, but it was holding back increased usage. And so our R&D teams have gone on a multi-year journey behind the scenes to be able to uh shift from these data point caps toward a more api rate limit based way of making sure that we're able to uh that we're able to guarantee the levels of performance that uh we want to and also be able to do that with keeping our cogs and our margin profile um in the place that we want it to be and so we're really excited about this uh moving into you know market more broadly with that pricing and packaging becoming available in more and more places We deployed it in a more private pilot throughout last year, and the competitive results of it were extremely good. It was a very potent way to neutralize a lot of the FUD that a lot of our competitors like to use around data points out there. And as you noted in your own reference text, it's some of the only negative things that you hear out there often are centered around these data point concerns. And so we're really happy to have neutralized those. We actually, on that new pricing and packaging, closed the first deal on the new pricing and packaging just eight days after it became available. And so customers are already showing early signs of liking the flexibility that is there that of course also came with the expansion and the flexibility of the flexible credits model as well to include more channels within it. And we think that that's gonna be a help for go-to-market throughout the year, both competitively and with respect to sales team productivity.

And just to answer your question on the impact on EBIT. So if you go back to when we announced Q4 and gave guidance for the year, I did indicate that on an organic basis, we expected to add about 400 basis points to non-GAAP operating income. That obviously has come down in the context of the guidance by about 300 basis points. So a good portion of that is the impact of OfferFit specifically on its own. And then a little bit of that is also from additional investments that we will make to help with the integration. There's those two components together that kind of get you there. Recognize that that is on a somewhat risk-adjusted basis. So take that into consideration. And a part of that mixes in on a gross margin basis. Their gross margin is a little bit lower than ours for the time being. And the bulk of it sits in the operating expenses.

Isabel, just to put a final point, is that two-third, one-third? Is it any way to quantify that?

When you're asking for the quantification, you mean between the offer fit or specifically and then any additional investment that we're making? Yeah, the majority of it. It's more like, you know, 80-ish percent. It's more than three-fourths is going to be specifically from them with a little bit from us.

Got it. Thank you very much.

Our next question comes from Scott Burke with Needham. Your line is now open.

Hi, this is Rahm Aurelian. Thanks for taking the question. Just wanted to touch on pricing and packaging again. Last year, you transitioned to the flexible credits model. Now that this has been in place for some time, any sort of commentary or insight you can provide on customer reception and feedback? Is this driving the sort of uplift in trials you anticipated and any impact to overall spend levels? Thanks.

Yeah, so I think we've talked about this in the past, and the same trends have continued throughout the rest of last year. So around this time last year, obviously, we initially released the flexible credits model on a small number of channels. We've expanded that to include more channels this year. I think customer uptake has been great and it did, in fact, increase, you know, it shortened negotiation times because the order form complexity went down. It also has created new strategies for us to be able to help customers expand their usage in various creative ways to be able to test out new channels and new ideas without being hamstrung by, you know, whatever their order form happened to be. um have purchased at some point you know potentially in the distant past uh depending on you know where they are in their contracts and just generally providing the flexibility that allows for a customer to you know expand across the braze feature set and experiment and find i find and identify new strategies are going to drive value for their business and so i think customer sentiment you know been very good it has definitely helped speed up negotiation cycles it also does help us introduce new features to customers and introduce new channels to them more quickly with less friction. It hasn't been in market long enough to see exactly what that's going to do to, you know, DBNR overall, but certainly we expect it to be supportive as we're able to avoid some of the sources of partial churn where people misestimated and overbought certain aspects of messaging channel entitlements, you know, which is it. Because we're a use it or lose it, that often would lead to customer satisfaction issues. And while we could reallocate sometimes that spend to new channels or to different strategies at renewal time, by that point, a lot of times there had already been that hit to customer satisfaction or the opportunity to be able to lay the groundwork to expand to those new channels maybe already passed or what have you. So just goodness across the board when it comes to aligning customer value creation along with the right foundations for expansion and speeding up our, you know, speeding up our deal cycles with the expansion of the flexible credits model into yet more channels and more parts of the Brace product, which, as I mentioned, just launched recently in this year's pricing and packaging refresh. We certainly expect to see more of the same.

Got it. It's helpful. Thanks for the question.

Our next question comes from Brett Huff with Stevens. Your line is now open. Brett, please unmute and ask your question.

Okay, can you hear me now?

Yes.

Okay, sorry about that. Two quick ones. Congrats on a nice quarter. First, for Bill, investors that we talk with still have a hard time wrapping their heads around the really uncertain macro, yet marketing dollars continue to seem to be being spent. So I wondered if you had an anecdote or two that could help square that circle. I think just being a little more concrete would certainly help me and maybe others. And then Elizabeth, any commentary on how FX assumptions changed on the full year rev guide so we can understand kind of what the organic underlying guide was? Thank you.

Yeah. I think broadly across the macro, a lot of the things that we've spoken about in the past, in particular around enterprise deal cycles and the unwillingness for a lot of companies to invest in new growth initiatives, a lot of the spending is still focused on consolidation and optimization. And we certainly have a role to play in that, especially when we are consolidating multiple point solutions together or when we're You know, driving increased levels of efficiency and productivity by marketing teams. But, you know, switching costs are still costs. And we do still see deals that take longer because people are trying to time their, you know, moving to a new vendor exactly with their renewals or the, you know, their prior legacy contracts running out so that they're not double paying. Those are the kinds of things that are causing a lot of these enterprise cycles to sometimes take longer, sometimes push or get dragged out. We're getting better at navigating those. And you are certainly seeing that in our sales teams, productivity and efficiency improvements over the course of the last few quarters. Our competitive win rates also continue to improve. And we're also seeing important advances in the broader partner ecosystem as well. I spoke about this in the prepared remarks, but I think that It's very clear that the legacy players in the space, you know, the likes of Salesforce and Adobe, have taken their eye off the ball broadly in customer engagement, are not investing nearly as much, if anything, in their existing products in the space. And, you know, it's not just their customers that are noticing that. It's also the broader partner ecosystem. And those are leading to benefits for us as well. And so, you know, I think that we're... you know, we're liking what we're seeing from a competitive win rate standpoint, from a team execution standpoint. There's still, you know, difficulty out there. We do see a regional comparative weakness across places like Southeast Asia, as an example, you know, where growth has not been as vigorous and where we haven't seen as much of the kind of venture activity starting to flow again, et cetera. We are seeing great results in core markets across the U.S. and, you know, EMEA in particular. and continue to see broad-based strength across verticals when we look out across the landscape. I know that there's, as I mentioned at the very top of the Q&A, a lot of hand-wringing around retail and consumer goods, but I think we're seeing good momentum there as well. And so it continues to be a noisy and difficult-to-navigate environment, but we like where we're positioned in terms of the efficiency and productivity of the sales team and our ability to execute within a pretty diverse customer base.

And just to answer your question on FX, the only currency in which we book customer contracts that is not USD is Japanese yen. And that accounts for low single digit percent of our total revenue. So the short answer is the FX impact embedded in any forward guide has a de minimis impact.

Great. Thank you all. Appreciate it. Our next question comes from Brian Peterson with Raymond James. Your line is now open.

Hi, thank you. This is Jonathan McCarrion for Brian. So you kind of just touched on it there, but I wanted to double click on the SI channel. I know it's earlier days there, but, you know, hear that it's a difficult environment from a marketing budget perspective and your commentary on the competitive environment sounds encouraging. So I'm curious what impact, you know, a more fluid macro has on that channel. Does that influence the momentum for Bray's engagement with those integration partners? And then just a quick follow up for Isabel housekeeping wise. In terms of the impact from offer fit, I know you mentioned some gross margin impact. Is there anywhere else you can break out within the OPEX lines, line by line, where we should see the biggest impact there?

Yeah, so on the broader agency community, you know, there's a couple different dimensions here. One is, you know, as I just mentioned just two weeks ago at City by City London, we had our largest attendance event of all time. I mean, we certainly anticipate exceeding that total again at Forge later this year. And, you know, a big part of that is not just the customer community, but also the broader partnership ecosystem, inclusive of a lot of The agency community and the SI community, all of whom are sponsors of these events as well. And so, you know, we're really encouraged by the progress that we are seeing there. It tends to be more regional, like when you look at, for instance, the big global systems integrators, you know, we are we're making great progress in certain geographies or certain verticals. I wouldn't say there's a broad-based groundswell within the likes of Accenture or Deloitte, if you will, but we're certainly making progress in areas of pre-existing strength and continuing to parlay that into building additional momentum. We also have a huge number of agency relationships around the world, many of whom started out in the mid-market. They're also now starting to serve up in the enterprise. Stitch is one of those based here. out of North America. They're also now expanding out into Europe along with us as they continue to grow their business rapidly. And we're continuing to see, you know, more and more competition amongst our partners as well to be able to, you know, be able to advertise the huge numbers of Braze certifications that they have. And they're competing vigorously against each other for opportunities in these deal cycles as we continue to surface them. You know, with respect to the broader macro and the impact on a lot of that, you know, the same things that I think are holding up switching of various ways because they have switching costs. You obviously also have an impact on the one-time costs associated with lift and shifts, many of which are executed on by systems integrators or by other agency partners. We also see ongoing creative services and a lot of the additional kind of data intelligence and data insights investments being made. You know, we do a lot of great work with VML and other parts of the broader WPP group on that, especially across Europe where we see a lot of great strength there. And so, you know, good signs all over the world in different verticals from, you know, a lot of the, you know, the most important and critical players in the space. And we're looking forward to continuing to build momentum with, you know, all of the major partners as we build out, you know, huge groundswell community around the customer engagement space.

And then on your question regarding the distribution of the offer fit costs. So recognize they're only 2% of our revenue, right? I said that in terms of revenue growth, sorry, from versus last year. So this will mix in to that effect. But in terms of the distribution of the costs, broadly speaking... You can think of it about being about 75% sales and marketing, about a quarter R&D, and a de minimis amount of G&A. So that's going to be the broad brush distribution.

Very helpful. Thank you both.

Our next question comes from Brian Schwartz with Oppenheimer. Your line is now open. Please go ahead.

Yes. Thank you for taking my questions this afternoon. Bill, First off for you, just wanted to ask you a little more color on offer fit on the pace of the integration plans. Specifically, how quickly can you achieve the growth and cost synergies with this acquisition? How should we think about timelines for success with the acquisition? And then I have one follow up for Isabel.

Yeah, so I think the key priorities for this year are the integration of the go-to-market motions and the integration of the products and the underlying technology. together so that we can both enhance the OfferFit offering as well as continue to grow it rapidly as we attach OfferFit to more and more of the Braze customer base and also continue to grow them and their independent offering on not a standalone basis, because obviously they'll be integrated as part of Braze, but continuing to build out the OfferFit offering with the rest of the partnership ecosystem where they work as a decision engine with customer engagement solutions that are not Braze, which of course represented around two-thirds of their customers at the time of acquisition. And we certainly intend on continuing to provide that as its own offering well into the future. And so when we look at You know, all of those different priorities, I think that, you know, OfferFit comes into Braze with a lot of momentum already built. They've been, you know, a great partner of ours for the last couple of years. We know them well. As I mentioned, I think a big part of really being successful this year is going to be making sure that we can get through the integration phase phases quickly so that there's not, you know, friction that's going to slow us down from that perspective. And we don't incur organizational complexity that will slow us down either now or, you know, further into the future. And then also that, you know, we make sure that as we bring together the teams and the opportunity set, and we open up the ability to cross sell offer fit to the brace customer base that we do so in a way where we're We're qualifying those opportunities really effectively that we're able to predictably deliver offer fit to those customers with, you know, quick time to value and be able to make sure that they get up and running and see that, you know, see that high performance uplift from the customized reinforcement learning engines. That is, of course, the secret sauce of what offer fit delivers to customers and do that as comprehensively as we can.

Thank you. And for Isabel, in terms of the assumption underlying the annual revenue guidance, or at least the net new revenue that's going to come in for the business this year, is your expectation the assumption that the majority will come from net new or from expansions? Thanks again for taking my questions.

Yeah, so there's no real expectation of a change in the evolution or distribution of that. So we typically – it's been sort of a broad 50-50 mix over kind of the broad quarters of our history during – slightly more challenge times, you'll end up getting more of that coming from expansion versus net new, because as Bill mentioned, some of the inertia and the switching costs and some of that, the challenge, some of our ability to capture that net new. However, you know, we do push to continue to kind of expand that net new amount. So that can be a little bit more than half. But broadly speaking, I think thinking about it as broadly 50-50 is probably the right way to think about it over the long term.

Thank you.

Our next question comes from Matt VanVleet with Canada and Gerald. Your line is now open.

Yeah, good afternoon. Thanks for taking the question. I guess when you look at maybe the integration of the sales team for OfferFit, curious on sort of the size and scale of the number of quarter carrying reps they have there. And at what point do you anticipate sort of synthesizing those so that all of your sellers are selling both products, even before the integrations of the products are fully complete? So how much capacity are you sort of adding, and when would you expect the cross-sell to really kind of take hold?

Yeah, so let me just work through that starting from next year. So as we start the next year's fiscal year, February 1, we anticipate that the combined sales teams will both be selling across the full gamut of Braze's customer engagement. platform plus the existing offer fit solution. And of course, we expect those products to intertwine with each other more over time as well. As we look at, you know, the deal closed on Monday. And so we added 14 ramp or we added 15 new reps. 14 of which will be ramped by the end of the year from OfferFit. The way that we are going to sell alongside them through the rest of the year, just recognizing the specific skills and experience required to sell OfferFit as it is today, we are enabling the Braze team to be able to work very closely with the OfferFit sales reps to be able to help with a lot of those qualification determinations that I mentioned before. So they can identify opportunities in their existing install base as well as in their new business cycles that they're already working through and be able to sell alongside those offer fit reps. And so we're looking forward to being able to parlay the learnings of these next two and a half quarters that we still have. in this fiscal year to be able to start next year with that combined sales team around the world selling, you know, the integrated solutions and having everyone doing that. And, you know, we're going to try to move as quickly as we can on that. The cross-sell and up-sell opportunities that are already there, you know, I'll just remind everyone again that we have been partnering with OperaFit for a while. And so our teams have already, work together in pockets around the world on the shared customers that already exist now obviously overfit doesn't have a tremendous number of customers so there's not a huge number of at bats in that but we've already vetted out aspects of this cross-selling motion and you know we certainly anticipate the momentum on that to be able to you know move rapidly throughout the year

And then, Isabel, I think everyone's sort of figuring out when we kind of trough on net retention here. With smaller renewal cohorts in the next two quarters, are we approaching that if execution remains as strong as it has maybe this quarter and last? How should we think about the trend of dollar-based net retention from here?

Yeah, so I think I sort of indicated that we'll see some kind of stabilization in the revenue growth before we see that in dollar-based net retention. So the cohorts of available renewal dollars are going to be a little lower, certainly in Q2 and Q3, but there's still going to be some elements of churn there. And so I wouldn't look to that necessarily as sort of a massive decel in the rate of change of the dollar base net retention. So we're not calling that specific trend quite yet. So I would, again, point everybody to the trend on revenue that's going to stabilize first.

Thank you.

Our next question comes from Derek Wood with TD Cowen. Your line is now open. Please go ahead.

Great, thanks. Bill, I wanted to ask about APAC. And I know you guys have put some investment there with some sales heads and new data center infrastructure and line as a new channel. But it also sounds like maybe there's some pockets of softness from the macro. Just can you talk about how you're feeling about demand and building new growth levers on those investments? And then a quick one for Isabel. You had strong growth in professional services revenue in the quarter. Wondering what drove that? And since we've got that spiking and we've got the acquisition folding in, do you care to comment on kind of how to think about growth in subscription revenue versus professional services revenue in the context of your guidance for the full year? Thank you.

Yeah, so when we look around the globe, as I mentioned, we had strengthened Q1 across both America and EMEA. We've also, as you've noticed, built on our pre-existing data center options that we already had in both the US and in the EU with recently launched data centers in Australia and Indonesia. We also anticipate that as data residency considerations continue to grow importance, both legally and commercially. And by that, I mean that, you know, there are certainly markets where data residency and other related concerns are not the law yet, but they are becoming kind of de facto commercial requirements, especially in more regulated industries. We expect to continue expanding that data center footprint over time and coordinating both Braze go-to-market and partnership investments alongside them in order to efficiently support the continued globalization of the customer base across those markets. I mentioned that broadly, we saw less strength in APAC than we did in America and in EMEA. And that certainly was true in Q1, especially as we've seen a little bit of an uneven recovery as the economy in China, which obviously impacts a lot of Southeast Asia, has had an uneven recovery over the last couple of years. But we are seeing strength in markets like Australia and New Zealand, where we of course, did open up that data center. We're seeing great growth in different industries and different pockets across APAC. And it's definitely an area where we are going to continue to invest to make sure that it's part of our long-term global portfolio of business and an important part of our long-term global customer community. We are seeing what we're seeing with respect to America and EMEA strength right now, but it's definitely a place where we want to be investing for the future.

And on your question regarding professional services, that is linked to actually events that happened in Q4 where we actually had a strong proportion, actually approaching that 50-50 proportion of net new business in our bookings during the quarter. And the higher proportion we have of net new business, the more revenue we will have in the subsequent quarter related to implementation and onboarding. And so that is some of the dynamic that you're seeing there.

Thank you.

Our next question comes from Tyler Radke with Citi. Your line is now open.

Hi, thank you for taking the question. First question for Bill, just go to market update. It was great to see the hiring of Miles replacement. Can you talk about any changes that you intend to make throughout the rest of the year? And then you talked about some of these verticalization strategies around things like financial services. Just curious,

type of traction you're seeing there and then regulated industries yeah so we're super excited to bring ed in and bring together his decade of experience scaling at salesforce uh and competing in our space along with his more recent experience at cro uh as cro at asana where he got you know hands-on experience with a lot of adjacent buyers and product areas um and a different sales motion so i'm really excited to have him come in obviously there's already a lot going on um so for bray's go to market you know our priorities for the rest of the year are going to rank consistent as we continue to capitalize on the legacy replacement cycle and the enterprise, especially that strength we're seeing in America and Europe, as I mentioned, across those. Investing in those verticalization efforts globally as we continue to bring together those cross-functional teams for both retail and consumer goods and financial services. And we're pushing that into coordinated event strategy and market development strategy around the world, including in LATAM and across all of APAC and in GCC worldwide. And the momentum on those has been really good. You know, we've definitely seen increased momentum. And just I think that the awareness of those investments is helping those deal cycles move a lot more efficiently for everyone that's working on those. We're also, you know, obviously working to continue to encourage greater customer expansion. We mentioned the pricing and packaging evolution that is helping support that, as well as lowering churn, which has been a culmination of the last year, year and a half of really focused preventative efforts, looking at a lot of the upfront around consumption and completeness, a lot of these things that I've been talking about the last few quarters, but obviously by their nature, you know, you don't really see the benefits of preventative early customer lifecycle churn prevention efforts until you start to renew those customers. And we're going to have that be happening later this year. And I think that that's an important driver of, you know, some of the improvements in the churn forecasts that I mentioned at the top of the call and those and just making sure that those trend lines continue, those preventative efforts continue to be effective. that those support customer expansion are all really important goals through the end of the year. And then, of course, working to rapidly integrate OfferFit. You know, Ed is going to join almost exactly a month after the OfferFit acquisition, which just closed on Monday. We'll have been off to the races from an integration standpoint. We'll have about a month left in Q2, so it's going to be an exciting July as we work through closing out Q2 alongside that OfferFit integration. We're excited to have Ed on board to help us through that and to look ahead then to the rest of the year.

Great. Thank you. And if I could sneak in a quick follow-up for Elizabeth, appreciate the commentary on the offer fit moving pieces on margins. Could you just clarify again on revenue, the impact there? And then just as we think about the guide for the updated guide, did you incorporate any incremental conservatism on the organic piece as well? Thanks.

Yeah, so if you look at the guide, actually, and we were clear about this in the prepared remarks, what's included is about $11 to $12 million contribution from OfferFit. And so actually, if you do the math on our prior guide, our actual beat in Q1, and then our net new guide, we essentially pass through the full beat from Q1, and then we added in the OfferFit component. And so what I would say is there is risk adjustment in the context of both our numbers and the offer fit numbers. I was fairly conservative in my commentary around how close to the sun we were flying when we gave guidance in Q4 for the year. And I said, look, we're going to be a little even closer to the pin this year. Some of the overachievement that we had in Q1 and our net new guide for the balance of the year, I think we've given us ourselves a little bit more wiggle room there as it relates to some of the risk adjustments. So we're very comfortable with the new level of risk adjustment that we've provided in the context of the net new guide. So it's a little bit more risk adjusted versus where we were after Q4.

Super helpful.

Thank you.

Our next question is from Nick Altman with Scotiabank. Your line is now open.

Awesome. Thank you. I wanted to circle back to Brian's question, but just going off of strong CRPO and RPO growth in Q1, Isabella, I know you said that the strength was broad-based. It was a strong renewal quarter, but just any mix shift in terms of the new ACV in the quarter from net new customers versus cross-sell and up-sell. And that's all I got. Thanks.

Yeah, no, so there is nothing sort of specific, as I mentioned. We hover in any given quarter, anywhere between sort of 40% net new, 60% upsell to the reverse of that. So there's kind of a certain degree of variability in that. And there was nothing unique or different about how Q1 behaved. So those dynamics are well in line with historical norms and where we would expect them to be trending.

Thank you. Our final question comes from the line of Michael Berg with Wells Fargo. Your line is now open.

Hey, thanks for taking my question. Wanted to ask one more on OfferFit, given that they have large professional services. Is there anything to assess in terms of the mix between subscription revenue and professional services as it relates to the OfferFit revenue you're taking on, Isabel? Thanks.

Yeah, I mean, they're going to behave financially a little very close to kind of our proportions. In addition, they're small today as a proportion of the total. So I wouldn't look to the incorporation of their financials to materially change that split between the two for us.

Yeah, and longer term as well, and this is already something that's been playing out for them year over year, Their overall gross margin inclusive of those professional services has been increasing year over year as they've continued to automate more of the prior, more manual roles that those professional services were playing. It's been an important part of their product development strategy. As I mentioned when we announced the acquisition, it's not dissimilar to the forward deployed engineering model that Palantir has effectively used over the years where They take advantage of the fact that their expert services are out in the field, seeing exactly how the product needs to evolve in order to make them, those deployed people, more efficient, allow them to be more productive over time. OfferFit has been following a very similar model where their expert machine learning services are closely tied to the product roadmap, making them more efficient over time. And then similarly, a lot of the actual literal hours, much like with the deployment of Braze, are tied to the upfront where they're going through and they're searching through the data sources, getting the data pipeline set up. That, by the way, is something we expect to speed up by utilizing the Braze data platform for offer fit deployments into the future. It's one of those great R&D and kind of services and delivery platforms. synergies that we're looking forward to. And then similarly, the overall technology costs of actually operating the reinforcement learning engine of OperaFit is actually less infrastructure intensive than running the Braze event-driven stream processor. And so while there is a bit of a headwind to their overall gross margin percent, in these early years of their product development we anticipate that in the long run it will be gross margin accretive for us on a percentage basis and you know we'll look to see that picture evolve over time but we feel really good about the dynamics there helpful thank you and just for the record for the call since this is transcribed i'm just going to update everybody or just remind everybody my name is isabella not elizabeth thank you as well All right. Thanks, everybody, for joining us today. We look forward to seeing many of you on the road over the next few months. We have our annual shareholder meeting at the end of June, and we will be back with you for post Q2 earnings thereafter.