Braze Inc Q3 2024 Earnings Call Transcript

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

Question: Arjun Bhatia - William Blair & Company, L.L.C. - Analyst : All right. Perfect. Thank you, guys. Congrats on a great quarter here. If I could just start with new customer demand, it seemed like you called out some competitive takeaways and strong traction in general. But I did notice that net new customer adds slowed a little bit. So can you just talk about what's happening with deal sizes and enterprise traction, new deal and how that pipeline might look going into Q4 here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 06, 2023 / 9:30PM, BRZE.OQ - Q3 2024 Braze Inc Earnings Call

Question: Arjun Bhatia - William Blair & Company, L.L.C. - Analyst : All right. Perfect. That's very helpful. And the, when we think about some of the Black Friday, Cyber Monday trends look very strong. Obviously, the throughput consumption was pretty robust this year. What does that mean for Braze customers longer-term, like, especially as we think about our customers coming up [through] renewal, or should that be an indicator of upsell and Isabelle, I think you touched on this a little bit, but I assume that is the gross margin impact that you're talking about where it may not be an immediate bump to revenue, but you're recognized in cost in Q4?

Question: Arjun Bhatia - William Blair & Company, L.L.C. - Analyst : All right. Very helpful. Thank you, both.

Question: Ryan MacWilliams - Barclays - Analyst : Hey guys. Thanks for the question. Great to see the CRPO growth improvement. Bill, how are your existing enterprise customers broadly thinking about next year's budget at this point? Like are you seeing customers more willing to make growth investments after being maybe more profitability focused in the last year?

Question: Ryan MacWilliams - Barclays - Analyst : Perfect. And just on the holiday season traffic, we saw a continued share shift towards mobile purchasing during the Cyber Week and Black Friday period. And this is a trend that Braze was built on and you guys have been playing for a long time. But just given like that significant gain, I think that was more -- that was bigger than people expected. But do you think this can finally maybe wake up some more non-mobile first enterprises or customers outside your traditional target zones that could engage Braze going forward?

Question: Ryan MacWilliams - Barclays - Analyst : Appreciate the color. Thanks, guys.

Question: Taylor McGinnis - UBS Equities - Analyst : Yeah. Hey team. Thank you for taking my question. Isabelle maybe for you. If we look at CRPO growth on quarter over quarter, excluding North Star, it seems to be trending similar to sequential growth that we saw last year. So just as we look into 4Q, any differences in the renewal base this 4Q versus last year. Could some of the recent trends that we're seeing in sequential growth hold. And just given that, this is such a big bookings quarter for you guys. I'm curious what you're seeing so far in terms of our deal activity and renewal conversations.

Question: Taylor McGinnis - UBS Equities - Analyst : Awesome. Thanks for answering my questions.

Question: Tyler Radke - Citi - Analyst : Yeah. Thanks for the question. So wanted to double-click on the enterprise strength that you saw in the quarter, pretty big pickup in 500k additions. Can you talk to the trends that you're seeing there? Is this primarily sales force displacements? Is this just success with upsells? Just help us understand what was driving the strength there or if there was any timing in terms of pulling deals out of Q4 as well. Thank you.

Question: Tyler Radke - Citi - Analyst : That's helpful. And just on the environment, maybe this for Isabelle, but if I look at your revenue beat, this was one of the strongest you've had all year and I think last quarter you benefited from linearity and the North Star acquisition this quarter that was already in the numbers. And then you also raised-- Q4 was guided 5 million above the Street, which was stronger than the guidance you gave, last quarter. So it feels like you're actually flowing through some operational upside, I guess. What was the biggest driver of that upside in the quarter? Was it these larger enterprise wins, or maybe did the environment play out a little bit better than you're expecting in terms of macro impacts? Thank you.

Question: Tyler Radke - Citi - Analyst : Thank you.

Question: Johnathan McCary - Raymond James - Analyst : Hi, this is Johnathan McCary in for Brian. Thanks for taking the question. So I'm curious, coming off of Forge, you know, how did that event performed versus expectations in terms of pipeline generation and then maybe give us some context in terms of what the conversations have been like around the new product announcements you had there?

Question: Johnathan McCary - Raymond James - Analyst : That's great. Thanks, Bill.

Question: Michael Berg - Wells Fargo Securities, LLC - Analyst : Hi. Thanks for taking my questions. And congrats on the quarter. Wanted to ask something more philosophically in the market, you guys are very well positioned to leverage first-party data. And given the current macro and budgets being constrained, it seems that there is an ongoing shift from paid advertising to platforms such as Braze. Can you talk about that trend is -- that's something that's real and how is Braze up potentially banning people talk about. Thank you.

Question: Michael Berg - Wells Fargo Securities, LLC - Analyst : Awesome. Helpful. And one quick follow-up. There's been a lot of discussion on the call around displacements of legacy vendors and something we have heard in the channel a fair bit recently. Has there been more maturity in both your go-to-market as well as alignment between your sales organization and the partner ecosystem to capitalize on the low hanging fruit and the legacy displacement opportunity? Thank you.

Question: Michael Berg - Wells Fargo Securities, LLC - Analyst : Helpful. Thank you.

Question: Matt VanVilet - BTIG, LLC. - Analyst : Yeah, good evening. Thanks for taking the question. Maybe just following on the last topic around the partner community, especially around the consulting and agency types. How do you feel about sort of who you have in the portfolio? Do you have the right partners? Do you need to continue to build that and number out there? Is it just really about driving home more business with the key partners that you're already aligned with.

Question: Matt VanVilet - BTIG, LLC. - Analyst : And then Isabelle, just quickly on, do you have any metrics you can share around the mix of business that is influenced by some of those partners or maybe and conversely, can you give us a target that maybe we should think about over the next five years or say how much of the business could be influenced?

Question: Matt VanVilet - BTIG, LLC. - Analyst : Okay. Thank you.

Question: Jake Titleman - Goldman Sachs - Analyst : Thanks for taking the question. Can you guys please give us an update on sales rep productivity. How that's trended over the last few quarters? And Bill, you also mentioned that you want to be ahead of the curve when the macro improves. So what would it take for you to start hiring again?

Question: Jake Titleman - Goldman Sachs - Analyst : Thank you. That's helpful. And then just a quick follow-up for Isabelle. So you're guiding to 26% growth in 4Q. How should we think about that as a potential starting point for fiscal 2025?

Question: Jake Titleman - Goldman Sachs - Analyst : Thank you. Appreciate it.

Question: Pinjalim Bora - J.P. Morgan securities LLC - Analyst : Great. Congrats on the quarter and thanks for the questions. Seems like macro continues to be a bit challenging is about? Is there a way to think about MDR going forward because you are reaching out getting easier comps starting in Q4, but that macro continues to be challenging. So I was thinking if it would you say troughed at a point in Q4 or Q1? Or do you feel like you might continue to slide in?

Question: Pinjalim Bora - J.P. Morgan securities LLC - Analyst : Understood. Thank you.

Question: Scott Berg - Needham & Company Inc. - Analyst : Hey, everyone. Great quarter. Thanks for taking my questions. Bill, in your prescripted remarks, you talked about passing the $500 million in committed AR threshold. Congrats, obviously big number, but how do you think about $1 billion or more than $1 billion? Do you have -- can you get there with your current product set? Or do you feel like you need some additional, whether it's modules, functionalities, channels, et cetera, to help achieve that goal?

Question: Scott Berg - Needham & Company Inc. - Analyst : Excellent. Thank you.

Question: Brian Schwartz - Oppenheimer & Co. Inc. - Analyst : Yeah. Thank you for taking my question and great quarter. Still the commentary that you've been giving on the call, but what you're seeing with the macro. I'm wondering if that is you're seeing a similar environment all around the world specifically, you know me I'm a [packed] in North America are there any differences or is there any stability or maybe somewhat improvement in any of the international markets? Thanks.

Question: Brian Schwartz - Oppenheimer & Co. Inc. - Analyst : Thank you.

Question: D J Hynes - Canaccord Genuity LLC - Analyst : Hey, thank you, guys. So Bill, we've seen some other marketing or CDP companies recently initiate or talk about rolling out mobile channel to complement their existing e-mail, SMS, and other activation channels. You guys obviously went the other way, right, starting in mobile and then initiating other channels. Can you just speak to the benefit or challenges of going one way versus the other? Do you think there's a material difference that I'd love to hear your take?

Question: D J Hynes - Canaccord Genuity LLC - Analyst : Yeah, I appreciate the color. Thank you.

Question: Andrew Sherman - TD Cowen - Analyst : Okay, thanks. It's Andrew from [Cowen]. Is about the sort of growth trends in MA use. I think business about half of the contract structure for customers. What are you seeing there from your larger customers and if the consumer improves and that's a growth driver here over the next couple of quarters?

Question: Andrew Sherman - TD Cowen - Analyst : Thank you.