Braze Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Derrick Wood - TD Cowen - Analyst : Thank you and congrats on a solid quarter. First question for Bill. You guys were called out at Snowflake's Keynote this week as a notable strategic partner. Can you give us an update on how you're working with Snowflake from a technology and go-to-market standpoint. Maybe just give us a sense around demand for your cloud data ingestion capabilities and now that you have Sage AI and bring that to more data flows, how customers are looking at the leverage that capability?

Question: Derrick Wood - TD Cowen - Analyst : Okay, great. That's great color. Isabelle, one for you. Can you talk about just growth trends in monthly active users? I believe this makes up now roughly half of contract structure for your customers. Just wondering what you're seeing at renewals and how you're thinking about renewal behavior and the direction of MAU growth through the year, given the continued mixed data points around the macro?

Question: D J Hynes - Canaccord Genuity - Analyst : Hey, guys. Congrats on the nice quarter. Bill, you alluded to the outage a couple of times and talking about some of the revenue impacts. I know the blog posted a really nice job going deep on the technical explanation of what happened. I'd love to just hear what the customer reaction has been to your response to the outage. Like is there any brand tarnish we should be worried about here? Just what has the feedback been since that?

Question: D J Hynes - Canaccord Genuity - Analyst : Great. Yeah, that's a super helpful explanation. And then Isabelle a follow-up for you. I just want to hit on NRR dynamics. I mean, it's great to see the blended metric as seemingly stabilized. The enterprise, a large customer continues to drift a little bit lower. Just curious what's driving that? Is it that the enterprise started to see macro pressures maybe a little bit later than SMB, and we're still feeling the tail effects of that in the trailing 12 month metric? Or maybe you could just speak to expansion dynamics enterprise versus SMBs. It sounds like enterprise is a lot healthier.

Question: Ryan MacWilliams - Barclays - Analyst : Bill, I know it's still early days here, but some of your advanced customers who are already incorporating generative AI into their marketing content or their marketing process, are you seeing these customers run more campaigns or utilize the Braze platform further as a result of generative AI adoption at this point?

Question: Ryan MacWilliams - Barclays - Analyst : Appreciate that. And then how is the rollout of new pricing and packaging around premium messaging channels going at this point? Are noticing more customers testing new channels as a result? And have you noticed any trends in the mix and channel usage with your customers so far this year between push, email, SMS? Thanks.

Question: Arjun Bhatia - William Blair & Company - Analyst : Bill, maybe the first one for you. Just as we're thinking about the macroeconomic backdrop, the tougher selling conditions, how are you seeing the rate of deals that are coming into the pipeline because for customers that are thinking of re-platforming at this time, it seems like a unique time to do it when there is uncertainty, and they're also dealing with this generative AI technological shift that's taking place. So do you see that in the pipeline or is that actually helping you in this moment to convert more customers over? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 8:30PM, BRZE.OQ - Q1 2025 Braze Inc Earnings Call

Question: Arjun Bhatia - William Blair & Company - Analyst : Okay. Appreciate that. And then for the second question, just you talked a lot about, I think, international investments in your prepared remarks. It sounds like you're expanding your data center footprint, maybe some go-to-market investments there as well. But with all the incremental investment in international, how should we think about the growth opportunity there? And as you think about the balance of this year and maybe even next year. What's the potential of growth acceleration in international markets as we just think about performance over the coming years?

Question: Arjun Bhatia - William Blair & Company - Analyst : All right. Perfect. Very helpful. Thank you. And congrats on a nice quarter again.

Question: Scott Berg - Needham & Company, LLC. - Analyst : Hi, everyone. Nice quarter here. Bill, I wanted to start off with a theme that we wrote about a couple of months ago coming off the Annual [Ted] Talk Conference. Primary theme of that show was talking about personalization and how the fever around these AI trends last year, year and a half is benefiting how these brands and companies want to go to market because they want to personalize marketing message or e-commerce sites more. Do you see that trend helping you right now? Because your numbers certainly buck the trend that we've seen from other April quarter reports last couple of weeks where AI seems to be pushing or delaying their opportunities. It almost seems like some of this AI interest is helping you because that's effectively what your product does, you personalize emails.

Question: Scott Berg - Needham & Company, LLC. - Analyst : Super helpful. Thank you, Bill. And then Isabelle, just from a follow-up perspective, can you talk about linearity in the quarter, your subscription revenue growth rate accelerated not just quarter over quarter, but was higher this quarter than both the last two, even after the revenue reserve release. Just to know if there's something unique in the quarter to drive that up that is just good bookings. Thank you.

Question: Scott Berg - Needham & Company, LLC. - Analyst : Very helpful. Thanks again. Congrats.

Question: Brent Bracelin - Piper Sandler & Co. - Analyst : This is Brent Bracelin on for Hannah here. Bill, I wanted to go back to the strong start here. It is a little different from what we're hearing from your large competitors and just trying to double click into what you're seeing. Is there any change because it does feel like enterprise software demands are very mixed. So are you seeing existing customers starting to lean a little more in the Braze? Is this a function of your go-to-market efforts starting to drive a little more new customer activity? Walk us through why you think Q1 is off to a pretty healthy start here and what drove that.

Question: Brent Bracelin - Piper Sandler & Co. - Analyst : Helpful color there. And then Isabelle, as you think about this new normal environment, you've been executing through here the last five, six quarters. You did talk about leaning into go-to-market, adding additional sales capacity, or trying to better positioned the company next year for growth. But it looks like Q1 came in a little better from an operating efficiency standpoint. Did you spread out or pause the hiring there or walk through what drove some of the improving efficiencies there in the quarter versus the plan to hire?

Question: Brent Bracelin - Piper Sandler & Co. - Analyst : Helpful color. Thank you.

Question: Brian Schwartz - Oppenheimer & Co. Inc. - Analyst : Thank you for taking my questions this afternoon. Bill, on the topic of AI, you gave good color on how it's impacting productivity and resources and personalization. I wanted to ask you about deal cycles. Is it your sense whether it's new logos or your customers' spending? Is AI helping or elongating deal cycles?

Question: Brian Schwartz - Oppenheimer & Co. Inc. - Analyst : The follow-up question I had it's either for Bill or Isabelle. Braze is a horizontal business, so I just wanted to ask you about the industries -- that any industry surprised you in terms of strength or weakness in the quarter? Thanks again for taking my questions.

Question: Michael Berg - Wells Fargo Securities, LLC - Analyst : I wanted to ask one on the macro on the budget, but slightly different way here. So like others have alluded to, you guys performed relatively well to others and broader software and I'm just curious if you believe or seeing in your conversations that Martech Investments are seeing a higher relative priority to other areas of software or maybe some of the other soft secular trends are driving that. Anything to point to there?

Question: Brian Peterson - Raymond James - Analyst : Bill, just wanted to get a quick update on the partner channel. How's that ramping in terms of capacity, any thoughts of the potential contribution to bookings this year? Thanks, guys.

Question: Pinjalim Bora - J.P. Morgan Securities LLC - Analyst : Oh, Great. Thanks for squeezing me in and congrats on the quarter. Just a quick one, maybe talk about the pipeline and the demand trends that you're seeing so far in Q2. Is there a change versus how you exited Q1 at this point? Thanks.

Question: Tyler Radke - Citi - Analyst : I wanted to direct this to Isabelle, so last quarter we talked about the progression of gross margins throughout the year, and that was nice to see gross margins come in a little bit better than we expected in Q1. Can you just talk about the gross margin side for the rest of the year, especially given some of the changes that Bill alluded to on the WhatsApp channel? Are you still expecting them to sequentially increase each quarter? What are you contemplating in terms of how those WhatsApp contracts ramp and the structure from a cost side perspective? Thank you.