Braze, Inc.

Welcome to the Braze Fiscal First Quarter 2027 Earnings Conference Call. My name is Ryan, 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, 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 2027. 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 and the fiscal year ended January 31, 2027, the anticipated benefits from and product advancements due to the combination of Braze and ongoing developments in Braze AI technology, 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, including our expectations regarding our profitability framework. 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 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 2027 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're off to a great start in fiscal 2027, reporting a quarter that demonstrates our market leadership and go-to-market momentum. We delivered our fourth straight quarter of organic and total revenue growth acceleration, generating $211 million of revenue, which is up 30% year-over-year and 3% from the prior quarter. We also continue to realize operating efficiencies, improving non-GAAP operating margin by over 300 basis points year-over-year, and we generated both strong operating cash flow and a record-free cash flow amount of $27 million in the quarter. Trailing 12 months, dollar-based net retention also continued to improve, rising another 100 basis points to 110%. while inflecting positively with our large customer cohort as well, rising 100 basis points to 111%. We are pleased to raise our revenue guidance for the second quarter, for the full year, and to reiterate that we are on track to achieve the 400 basis points operating margin expansion promised for the fiscal year. The strong market momentum and buyer trends that we experienced at the end of fiscal year 2026 carried into the first quarter of fiscal 2027. Brands are moving quickly to transform their businesses with AI and to further leverage their investments in first-party data and direct-to-consumer relationships. Q1 bookings were robust, driven by competitive takeaways, particularly in the enterprise. Net customer additions increased by 104 sequentially, up 16% year-over-year, and customers spending $500,000 or more annually increased by 16 sequentially, up 33% year-over-year. And our $1 million-plus customer count rose by 27% year-over-year, while we achieved $6 million-plus deals and expanded our eight-figure customer count to five. Notable new business wins and existing customer expansions include Bondora Group, ClassPass, Denny's, Dayuna, Kuesky, NRMA, Regal Cinemas, Salomon, and Subway. In addition, we achieved a milestone new business win with a prominent AI lab, further expanding our presence across high-scale, data-intensive workloads. Our upsell motion was also strong, as customers adopted additional channels, deepened data platform integrations, and experimented with new and enhanced Braze AI tools, such as Operator and Agent Console. Braze is moving fast on the leading edge of frontier AI technologies, and that pace of innovation is what enterprises globally are demanding, positioning us to become the standard for customer engagement. The legacy replacement cycle remained a fertile source of new business this quarter, and demonstrated the market's preference for AI-driven solutions paired with high-performance first-party data activation, the combination required to execute modern cross-channel customer engagement at scale. Since our founding, RAISE has been built on the architectural choices that now turn out to be exactly what AI demands. Real-time, a focus on first-party data, a stream processor that learns as it runs, and enterprise-grade security and performance built in from day one. By contrast, the same flaws that held back our competitors during the mobile and stream processing eras are hindering them again in the status quo. The architectures that could not handle real-time data then cannot harness advanced AI today. As we accelerate product development, we are putting AI to work on the problems that our customers actually face. This quarter, brands across diverse industries and geographies graduated from legacy platforms to Braze. These include an expansion into LATAM with an existing global beauty customer and new business opportunities with companies like an Australian online wagering business, a France athletic apparel company, a global retirement and investment solutions company, and one of the leading energy drink companies in the United States, whose products are a longtime favorite at our HQ in New York and have been credited over the years with major productivity gains in R&D, alongside our AI coding tools, of course. Our momentum continues to be driven by the four foundational strengths that we articulated last quarter. First, the Braze data platform's ability to serve as the first-party context engineering layer for AI at massive scale. Second, our vertically integrated data and decisioning architecture. Third, our composable AI architecture that makes Braze both smarter and easier to use. And fourth, our position as both a revenue-driving engine and mission-critical operational capability. These strengths are compounding as we accelerate AI innovation and continue winning in the enterprise. The marketers using Braze are seeing better performance from the programs that they run today, and they're seeing the work itself change. What used to take a team of specialists is increasingly something that a small group can build, monitor, and improve in a single afternoon. And the capabilities of the Braze platform are advancing at a rapid pace to support them. As I shared in March, Braze AI Operator and Braze AI Agent Console reach general availability early in the first quarter, ahead of schedule, and we are seeing strong early adoption. Hundreds of customers are already using them to design and execute more sophisticated programs with more efficient teams. Braze AI Decisioning Studio's new business pipeline is scaling rapidly and contributing to growth this year. And these are not just roadmap commitments. They are AI solutions that are in the wild and in our customers' hands. earning their place in how some of the world's most demanding brands engage with their customers. The early adoption we are seeing across Braze AI Operator, Braze AI Agent Console, and Braze AI Decisioning Studio reflects a consistent pattern. Customers across industries and scale are finding that our AI delivers what general-purpose tools cannot. It operates directly on their first-party data, inside their existing workflows, and against their specific goals. and we published an incredible example of what Braze AI Operator makes possible in a recent case study with Clio, a global family care platform that wanted to rebuild its member welcome series from the ground up. Clio knows their members well and engages with them frequently on their health and care journey. They use Braze to translate that knowledge into real-time action, but their ambition was outpacing their ability to implement new personalization strategies and experiments at the scale that they desired. Now, with Braze AI Operator working alongside them directly inside the Braze dashboard, Clio's lifecycle marketing manager was able to quickly build and QA the code and configuration behind an upgraded welcome experience that automatically adapts to each member's care goals. The results were striking. Unsubscribes across the welcome series fell 81%, opt-outs on the first email dropped 97%, and app opens increased 284%. And that's what Braze AI Operator was built to do. put sophisticated execution in the hands of the people that are closest to understanding their customers, without requiring an army to support them. The same principle, AI that understands context rather than operating in the abstract, is what led Luxury Escapes to take a different kind of leap with Braze AI Agent Console. One of the world's fastest-growing travel companies with 9 million global members, the brand deployed Agent Console to push past the limits of rules-based segmentation. Their team replaced fixed thresholds with an AI agent that evaluated 10 distinct behavioral signals simultaneously throughout each new user into the right welcome cohort. The agent-based approach delivered a 10% lift in revenue per user, driven entirely by conversion rate, along with a 7% increase in total transaction value and a 6% increase in purchase volume. What mattered most to the team was what the agent chose not to do. It did not default to the promo cohort to take the path of least resistance. It was reading the users in a way that rules never could, and the performance followed. Now, if you scale that same challenge up to 114 million loyalty members, the problem shifts from replacing segmentation rules to replacing the testing infrastructure itself. And that's where Braze AI Decisioning Studio comes in. One of the world's largest hotel franchisees adopted Decisioning Studio to move past a manual testing operation, which was previously a sequential, manual, 10-week cycle of build, test, and analyze. Braze AI Decisioning Studio replaced that process with continuous automated experimentation across hundreds of simultaneous permutations, optimizing message, timing, and creative for each member in real time. They achieved double-digit increases in click-through rate, with personalization of creative accounting for roughly half of the total uplift. We built Braze on the conviction that the brands closest to their customers would win their categories, and AI is making that advantage compound faster. The combination of our data platform, our AI decisioning layer, and our comprehensive channel suite gives customers something that no loosely assembled stack can replicate. Engagement rooted in their own first-party data and delivered at the speed and scale modern consumers expect. Braze is becoming the standard for global customer engagement. Not because we declared it, but because the world's leading brands are building with Braze and wielding the sophisticated AI that we've placed in their hands. We entered the rest of fiscal 2027 with strong commercial momentum, an accelerating product roadmap, and a team that is winning where it counts. I'm energized by what is ahead. And before I close, you probably saw the news that we shared at the end of April, that Isabel is stepping away and we are actively engaged in a CFO search at this time. I want to take a moment to thank Isabel for her dedication over the past six years. She's been an incredible partner through some of our most defining moments. guiding us through the IPO, helping us scale the business to nearly a billion in ARR, and driving our path to profitability. Isabel, we're grateful for everything that you've contributed to Braze, and we're excited to see what's next for you. And with that, I'll now turn the call over to Isabel.