Q3 2024 Braze Inc Earnings Call

Speaker 1: These statements include, but are not limited to, statements regarding our financial outlook for the fourth quarter and the fiscal year ended January 31, 2024 and the fiscal year ended January 31, 2025, our planned product and feature development and the benefits to us and our customers therefrom, including our AI features, the potential impact and duration of current macroeconomic trends, our anticipated customer behaviors, including vendor consolidation trends and their impact on Braze.

Two statements regarding our financial outlook for the fourth quarter and the fiscal year ended January 31, 2024, and the fiscal year ended January 31, 2025 are planned product and feature development and the benefits to us and our customers there from including our AI features the potential impact and duration of current macroeconomic trend.

<unk> are anticipated customer behaviors, including vendor consolidation trends and their impact on braze.

Speaker 1: anticipated benefits of our partnerships, the expected effects of our social impact initiatives, and our long-term financial targets and goals, including the anticipated period in which we may generate positive non-GAAP operating income and positive free cash flow.

The anticipated benefits of our partnerships the expected effects of our social impact initiatives and our long term financial targets and goals, including the anticipated period in which we may generate positive non-GAAP operating income and positive free cash flow.

Speaker 1: 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 statement.

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.

Speaker 1: 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 FCC filings, both available on the Investor Relations section of our website.

Speaker 1: I'd also like to remind you that today's call will include certain non-GAAP financial measures used by management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal third quarter 2020 for performance in addition to the impact these items have on the financial results.

I'd also like to remind you that today's call will include certain non-GAAP financial measures used by management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal third quarter 2024 performance. In addition to the impact these items have on our financial results.

Speaker 1: 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.

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.

Speaker 1: 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.

Third 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 another strong quarter generating $124 million in revenue up 33% versus the prior year. Despite a macroeconomic environment that remains challenging.

Speaker 2: We delivered another strong quarter, generating $124 million in revenue, up 33% versus the prior year, despite a macroeconomic environment that remains

Speaker 2: Our execution was strong, and we continued to drive operating efficiency in the business, improving non-gap gross margin by 170 basis points year-over-year and non-gap operating margin by over 1,100 basis points compared to the third quarter.

Our execution was strong and we continue to drive operating efficiency in the business improving non-GAAP gross margin by 170 basis points year over year, and non-GAAP operating margin by over 1100 basis points compared to the third quarter of last year. We were pleased with the strength of our enterprise business. The continued rapid pace of R&D and the resulting customer excitement about new product launch.

Speaker 2: We were pleased with the strength of our enterprise business, the continued rapid pace of R&D and the resulting customer excitement about new product launches and announcements, as well as the continued expansion of the global brace partner and customer ecosystem.

And announcements as well as the continued expansion of the global brace partner and customer ecosystem. In October. We also hosted forge our annual flagship customer conference, which brought together, leading marketing growth and engagement teams to learn best practices for delivering brilliant customer experiences, including incredible stage sessions from brands, including Activision Blizzard Alf cosmetic.

Speaker 2: In October , we also hosted Forge, our annual flagship customer.

Speaker 2: which brought together leading marketing, growth, and engagement teams to learn best practices for delivering brilliant customer experience.

Speaker 2: including incredible stage sessions from brands including Activision Blizzard, Elf Cosmetics, McDonald's, The Walt Disney Company, and Wise Labs. It was an inspiring capstone for what has been an exciting year for Braze's own global events, including the newly introduced City by City.

Mcdonald's the Walt Disney Company, and Wise labs. It was an inspiring capstone for what has been an exciting year for braces own global events, including the newly introduced city by City series in total we hosted events across 21 major global cities and welcomed nearly 4000 attendees through our doors looking ahead into next year, we're already excited to be hosting for it.

Speaker 2: In total, we hosted events across 21 major global cities and welcomed nearly 4,000 attendees through our doors.

Speaker 2: Looking ahead into next year, we're already excited to be hosting Forge again in the U.S. and bringing city-by-city to five continents as our customer community and partner ecosystem continues to prosper.

Again in the U S and bringing city by city to five continents, as our customer community and partner ecosystem continues to prosper across our global footprint bracer scaled by methodically building, our customer base across a wide array of industry verticals business models and company sizes and today I'm proud to announce that during the month of November we passed $500 million of committed Andy.

Speaker 2: Across our global footprint, Brace is scaled by methodically building a customer base across a wide array of industry verticals, business models, and companies.

Speaker 2: And today, I'm proud to announce that during the month of November , we passed $500 million of committed annual recurring revenue, nearly doubling since our IPO just over

Recurring revenue nearly doubling since our IPO just over two years ago.

Speaker 2: A huge thank you to our dedicated team across the globe who helped us achieve this milestone. I'm excited to keep building on this success with you as we continue on our journey to make Braze the standard.

A huge thank you to our dedicated team across the globe, who helped us achieve this milestone I'm excited to keep building on this success with you as we continue on our journey to make brace the standard for customer engagement.

Speaker 2: Brands continue to recognize the significant ROI that can be achieved through personalized, cross-channel customer engagement enabled by the Brace platform.

Brands continue to recognize the significant ROI that can be achieved through personalized cross channel customer engagement enabled by the <unk> platform.

Speaker 2: New business wins and upsells included FabFitFun, Mythical Games, Oro, formerly Netspend, Papa John's UK, and Sonos, among others.

New business wins, and Upsells included fab bit fun mythical games Oro, formerly not spend Papa John's U K and so knows among others enterprise New business was strong as we continued to capitalize on the legacy vendor replacement cycle and the consolidation trend that we've highlighted in prior quarters during the quarter, we added to our growing list of major Q I saw our customers with.

Speaker 2: During the quarter, we added to our growing list of major QSR customers with a competitive takeaway from a legacy market.

A competitive takeaway from our legacy marketing cloud and we're excited to consolidate away a number of other vendors as we begin work with the top news organization looking to simplify their complex technology ecosystem and drive better outcomes for their customers through higher quality engagement.

Speaker 2: We also continue to win against both startup competitors and legacy point solutions as they struggle to deliver high quality customer engagement seamlessly coordinated across the many channels that matter to the modern.

We also continue to win against both startup competitors and legacy point solutions as they struggled to deliver high quality customer engagement seamlessly coordinated across the many channels that matter to the modern BTC marketer.

Speaker 2: We are excited by our competitive position amongst the category of customer engagement, especially as we reflect on what hasn't.

We are excited by our competitive position amongst the category of customer engagement, especially as we reflect on what hasn't changed in our space and that's the top brands continued to invest heavily in order to deliver increased value and relevance to their consumers. Both by understanding the real time context that surrounds every marketing and product interaction and by leveraging their growing first party data.

That's to harness the gains available from real time stream processing combined with AI, driven orchestration and personalization.

As marketers chart, the course of their business goals and customer engagement initiatives and our visual canvas environment. They can increasingly rely on AI ml and other forms of automated decision, making to manage the complexity of the modern customer engagement environment, while delivering relevance and personalization to their customers at scale.

While the macro environment remains uncertain as we head into next year. We are confident that customer engagement will remain a business imperative for brands and tough times brand shift their focus to high return initiatives like lifecycle optimization and retention and to standout marketers need powerful customer engagement tools sophisticated brands continue to invest in their customer engagement efforts.

Finding opportunities to initiate new relationships efficiently and strengthening those bonds over time by staying relevant in their customers' lives and delivering value and critical moments, especially as consumers continue navigating an environment with high interest rates and inflation the period from Black Friday, Cyber Monday was a particularly important time for brands to breakthrough the early now and into the holiday season and staff.

And out in their customers' minds.

Appraise this year against a record breaking sand volumes as we sent over 37 billion messages in the four day period from Black Friday through cyber Monday more importantly, we also saw increases in the sophistication of messages campaigns and campuses.

Black Friday alone, we processed nearly 25 billion in pound API calls and during that day's peak activity periods are outbound packet throughput more than doubled compared to last year.

That rise was driven by more spend time, API calls and advanced personalization being used by more customers.

Brands also lean further into cross channel messaging this year with Bray supporting a wide array of established and emerging messaging channels, including significant increases in the use of whatsapp email SMS MMS content cards, roku messages and web push zooming out to the orchestration layer, we saw 67% increase in messages sent using canvas or visual development environment.

Which reflects our marketers are orchestrating multi step cross channel messaging flows and relying on differentiated brace capabilities. During this critical time in order to stay on the leading edge of customer engagement. We are relentlessly focused on product innovation that can accelerate the legacy replacement cycle and compel more brands to upgrade their customer engagement at forge, we unveiled new low code.

And AI driven product innovations designed to more effectively personalize brands customer engagement efforts and drive more agile and productive marketing teams. We're always looking for ways to allow our customers to test and iterate more quickly on customer experience both in and outside of their products building on the strong and product Foundation provided by our SD case, we were excited to promote feature flags to general Vale.

The ability in October.

Feature flags allows marketers to quickly launch test and optimize features on mobile apps or websites, providing flexibility to test the bearing expressions of their product and promoting an agile and experimental method of product delivery that results in better experiences for customers.

These types of experiments are particularly impactful when coordinated with customer messaging and optimized by the AI and testing features native to canvas.

One brand putting this all into action is a mobile or a dot I T. A leading player in the EU real estate industry, who used feature flags to test the release of dark mode to a segment of customers who are very active in the evening.

After turning on dark mode for that segment and targeting those same users within in that message about the new feature they allowed the test users to experiment for two weeks and then subsequently collected qualitative feedback from them via an in App survey after validating both the survey feedback and the conversion data and mobile are a gradually extended the feature to all of their registered users normally launch.

This would have required multiple platforms and complex crossing coordination by bringing complementary product and messaging were close together one person coordinated this entire launch embrace and did it in half the time of similar past experiments.

At Forge, we also announced several tools and development that we anticipate adding to our sage AI suite, including an AI recommendation engine that is designed to use machine learning to match relevant items from brace catalogs with customers most likely to buy them. The addition of a large language model or L. L. M canvas step to our visual programming language and channel specific message content recommendations paired with perf.

Formats prediction.

The canvas L. M. SAP uses Jenny I to interpret user provided input such a survey feedback or apply to a whatsapp conversation and then provides a contextual response that can be tabulated into subsequent canvas actions or message steps.

We are actively testing multiple underlying models for this L O M SAP, including our own custom trade models built on top of Lama too as well as open AI hosted models such as G. P T for turbo.

Extending on our experimentation with custom train models. We're also very excited by our work and channel specific message content recommendations paired with a growing ability to automatically predict which variance are likely to perform best using custom train predictive transformer models by providing these predictions before launching a canvas or campaign, we intend to further increase marketer velocity encourage more crew.

<unk> of risk, taking and free up time that can be spent on further experimentation with deeper personalization techniques.

This is just a small portion of our exciting AI related product roadmap, which we are designing to push the boundaries to deliver the most personalized brand experiences for our customers as the legacy clouds continue to be held back by antiquated architectures and decades of unpaid complexity that we believe are modern foundations combined with a relentless focus on innovation will accelerate the legacy replacement cycle.

And compel more brands to upgrade their customer engagement strategies with the Braves platform.

As we zoom out and look at our broader ecosystem I'm also excited to share an update on our strengthening relationship with AWS. Just last week, we shared braces achievement of AWS advertising and marketing technology competency in the category of digital customer experience and in October we announced the availability of break through the AWS marketplace.

These recent announcements build on our broader partnership which includes AWS retail competency travel and hospitality competency and digital customer experience competency, we look forward to growing our relationship with Amazon and other partners as we improve the depth and capabilities of our solutions.

Before turning the call over at Isabelle I'd like to update you on our latest social impact initiative Tech fair and equitable future announced just yesterday. This program aims to remove barriers for underrepresented founders by providing introductory free access to the <unk> platform. We are also excited to share that brace recently made our first commitment to a virtual power purchase agreement an important step for our overall client.

Our commitment and we look forward to sharing more climate related updates next year.

To all our stakeholders for your continued interest in res. We are excited about our future meeting customers, where they are on their customer journey and empowering them to achieve world class customer engagement will delivering efficient growth at scale for our shareholders. We look forward to continuing this journey to becoming the de facto standard for customer engagement with you in the coming months and years and now I'll turn the call over to us.

Well.

Thank you Bill and thank you to everyone for joining us today.

Well stated we reported a strong third quarter with revenue up 33% year over year to $124 million, which includes an approximately three and a half million dollar contribution from our North Star acquisition, which closed on June 1st of this year.

Growth was driven by a combination of existing customer contract expansions renewals and new business. Our subscription revenue remains the primary component of our total topline contributing 95% of our third quarter revenue.

The remaining 5% represents a combination of recurring professional services and one time configuration and Onboarding Pete <unk>.

Total customer count increased 17% year over year to 2011 customers as of October 31 up 296 from the same period last year and up 53 from the prior quarter. Our total number of large customers, which we define as those spending at least $500000 annually grew 28% year over year to 189.

And as of October 31 contributed 58% to our total <unk>. This compares to a 56% contribution as of the same quarter last year.

Across all customers dollar based net retention was 118% while dollar based net retention for our large customers was 121% expansion.

Expansion was again broadly distributed across industries and geographic regions Rev.

Revenue outside the U S contributed 44% of our total revenue in the third quarter compared to 43% in the prior year quarter and 43% in the second quarter of this year.

In the third quarter, our total remaining performance obligation was $560 million up 37% year over year and up 7% sequentially.

Current RPI was $370 million up 31% year over year and up 5% sequentially.

The year over year increases were driven by contract renewals and Upsells and the signing of new customer contracts overall.

Overall dollar weighted contract length remains at approximately two years.

The Northstar acquisition contributed approximately three percentage points of year over year C. R. P O growth and we will lap the impact of this acquisition on June one of FY 'twenty five.

non-GAAP gross profit in the quarter was $88 $5 million, representing a non-GAAP gross margin of 71.4%. This compares to a non-GAAP gross profit of $64.9 million and non-GAAP gross margin of 69, 7% in the third quarter of last year.

The 170 basis point year over year margin improvement was driven by ongoing personnel efficiencies and the continued cost optimization of our technology stack non-GAAP sales and marketing expense was $58 $3 million or 47% of revenue compared to $46 $2 million or 50% of revenue in the prior year quarter.

While the dollar increase reflects our year over year investment in head count 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 organization non-GAAP R&D expense was $22 million or 16% of revenue compared to $17 $5 million or 19% of Rev.

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 non-GAAP G&A expense was $19 million or 15% of revenue compared to $18 $6 million or 20% of revenue in the prior year quarter. The.

The increase was driven by investments to support our overall company growth, including head count costs and increases in software subscription and license says non-GAAP operating loss was $8 $9 million compared to a non-GAAP operating loss of $17 $3 million in the prior year quarter.

non-GAAP net loss attributable to <unk> shareholders in the quarter was $4 $5 million or a loss of five cents per share compared to a loss of $13 $8 million or a loss of <unk> 15 per share in the prior year quarter now turning to the balance sheet and cashless statement, we ended the quarter with $471 $9 million in cash cash equivalents restricted cash.

<unk> and marketable securities cash used in operations during the quarter with $2 million compared to $23 $9 million in the prior year quarter, including the cash impact of capitalized costs free cash flow was negative $5 $9 million compared to negative free cash flow of $28 $1 million in the prior year quarter as we have stated before we <unk>.

Expect our free cash flow to fluctuate from quarter to quarter, given timing of customer and vendor payments and now turning to our forecast demand for customer engagement solutions is solid our teams execution has been strong and our pipeline remains healthy. However, we continue to experience macroeconomic headwinds that manifest in elongated sales cycles constrained marketing budgets and.

Lower new business growth, we approach our guidance with a prudent and risk adjusted methodology and assume current macroeconomic conditions remain unchanged going forward for the fourth quarter, we expect revenue to be in the range of $124 million to $125 million, which represents a year over year growth rate of approximately 26% at the midpoint, while we're not provide.

Specific gross margin guidance, we expect gross margin will be negatively impacted by higher seasonal activity during the fourth quarter. As a reminder, our long term non-GAAP gross margin forecast of 67% to 72%.

Fourth quarter non-GAAP operating loss is expected to be in the range of $7 million to $8 million at the midpoint. This implies an operating margin of approximately negative 6% an improvement compared to the better than negative 7% guide that we had provided earlier this year.

Fourth quarter non-GAAP net loss is expected to be four and a half to five and a half million dollars and fourth quarter non-GAAP net loss per share in the range of four to five cents per share based on approximately 99 million weighted average basic shares outstanding during the period.

For the full fiscal year 'twenty 'twenty four we expect total revenue to be in the range of 465 million to $466 million, which represents a year over year growth rate of approximately 31% at the midpoint. This includes an estimated $9 million in ear contribution from Northstar or approximately two five percentage points of growth over FY <unk>.

'twenty three which once again, we will lap on June 1st of this year.

Fiscal year 2024, non-GAAP operating loss is expected to be in the range of $39.5 million to $45 million non-GAAP net loss for the same period is expected to be in the range of $25 five to $26 $5 million.

Full year 2024, non-GAAP net loss per share is expected to be 26 to 27 cents per share based on a full year weighted average basic share count of approximately 98 million shares. In addition, we believe we are on track to meet the profitability goals. We have previously communicated for fiscal 2025, we expect phrase will achieve positive quarterly.

non-GAAP operating income and positive quarterly free cash flow by the end of fiscal year ended January 31, 2025, I'll wrap up my remarks by reiterating our commitment to driving product innovation, while consistently executing against our financial targets. We remain confident in our ability to grow our top line, while maintaining cost discipline and delivering on our financial targets.

We have set for fiscal 2025 and with that we'll now open the call for questions. Operator, please begin the Q&A.

We will now begin the Q&A session. If you would like to ask a question. Please use the ratio which at the bottom of it.

Now I'll wait one on Akira from balls.

Our first question comes from Arjun Bhatia with William Blair, Please limit yourself and ask your question.

Alright, perfect. Thank you guys and congrats on a great quarter here.

If I could just start with new.

Demand it seems like you called out some competitive takeaways.

Strong traction in general.

Net new customer adds slowed a little bit. So can you just talk about what's happening with deal sizes in <unk>.

Enterprise traction in new deals and how that might.

Might look going into Q4 here.

Hey, Arjun, it's Isabelle I'm, just gonna address specifically your question on the net new customer adds.

Where we're seeing kind of more.

More challenges is down at the F&B segment, and that's on sort of two fronts. One is the new customer adds and our ability to kind of get new new logos in that segment and then also some challenges obviously from a loss perspective logo loss in that segment.

That segment of the market is really experiencing kind of toughest environment in terms of access to capital and liquidity and the ability to kind of spend out their budgets and we're seeing more business failures down at that at that level, but rest assured. This is it's not really a competitive issue not competitive flows are actually positive to grades during the quarter and so we're very happy in terms of how.

We're behaving in and realizing our reward during the quarter relative to the competitive environment is really what you're seeing is just is more a reaction of of elements happening at the S&P level. I would also note that while we saw more elevated losses of logos that the S&P level. The dollar level was relatively low in.

That segment, specifically and overall the dollars of loss in the quarter was well within our sort of budget tolerances. So this was not unexpected and as we mentioned we are seeing relative strength in the enterprise and we think that's primarily because enterprises are used to planning and operating on longer time horizons. They operate with more stable Foundation.

And those are the key decision, making great ingredients that drive both the legacy replacement cycle and the vendor consolidation trends and we're seeing those factors play out in our favor even as budgets have remained constrained inefficiency is being prioritized over growth in most of those companies. However, it's definitely selling opportunity constrained environment and those sentiments don't exist across our <unk>.

Tire addressable market, which really just brings us back to the imperative for us to continue executing with strength and investing in the underlying improvements that you know in our own efficiency in our own productivity and our own velocity. So that we can continue to grow even as the macro process.

Alright, perfect. That's very helpful. And then when we think about some of the Black Friday cyber Monday trends look very strong obviously the throughput.

Assumption was.

Robustness here.

What does that mean or raise customers longer term, especially as we think about cost where I was coming up.

Renewal shabab.

Be an indicator of upsell and it's about I think you've touched on this a little bit but I assume that is the gross margin impact.

So you were talking about where it may not be an immediate bump to revenue, but you're recognizing the costs in Q4, that's exactly right revenue is recognized ratably over the contract term, whereas the cost component is definitely based on utilization and you said so that's the the compression that you see in Q4, yeah, and I would say that you shouldn't see that as a forward.

Later of consumption based upsells, because marketers certainly plan for Black Friday, cyber Monday to be higher volume and that is incorporated into their purchasing however, I do take it as a positive indicator that the increased usage of canvas in particular as well as our more advanced features means that.

A broader and broader percentage of our customer base is utilizing the parts of Braves that are differentiated and the drive differentiated value and we know that customers that use canvas are stickier and they get they derive more value from raise we have less competitors are when a customer is more sophisticated and we maintain our premium price point I'm much more easily in those circumstances and so.

That's why we're so focused on continuing to drive that more differentiated and more sophisticated usage and I think that some of the non volume stats that you saw in our Black Friday cyber Monday readout, we're very much in support of that.

Alright very helpful. Thank you both.

Yep.

No.

Our next question comes from Frank Bachman, Please on mute.

Ask your question.

Brent we can't hear you if you're talking.

I think maybe we can go to the next question operator.

Our next question will come from Ryan Macwilliams with Barclays. Please.

Ask your question.

Hey, guys. Thanks for the question great to see the CRP O group improvement Bill how are your existing enterprise customers broadly thinking about next year's budgets at this point.

Are you seeing customers more willing to make growth investments after being maybe more profitability focus in the last year.

Yeah, I mean, I would say with what we're experiencing right now we don't have reason to believe that the macro impacts on the buying environment are going to meaningfully change through next year, our marketing budgets and team sizes are still flat or otherwise constrained cfos are still scrutinizing every dollar that goes out the door.

And we also see many businesses still struggling to adapt to the new macro.

In the SMB segment.

So no. It wasn't your question, but you know many of them are also watching their runway shrink month over month waiting for the VC environment to normalize a bit more which so far has not really happened and so we've been really happy with the execution of the team. We're controlling what we can and we're very happy with the creativity dedication innovation from you know the global <unk> team, but we're not and.

Dissipating and improvement in the buyer environment, you know as I mentioned before we still consider it to be an opportunity constrained environment, but we're doing everything we can to control we can to execute as well as we can and you know we're doing it at the same time that we're making foundational investments both in the product in our efficiency and our velocity.

Our plan is to be far ahead of the competition on all of those fundamentals when conditions eventually do loosen up again.

Perfect and just on the holiday season traffic.

So I'll continue share shifts towards mobile purchasing during the cyber week and Black Friday period. I know this is a trend that Bruce was built on and you guys were playing for a long time, but.

Given like that sniffing gain I think that was more that was bigger than people expected, but do you think those can finally, maybe wake up some.

Some more non mobile first enterprises or customers outside of the additional target zones.

Gordon.

Yeah, absolutely you know and I think that it's not just the mobile side of it waking them up to the opportunity that exists in mobile and that is obviously a strength for Braves, but it's also another reason for more brands to break down the silos that exist between their teams that we see in particular in the traditional enterprise, especially in some of the slower moving categories that are there.

Still huge huge silos and walls up between the email teams. The web teams the mobile teams and that's something that we saw play out over the course of the last five or six years and some of the faster moving categories are in <unk> and in some of the.

Digital first businesses that really broke down those walls. They started to focus on the more coherent cross channel experience delivery instead of just delivering messages in silos and those are kind of strategy and organizational shifts that really play into brazos favor and so I think more than just the shift to mobile and you know obviously braces model.

Frank is really that focus on cross channel execution Cross channel orchestration and businesses evolving themselves to to.

Be more ideal customers embrace.

Here's the color because.

For sure. Thank you.

Our next question comes from Carl O'connell with UBS.

Yourself and ask your question.

Yeah, Hey team. Thanks, so much for taking my question is about maybe for you. If we look at CRP, oh growth quarter over quarter, excluding north starch. It seems to be trending similar to sequential growth that we saw last year.

As we look into <unk> any differences in the ring.

This <unk> versus last year.

Because some of the recent trends that we're seeing in sequential growth Holden 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 deal activity and renewal conversations yeah. So I'll address your question about North star for Us on a sequential so the Northstar impact I would think about that more as impacting the year over year versus the sequential because once it's in.

The number it's just sort of it's in it right and into sort of persistent and then we'll lap. It June one of next year and so I would look at actually if you look at the sequential but that's not really impacted by Northstar, specifically, so think of that as kind of a more normalized outlook on the company and.

What we're seeing in terms of Q4.

There are more renewal dollars to happen in Q4, that's that's fairly typical.

And so we are we do have that offer for Q4 and what we're seeing in terms of bookings. So far we've talked about linearity this year being better than expected and when I say better than expected. It just means it sort of returning to levels that were are trends that were consistent add before.

The market sort of fell apart about 18 months ago, and what I broadly expect to actually see that in Q4 of this year as well.

Often they sense for answering my question.

Thanks Taylor.

Our next question comes from caller he was subtle.

Ask your question.

Yeah. Thanks for the question so wanted to double click on the enterprise strength that you saw in the quarter pretty big pickup in 500 K additions.

Can you can you talk to.

The trends that Youre seeing there is this primarily salesforce displacements of this just success with with up sells.

Just help us understand what's driving the strength there or if there was any timing.

In terms of pulling deals out of Q4 as well thank you.

Yeah. So I think when you look at the 500 K cohort for our Brazos, a reminder, that new business can enter that right out of the gate, but also we can achieve that through upselling smaller logos into that category overtime and so certainly both of those things are at play in the sequential growth in that number I think you know across the enterprise as I articulated earlier, we're seeing.

Both the legacy replacement cycle at work I think that as Braises awareness and our prominence in some of the pressure on these enterprises to really transform themselves to stay more competitive in our markets, where many of them are experiencing challenges from digital first companies in and they're looking at how those digital first companies operate in the answer in many of those cases is that they use rates rate or are they off.

Right with the agility that only <unk> can deliver especially when you're trying to coordinate across the complex challenges of a cross channel customer engagement and delivering to global audiences, which more and more businesses are doing. These days you know it's not just the fortune 500 that needs to tackle the complexity of the global environment and it's also a lot of digital first startups that take advantage of the App store.

In order to have that reach and so you know Braves I think is well positioned for those changes in the environment and you know we're a we're doing everything we can to be able to execute even as those businesses are facing constrained budgets and you know teams that are driving toward efficiencies. Another part goes back to the you know something I've mentioned for probably five or six quarters now.

L. A which is just that during times, where brands are focused on efficiency working on retention on leveraging first party relationships and first party data assets and ensuring that you are retaining the customers that you've spent a lot to acquire in the first place at higher and higher rates as is of the utmost importance and there's an opportunity to focus on that one.

Acquisition gets a little bit more de emphasized as it has through these macro conditions and so you know, it's it's a little bit of a lot of those different things, but you know it is still uneven in terms of how we're seeing enterprises lean into new investments are there still a lot of any pension going on there's a lot of scrutiny. On every dollar you know, we're certainly seeing and we've spoken about this but.

For a more stable environment. This year than we did in the back half of last year, but I wouldn't say that we've seen any sort of material or improvement from you know from Q1 to Q3 through this year, it's very much a lot of enterprises living in the same budget realities as they have the same kind of team sizes. They have the same push for.

<unk> throughout the entire year, we don't see strong evidence that those factors are going to change in the near term. We're certainly on the lookout for them because as I mentioned before you know as the environment Loosens up again, we want to be far ahead of the competition and.

Leveraging that great execution that we have to to get even further out ahead, but we are seeing that strength in the enterprise right now and and we're adapting accordingly.

That's helpful and just on the environment, maybe this for Isabel, but if I if I look at your revenue beat this was one of the strongest you've had all year and and I think last quarter you benefited from linearity in <unk> and.

The Northstar acquisition this quarter that was already in the numbers and then you also raise.

You know Q4, Q4 was guided 5 million above the street, which was stronger than the guidance you gave.

Last quarter. So so it feels like you're you're actually flowing through some some operational upside I guess, what what was the biggest driver of that upside in the quarter was at one of these larger enterprise wins are or maybe you did the environment play out a little bit better.

Than you were expecting in terms of macro impacts. Thank you.

Yeah. So I think where you know the macro continues to be challenging I think we're executing well in the context of this macro.

In Q3, yes, there was definitely when I say the impacts from linearity again, not better than normal, but we haven't been normal for a long time. So we're kind of back to a more normalized linearity, which is helpful relative to you know if even rewind the clock back to kind of the beginning of the year and how we set out guidance.

Northstar wasn't in there we were baking in quite a bit of kind of backend loaded our deal flow in the context of quarter over quarter. So while yes that we've now had the benefit of a few quarters of that and so I could take some of that into consideration in the context of the new guidance.

With the uncertainty that continues to plague us I don't take all of that into consideration and so we you are seeing some of the upside here I. It's been you know two and a half quarters of I you know some of this better linearity here I wouldn't necessarily we will continue to take a risk adjusted approach as we forecast out further into the future and I would.

Suggest you know the analyst teams do you do the same thing.

Thank you.

Our next question will come from Brent <unk> with Piper Sandler.

Please limit yourself and ask your question.

Thank you airport logistics here, thanks for bearing with me Bill I wanted to go back to the replacement cycle. You did mentioned several vendor consolidation deals in the quarter.

Do you get any sense of an increasing appetite with some of these large enterprises that theyre now may be more willing to look at consolidation than they were maybe two years ago and if so maybe why and then one quick follow up for Isabelle.

Yes, I think that Theres, a couple of things from a consolidation standpoint, one is that the pace at a lot of businesses slowed a little bit right. There was a break neck pace through the highly expansionary period that led into the end of 2021 and that led to a lot of software getting deployed in a lot of places you know as as we're all aware.

A lot of that software was utilized to different levels of effectiveness and I think that there's just a lot of scrutiny being placed on are what are in many businesses Super complex technology environments, and so you know picking the ability to kind of pick your head up plan in this environment of that is relatively calmer than it was when you assembled the complex.

<unk> and be able to look for the ability to consolidate effectively is really is really part of what drives that attitudinal Lee and then from a financial perspective, you know I think that the total cost of ownership of a complex technology landscape because of the number of people that are required to manage it the amount of overhead that goes into play with communication across.

All the different tools and coordination there you know in the example that I cited in the prepared remarks of our customer being able to use a combination of feature flags in product surveys and reporting on an experiment that they rolled out all as a single person in the same tool. If you think about how that translates into organizational productivity and agility and what that means for them.

Total cost of ownership savings perspective, those are all aspects of consolidation that are I'm really pointed in the direction of efficiency and so when you combine those two things together I think that creates a good environment, where both attitude newly people are open to taking another look at what got assembled while they were going through the.

Through that period, leading into late 2021 and there's just a lot of great rationale to simplifying and ecosystem, especially when you have as many moving parts in our in some of these marketing technology ecosystems as we see at some of these prospects.

Helpful Color and then just as a bell on the demand environment, three straight quarters of 30% plus growth I get budgets remain constrained I get there's a little bit of acquisition benefit there, but the three trends three quarters do make a trend do.

Do you feel like the environment at least stable enough.

And then <unk>.

Man perspective for you to continue to kind of control what you can control or would you say theres still some outliers that we should be aware of thanks.

Yeah. So you know I wouldn't point to any specific outliers that we should be aware of but there is and there is just continued uncertainty generally in the market and so I you know I would say I said two quarters. There is not a trend make yes. It's been three quarters, yes, there are a tailwind from the Northstar acquisition.

So we are going to continue to be prudent with on the profitability side. You know some of these overachieve, we have actually opened up some additional spend capacity, particularly in R&D that is a longer term play for us obviously.

But we are you know we are trying to take some of this benefit in kind of reinvest in the business in ways that are going to pay out dividends over the longer term.

Super helpful. Thank you.

Our next question comes from Brian Peterson with Raymond James Please let me know.

So I'm going to ask your question.

Hi, This is Jonathan Macquarrie on for Brian Thanks for taking the question.

So I'm curious coming off of forge.

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 products.

Once you got there.

Yeah, absolutely so as I mentioned Ford was actually a capstone on a full year of owned events and we've been happy with how that's been able to activate our global customer community. The goals of these events very depending on the event series and forge is really the flagship customer event, where we bring in you know primarily existing customers are we.

Do a lot of certifications that you know our partnership landscape is on display Theres a lot of learning that can really help with deal acceleration. It can help cement relationships and improve the sophistication. We don't look for that to specifically create a lot of net new pipeline or city by city and kind of get real with brazen grow with praise event series that make up the rest of.

Those that I cited in the.

In the prepared remarks are more oriented towards the prospects a new business pipeline generation and those have a steady drumbeat on their schedule throughout the year.

With respect to you know the conversations and what we're seeing in terms of customer excitement and trends you know I think that AI continues to be the center point of a lot of that you know and.

And as I mentioned in the prepared remarks and.

In addition to working with opening is proprietary models. We've also been doing our own training on a number of models, including on various sizes of Lama too and we've been really excited to see the results of those tests. So far I. We're excited about what that means both for co pilots as well as around automated decision, making you know we've shared a little bit Ah, we shared a bit it forwards.

And we've shared some of the constituent components of Sage AI that we're ready to talk about right now both with our customers as well as you know with all of you through these through this earnings call them, but there's a lot more that's underway across our teams on the copilot side of the house I think that the whole community is excited for this near term future, where Jenny I embrace is going to make it feel.

Less like you're using a tool and more like you're working with frankly, a whole team of specialists and consultants to help you tackle your business challenges, we're thinking about this as being like having a brand strategy is to copy strategists, a developer and data analysts all close at hand, and ready to improve and accelerate customer engagement initiatives for our customers. When we talked to a lot of people at forged theirs are.

A lot about operational efficiency, there's a lot about helping marketers do more with less and I think that copilot features like this are particularly helpful. In a platform like <unk>, where we can deliver differentiated capability to people, but only when they have certain technical and data skills. You know when we're talking about various parts of the feature set and when we can lower the barrier.

To entry to leverage those capabilities people get really excited about that because it means that they can compound the kind of skills that they are acquiring in their own role along with new features that brace continues to roll out I think similarly continued progress on G&A I in the creative production realm, it's going to make it easier to leverage raises experimentation capabilities one of the key compare.

Differentiators about Braves versus many of our less sophisticated or lower cost competitors has always been that we enable agility and we enable experimentation across all the different strategies that are marketed right might run, but that's unfortunately, not a way of working that you know all teams and businesses our resource to take advantage of today and so you know were excited and we heard a lot of.

<unk> from our customers that are experiencing with these new gen AI capabilities lower cost of production to speed iteration cycles for new content and creative assets.

And in doing so we're excited that more companies are going to be able to work in a way that they find the advanced capabilities abrase to be indispensable and you know going back to the the conversation on Black Friday, cyber Monday and seeing more advanced features being used there what that means is that there's more realized differentiation for braves across a larger community of marketers because.

More of them are able to use our more sophisticated capabilities.

That's great. Thanks, So yeah absolutely.

Our next question comes from Michael Berg Football Fargo.

Ask your question.

Alright, Thanks for taking my questions and congrats on the quarter I wanted to ask.

Something more philosophically on 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 Bruce can you talk about the trend is for it and that's something that's real house.

Patrick.

Thank you.

Speaker 2: Yeah, so this is something we've been talking about for a long time, which is that, you know, I think a lot of the focus and the dollars in marketing organizations were primarily on acquisition, which meant, in a lot of cases, performance marketing and advertising. And over time, we've seen that, you know, even as there's been a capability to use first party data to make those strategies more efficient and more effective, that the internal silos that existed in a lot of marketing teams between the performance marketing and the CRM or the customer engagement teams, just kept them from being able to utilize those. And so, you know, going back to some of the analysis I just gave about what's driving vendor consolidation, I think part of this is a mindset, which is that, you know, in the

Yeah. So this is something we've been talking about for a long time, which is that you know I think a lot of the focus and the dollars in our marketing organizations, we're primarily an acquisition, which meant in lot of cases performance marketing and advertising and over time, we've seen that you know even as there's been a capability to use first party day.

To make those strategies more efficient and more effective that the internal silos that existed in a lot of marketing teams between the performance marketing in the CRM or the customer engagement teams I just kept them from being able to utilize those and so you know going back to some of the analysis I just gave about what's driving vendor consolidation I think part of this as a mindset.

Which is that you know in the in the kind of quest to get additional efficiency when theres more scrutiny and when these businesses are able to kind of slow down a little bit and rethink the way that they've been working they realize that actually theres been this low hanging fruit there for years now for them to be able to incorporate first party data and to be able to incorporate them.

Speaker 2: in the kind of quest to get additional efficiency, when there's more scrutiny and when these businesses are able to kind of slow down a little bit and rethink the way that they've been working, they realize that actually there's been this low-hanging fruit there for years now for them to be able to incorporate first-party data and to be able to incorporate first-party channels into their acquisition and their performance marketing strategies in order to drive additional efficiency. And so we've responded to that by increasing investment, especially over the last 12 to 18 months to make those integrations that we have into that ecosystem more comprehensive and make them easier to use. That in turn has been then driving additional collaboration between the CRM and customer engagement teams with their performance marketing or their acquisition teams. We think that those are teams that should work in harmony over the long term, and it was really just needed to have a catalyst in order to make that happen. And so we very much think that that trend is real. I think that it's been happening for years now. There's definitely more.

First party channels into their acquisition and their performance marketing strategies in order to drive additional efficiency and so we've responded to that by increasing investment, especially over the last 12 to 18 months to make those integrations that we have into that ecosystem more comprehensive and make them easier to use that in turn has been then drive.

Additional collaboration between the CRM and customer engagement teams are with their performance marketing are there acquisition teams. We think that that's a you know that those are teams that should work in harmony over the long term and it was really just needed to have a catalyst in order to make that happen and so we very much think that that trend is real I think that it's been.

Happening for years now there's definitely more focus on it as brands are pushing toward more efficiency and it's something that we think is going to continue.

Speaker 2: focus on it as brands are pushing toward more efficiency. And it's something that we think is going to continue.

Awesome Hull and one quick follow up.

Speaker 3: There's been a lot of discussion on the call around displacements of legacy vendors. It's something we have heard in the channel a fair bit recently. Is 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.

There's a lot of discussion on the call around displacement of legacy vendors, it's something we have heard in the channel a fair bit recently.

There've 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 in the legacy displacement opportunity. Thank you.

Speaker 2: Yeah, so, you know, we have a highly diversified customer base, and we've always had a great ability to flex both our sales capacity, our marketing investment, and our partner focus into both regions, or I guess all of regions, verticals, and account classifications, or account sizes that we see the most potential in. And so, you know, when I kind of look at those different dimensions, you know, today we're seeing the world experiencing pretty similar macro conditions. We've obviously mentioned the enterprise is in the near term, at least, performing better than S&B. But in the long term, you know, we're investing across the range of customer sizes that we sell to today. We're excited about the potential, you know, from S&B all the way up to the world's largest enterprises. And we're cultivating partnership, partner relationships across that whole spectrum as well, you know, inclusive of, you know, smaller marketing and growth agencies that work through our partner-led onboarding program to deliver to S&Bs all the way up to, you know, the global systems integrators, the big marketing, you know, marketing holding companies.

Yeah. So you know we have a highly diversified customer base and we've always had a great ability to flex both our sales capacity our marketing investment in our partner focus into both regions are or I guess all of regions verticals and account classifications or account sizes that we see the most potential in and so you know when I kind of look at those different <unk>.

Dimensions, you know today, we're seeing the world experiencing pretty similar macro conditions. We we've obviously mentioned the enterprise I is is in the near term at least I'd performing better than SMB, but in the long term you know we're investing across the range of customer sizes that we sell to today and we're excited about the potential although you know.

M S N b, all the way up to the world's largest enterprises and we're cultivating partnership.

Partner relationships across that whole spectrum, as well inclusive of smaller marketing and growth agencies that work through our partner led Onboarding program to deliver to you Smbs all the way up to you you know the global systems integrators, the big marketing marketing holding companies.

Speaker 2: that are the agency holding companies that work with us in the world's largest enterprise businesses. And as we see opportunities to break into, you know, whether it's particular verticals or maybe customer profiles that are characterized by, you know, changes to their regulatory landscape or maybe to their competitive landscape or places where we're able to look at the, you know, the competitive install base, whether it's a legacy marketing cloud or a legacy marketing cloud with a collection of, you know, point solutions, those are all data points that our sales team and our partners use in order to pursue, you know, strategies, whether it's around just creating those opportunities, you know, doing targeted account-based marketing or, you know, being able to do that in a more automated demand gen way and then all the way through the rest of the funnel. So, you know, very much.

That are the agency holding companies that work with us in the world's largest enterprise businesses and as we see opportunities to break into you know whether its particular verticals or maybe customer profiles that are characterized by you know changes to their regulatory landscape or maybe to their competitive landscape or places, where we're able to look at.

At the you know the competitive install base, whether it's a legacy marketing cloud or legacy marketing cloud with a collection of a you know a point solution.

<unk> those are all data points that our sales team and our partners use in order to pursue strategies, whether it's around just creating those opportunities you know doing targeted account based marketing and or you know being able to do that in a more automated demand Gen. A way and then all the way through the rest of the funnel. So you know very much where we are.

Speaker 2: We are tailoring and kind of targeting strategies around those types of considerations, but I would zoom out a little bit and realize that because of how diverse raises customer bases that is very much a muscle that exists across multiple dimensions.

Our tailoring and pur and kind of targeting strategies around those types of considerations, but I would zoom out a little bit and realize that because of how diverse raises customer base is that is very much a muscle that exists across multiple dimensions.

But well thank you.

Speaker 4: Our next question comes from Matt Bentley with BTIG. Please unmute yourself and ask your question.

Our next question comes from my memory or P. P. I G.

Ask your question.

Speaker 3: 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. You know, how do you feel about sort of who you have in in the portfolio? Do you have the right partners? Do you need to continue to build that number out there? Is it just really about driving home more business with the key partners that you're already aligned with?

Hey, good evening, thanks for taking the question.

Just following on the last topic around the partner community, especially around the consulting and <unk>.

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.

Number out there or is it just really about driving home more business.

With the key partners that Youre already aligned with.

Speaker 2: I think we're still so early in building strong relationships across the services ecosystem that the answer to that is very vehemently all of the above. It continues to be a major priority for investment. You know, we've been super encouraged by the progress that we have achieved with those partners who have leaned into their relationship with Braze because it validates the fundamentals of the flywheel that I've spoken about in past quarters. You know, it's win, win, win when we can bring business to the services ecosystem, when they can then build their bench of Braze certified marketers. They can bring, you know, more finely tailored services to our customers, which helps them achieve more differentiated value out of Braze. And that just spins the flywheel of our community and our services ecosystem. And so, you know, when we look ahead to Braze continuing to grow to orders of magnitude larger than it is today, our services footprint is both going to be deeper and broader. And, you know, it's going to be more global and it's going to be across more areas of service. When you look at the entire lifecycle of production of campaigns all the way through the execution, the data analysis and continuing to, you know, reach into more of the product surface area as well. And so there's a lot of opportunity for our services partners to continue to partner with Braze across a lot of different dimensions. You know, we're going to meet them with additional investment on our side and ensure that that services ecosystem continues to grow in partnership.

I think we're still so early in building strong relationships across the services ecosystem that the answer to that is very vehemently all of the above it continues to be a major priority for investment we've been super encouraged by the progress that we have achieved with those partners who have leaned into their relationship with braised because it validates the fundamentals of the flywheel that I've spoken about in past <unk>.

<unk> you know it's win win win when we can bring business to the services ecosystem. When they can then build their bench hombre certified marketers. They can bring more finely tailored services to our customers, which helps them achieve more differentiated value at abrase and that just spends the flywheel of our community and our services ecosystem and so you know when we look ahead.

Ah braised continuing to grow to you know orders of magnitude larger than it is today our services footprint is both going to be deeper and broader I and you know it's going to be more more global and it's gonna be across more areas of service. When you look at the entire lifecycle of production out of campaigns all the way through the execution and the data analysis and can.

<unk> to reach into more of the product surface area as well and so there's a lot of opportunity for our services partners to continue to partner with Grays across a lot of different dimensions, you know, we're going to meet them with additional investment on our side and ensure that that services ecosystem continues to grow in partnership with us.

Speaker 3: And then, Isabel, just quickly on, do you have any metrics you can share around sort of the mix of business that is influenced by some of those partners, or maybe and conversely, you know, can you can you give us a target that maybe we should think about over the next five years or say, of how much of the business could be influenced?

And then just quickly on <unk> do you have any metrics you can share around sort of the mix of business that is influenced by some of those partners.

Or maybe and tumors that can you 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 yeah. So we don't have specific metrics that we disclose or discuss certainly we expect it to continue to increase I think the way bill characterized it is exactly right. We are in the early stages of this and a few quarters ago, you know our our president Myles. It's like Wow, you know we have made more progress with you.

Speaker 2: Yeah, so we don't have specific metrics that we disclose or discuss. Certainly, you know, we expect it to continue to increase. I think the way Bill characterized it is exactly right. We are in the early stages of this. A few quarters ago, you know, our President Miles was like, wow, you know, we have made more progress with these guys in the last, you know, couple of months than we have in the last like five years, which is right, but we are still in the early stages of this. And so to be at a point yet where we are not only assigning, but also publicizing, you know, the attribution of our bookings, our top line to the partners, it's just too early to do that.

Guys in the last couple of months than we have in the last like five years, which is right, but we are still in the early stages of this and so to be at a point, yet where we are not.

Not only are signing but also public publicising I you know the attribution of our of our bookings our topline to the partner or is it just too early to do that.

Speaker 5: Okay, thank you.

Great. Thank you.

Speaker 4: Our next question comes from Jake Tittleman at Goldman Sachs. Jake, please unmute yourself and ask your question.

Our next question comes from catalog.

Fox So please limit yourself and ask your question.

Speaker 6: 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?

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. 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, yes.

Speaker 2: Yeah, so as we've said, we've been very happy with our team's execution and the productivity of our sales team is absolutely a part of that. You know, looking ahead into next year, we're we're focused on first closing out a strong Q4, and we're, you know, while we're doing that, we're hard at work preparing for our next sales kickoff in early February . We don't have details to share on this specifically today, but that kickoff will include some evolved pricing and packaging. We're going to be deploying more sophisticated territory carbs and account planning mechanisms. We hope that's going to continue to support improvements in velocity and productivity for our sales teams. You also heard Isabel mention a little bit earlier that we've authorized additional hiring in this year, specifically focused in R&D in order to help support additional revenue and additional.

Yeah. So as we've said we've been very happy with our teams execution and the productivity of our sales team is absolutely a part of that you know looking ahead into next year, where we're focused on first closing out a strong Q4, and we're well we're doing.

That we're hard at work preparing for our next sales kick off in early February we don't have details to share on the specifically today, but that kick off will include some of all pricing and packaging and we're gonna be deploying more sophisticated territory carbs and account planning mechanisms and we hope that's going to continue to support improvements in velocity and productivity for our sales teams. You also heard Isabela mentioned, a little bit earlier that.

We've authorized additional hiring in this year, specifically focused in R&D in order to help support you know additional additional revenue and additional.

Speaker 2: you know, just product feature sets, more sell, more stickiness, more usability, et cetera, further into the future. As we look into next year and increasing the size of the sales team, you know, we, as I mentioned before, with the highly diversified customer base, we do have an ability to flex new sales capacity and marketing investment into areas where we see strength. We are expecting an uneven recovery when we look at that from a global perspective. And so we're ready to adapt to that as it presents itself. And we're, you know, hard at work trying to read the tea leaves in the many regions that we operate in around the world so we can deploy capacity when we have confidence that, you know, those regions can support it. I think that, you know, we're also gonna look at account segmentation, you know, with respect to enterprise versus SMB, as well as, you know, in particular at the high end within our global strategic accounts program with the largest customers, looking at new categories and verticals that we could potentially continue to expand into. And so I think that seeing opportunities along those dimensions is what's gonna give us the competence to continue to build new sales capacity. And then along the way, we're gonna continue to invest in the broad-based productivity improvements, you know, that we've been hard at work on for the last year. And to some extent, that's a job that's never done, but, you know, we've certainly been really happy with what that has meant from an execution standpoint.

You know just product feature sets more sell more stickiness more usability et cetera further into the future as we look into next year and increasing the size of the sales team you know, we as I mentioned before with a highly diversified customer base. We do have an ability to flex new sales capacity and marketing investment into areas, where we see strength we.

We're expecting an uneven recovery when we look at that from a global perspective, and so we're ready to adapt to that as it presents itself and we're hard at work trying to read the tea leaves in the many regions that we operate in around the world. So we can deploy capacity when we when we have confidence that those regions can support it I think that you know we're also gonna look at account segmentation.

And with respect to enterprise versus SMB as well as you know in particular at the high end are well within our global strategic accounts program with the largest customers are looking at new categories and verticals that we could potentially continue to expand into and so I think that seeing opportunities along those dimensions is what's going to give us the comp.

Since that continue to build new sales capacity and then along the way we're going to continue to invest in the broad based productivity improvements that we've been hard at work on for the last year end and to some extent that's a job that's never done, but we've certainly been really happy with what that has meant from an execution standpoint.

Speaker 6: Thank you. That's helpful. And then just a quick follow-up for Isabel. So you're guiding to 26% growth in 4Q. How should we think about that as a potential starting point for fiscal 2025?

Thank you that's helpful. And then just a quick follow up for Isabel So you're guiding to 26% growth in <unk>, how should we think about that as a potential starting point for fiscal 2025.

Speaker 2: Yeah, so I'll speak sort of high level about 2025, but specifically for Q4, just remember both Q4 and Q1 are seasonally low from a sequential growth rate perspective. So, that is not unexpected, and all analysts and anyone doing models should incorporate that fact into any forecast.

Yeah, So I I I I'll speak for a high level of about 25, but I'm specifically for Q4, just remember I. Both Q4, and Q1 are seasonally low from a sequential growth rate perspective, so that is not unexpected and and all analysts and anyone doing models should incorporate.

That fact into any forecasting and then you can look historically that is a pattern that repeats itself and I think that you know as we look out into the future. Our you know we are going to continue to take a risk adjusted posture. When it comes to guidance and keep in mind that you know what I and I said.

Speaker 2: And you can look historically, that is a pattern that repeats itself.

Speaker 2: I think that, you know, as we look out into the future, you know, we are going to continue to take a risk-adjusted posture when it comes to guidance.

Speaker 2: And keep in mind that, you know, what I – and I said this earlier in the call, some of the results that happened over the back two-thirds of this year were as a result of North Star, which obviously we will lap in the early part of next year. And so, I would take that into consideration when not only thinking through what the guidance might look like, but then what the results might look like on the – what we're sort of planning for in terms of results on the other side of that guidance.

This earlier in the call some of the results that happened over the back two thirds of this year, where as a result of North Star, which obviously, we will lap in the early part of next year and so I would take that into consideration when not only thinking through what the guidance might look like but then what the results might look like on the.

What were sort of planning for in terms of results on the other side of that guidance.

And just remember that Q1 will still have a bit of a tailwind from the Northstar acquisition, but that is pretty much the last quarter that will have a year over year tailwind.

And so you know what we will get to FY 'twenty five in more fulsome detail in March once we have more visibility given the results of Q4.

Speaker 7: once we have more visibility given the results of Q4, but hopefully that's helpful from at least a philosophy perspective.

But hopefully that's helpful from at least a fill us philosophy perspective.

Thank you appreciate it.

In order to get everyone's questions.

So one question. Our next question comes from <unk> with Jpmorgan.

So I'm going to ask your question.

Great Congrats on the quarter and thanks for taking the questions. It seems like macro continues to be a bit challenging is about is there a way to think about India going forward, because you are kind of reaching or.

We'll be reaching getting easier columns, starting in Q4, but with macro continues to be challenging.

So I'm thinking if it kind of.

If you see kind of bulbs.

A point in Q4 Q1 or do you feel like you might continue this later.

Speaker 7: Yeah. So, you know, I think that it is a lagging indicator, especially given that it is a 12-month trailing. And so, I would not – while we don't guide on it specifically, our own internal models and forecasting will assume that, from a risk-adjusted perspective, that there's going to be more to come out there. So, I don't think we have fully called the bottom yet, and that's mostly just because it is a lagging indicator, mostly because it's a 12-month trailing.

Yeah. So you know I think that it is a lagging indicator, especially given that it is a 12 month trailing them and so I I would not well we don't guide on it specifically are our own internal models in forecasting we'll assume that from a risk adjusted perspective that there's going to be more.

More to come out there. So we're I don't think we have fully called the bottom yet and that's mostly just because it's a it is a lagging indicator, mostly because it's a 12 month trailing statistic. So I I would incorporate that fact pattern in when thinking about the future.

Speaker 7: So, I would incorporate that fact pattern in when thinking about the future.

Understood. Thank you.

Speaker 4: The next question comes from Scott Berg with Needham. Please unmute yourself and ask your question.

Next question comes from Scott Berg with Needham Please limit yourself and ask your question.

Speaker 8: Hi, everyone. Great quarter. Thanks for taking my questions. Bill, in your pre-scripted remarks, you talked about passing the $500 million dollars in committed ARR threshold. Congrats. It's obviously a big number, but how do you think about a billion dollars or more than a billion dollars? Do you have can you get there with your current product set or do you feel like you need some additional, you know, whether it's modules, functionalities, channels, et cetera, to help achieve that goal?

Hi, everyone great quarter, Thanks for taking my questions.

Bill in your pre scripted remarks, you talked about passing the $500 million and committed.

Our threshold congrats it's obviously, a 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.

It's modules functionalities channels et cetera to tell between vertical please.

Speaker 2: Yes, I think that, you know, when we look out toward doubling again and then growing, you know, orders of magnitude after that, there will absolutely continue to be meaningful expansion of our product surface area. You already see us making forays into new buyer personas as we've, as we've expanded into, you know, selling things like feature flags to more of a chief product officer, chief technology officer, kind of a budget than CMOs. And, you know, we've obviously been doing a lot of investment into our data platform along the way is going to be continued expansion into different channels, continuing to expand our orchestration and personalization capability. And so I think you should expect to continue to see a broad base of investment, which, you know, we're excited about how all of those new product expansions compound themselves into existing customer growth. It provides us with additional landing points and starting points for new customers and, you know, continues to just add more differentiated value for Braze over time, which obviously encourages stickiness and community growth. I think also, you know, 1 of the things that I come back to when I think about our future growth is that Braze still is right around 2000 customers today, even as we're at 500Million in car. And so as we expand to, you know, a billion in AR, we'll expect to be somewhere around 4 to 5000 customers. And as we continue to grow from there, you know, we're preparing as an organization for having orders of magnitude more than that. And so, as we look at upgrading our own internal processes right now, every time we look at whether it's a new post sales motion, a new way that we're continuing to.

Because I think that you know when we look out towards doubling again, and then growing orders of magnitude. After that there will absolutely continue to be meaningful expansion of our product surface area, you already see us, making forays into new buyer persona is as we've as we've expanded into selling things like feature flags to more of a chief product officer or chief.

Technology officer kind of a budget and then see them OS I and we've obviously been doing a lot of investment into our data platform along the way is going to be continued expansion into different channels continuing to expand our orchestration and personalization capability and so I think you should expect to continue to see a broad base of investment, which we're excited about.

How all of those new product expansions compound themselves into an existing customer.

Customer growth it provides us with additional landing points and starting points for new customers and it continues to just add more differentiated value for <unk> over time, which obviously encourage a stickiness and community growth. I think also you know one of the things that I come back to when I think about our future growth is that Brazil is right around 2000 customers today, even as we're at $500 million in car and so.

As we expand to you know a 1 billion and are are we will expect to be somewhere around four to 5000 customers and as we continue to to grow from there we're preparing as an organization for them, having orders of magnitude more than that and so as we look at upgrading our own internal processes right. Now every time, we look at whether it's a new post sales motion.

In a new way that we're continuing to.

Speaker 2: to add automation to things like product-led sales or product-led growth motions, et cetera. Those are all investments that we're making to prepare for a meaningful scale differences as we continue to grow. For Braze to achieve our community goals, we obviously need to have a much larger reach, but we think that's also a motion that will compound on itself. Speaking of that, there's also obviously the agencies and the ecosystem and the partnership side, which also will help to compound our way to a billionaire and beyond. You're seeing investment across a lot of different dimensions for Braze to be able to support that. We feel really good about the very diverse customer base that we have today. You hear me talk about that all the time. Braze is very much not a business that went and highly penetrated and concentrated itself into a specific vertical or a specific channel or a specific geo. We have a very diverse foundation upon which to continue to build a very, very large business and build into a very large opportunity. It's obviously more challenging to start building a business that way than it is to start in a niche and be able to kind of build directly into it. But we also see it as being less risky as we look out to bigger numbers and kind of more long-term targets because we've already proven that we can sell into those verticals, that we can satisfy those use cases, that we can deliver a product to companies of those sizes and that we can solve not just regional and local use cases around the world, but also the unique nature of global businesses as well.

To add automation to things like product led sales or product led growth Moshe et cetera.

These are all investments that we're making to prepare for a meaningful scale differences as we continue to grow off a base to achieve our community goals. We obviously need to have a much larger reach but we think that's also a motion that will compound on itself.

Speaking of that there's also obviously the agencies in the ecosystem and the partnership side, which also will help to compound our way to a billionaire our and beyond and so you're seeing investment across a lot of different dimensions for braves to be able to support that we feel really good about the very diverse customer base that we have today, you'll hear me talk about.

That all the time braises very much not a business that went and like highly penetrated in concentrated itself into a specific vertical or a specific channel or civic G. O. We have a very diverse foundation upon which to continue to build a very very large business and build into a very large opportunity. It's obviously.

More challenging to start building a business that way than it is to start in a niche and be able to kind of build directly into it but we also see it as being less risky as we look out to a big bigger numbers in and kind of more long term targets because we've already proven that we can sell into those verticals that we can satisfy those use cases that we can deliver them a.

The companys of those sizes and that we can solve not just a regional or local use cases around the world, but also the unique nature of global businesses as well.

Speaker 9: Thanks a lot.

Excellent. Thank you.

Speaker 10: Our next question comes from Brian Schwartz with Oppenheimer. Please unmute yourself and ask your question. Yeah, thank you for taking my question. Great quarter. Bill, the commentary that you've been giving on the call about what you're seeing with the macro, I'm wondering if that is, you're saying a similar environment all around the world, specifically, you know, in EMEA and APAC in North America. Are there any differences or is there any stability or maybe?

Our next question comes from Brian Schwartz with Oppenheimer.

Ask your question, yes. Thank you for taking my question and great quarter build the commentary that you've been giving in on the call about what youre seeing with the macro I'm wondering if that is you're saying is similar environment all around the world specifically you know me I E.

Packed in North America or are there any differences or is there any stability or maybe somewhat improvement in any of the international markets. Thank you.

Speaker 10: somewhat improvement in any of the international markets. Thank you.

Speaker 2: You know, no, we're not seeing any sort of, you know, meaningful improvement. I think everybody's kind of suffering under the same high interest rate environment, the same volatility, the same drive toward toward, you know, efficiency, overgrowth, the same, you know, inflationary environments. I would say that, you know, we we also we saw different timing in terms of some of the venture world, just because a lot of the companies in the United States were had, you know, very recently raised large amounts of money. And so their runways weren't coming up on them quite as quickly. So we are actually, to some extent, anticipating that that could become more of a problem in the venture backed world in America, in the Americas and EMEA coming into next year as some of those runways start to run out. And I think we've already been seeing that in APAC over the last year, where a lot of those startup businesses were a little bit less well capitalized heading into this environment. And so that part of it, I would say, is uneven, but it's more like uneven timing on badness. You know, all that said, we are also expecting the recovery, you know, and eventual loosening of conditions to similarly be uneven. We're certainly seeing, you know, different responses from governments and different currency performance and different, you know, paces of progress in terms of inflation, stabilization and different markets around the world. And so for us, what that adds up to is that we need to continue to be, you know.

No we're not seeing any sort of no meaningful improvement I think everybody is kind of suffering under the same high interest rate environment at the same volatility the same drive toward toward efficiency Overgrow the same.

Inflationary environments.

I would say that I you know we also we saw different timing in terms of some of the venture world just because a lot of the companies in the United States, where had you know very recently raise large amounts of money and so they're runways weren't coming up on them quite as quickly. So we are actually to some extent anticipating that that could be.

More of a problem in the venture backed World in America in the Americas, and EMEA coming into next year as some of those runaway start to run out and I think we've already been seeing that in APAC over the last year, where a lot of those startup businesses, where I'm, a little bit less well capitalized heading into this environment and so that part of it I would say is uneven, but it's more like uneven timing on <unk>.

This you know all that said we are also expecting the recovery I you know in an eventual loosening of conditions to similarly be uneven. We're certainly seeing you know different responses from governments in different currency performance and different pieces.

Pieces of progress in terms of inflation stabilization in different markets around the world and so for US what that adds up to is that we need to continue to be you know.

Speaker 2: really paying close attention to data, to evolving conditions and making sure that we're deploying sales capacity and marketing investments in the places where we start to see early signs of recovery. Because while I think we're seeing similarly subdued negative macro conditions all around the world right now, we are expecting the eventual recovery to be uneven and we want to make sure that we're quick to those markets that are early to it.

Really paying close attention to data to evolving conditions, and making sure that we're deploying our sales capacity and marketing investments in the places where we start to see early signs of recovery because well I think we're seeing similarly subdued negative macro conditions all around the world right now we are expecting the eventual recovery to be on <unk>.

And we want to make sure that we're quick to those markets that are that are early to it.

Thank you.

Speaker 4: Our next question comes from DJ Hinds with Pianocord. Please unmute yourself and ask your question.

Our next question comes from DJ Hynes with Canaccord.

Ask your question.

Speaker 6: Hey, thank you guys. Um, so Bill, we've seen some other marketing or CDP companies recently initiate or talk about rolling out. You know, a mobile channel to compliment their existing email, SMS and other active 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?

Hey, Thank you guys.

So bill we've seen some other marketing our CDP companies recently initiate or talk about rolling out our.

Our mobile channel to complement their existing email SMS and other activity 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 I'd love to hear your take.

Speaker 2: Yeah, so I'd first correct history a little bit and note that we actually started across four separate channels, and the very first version of our product that we launched included email. And so, you know, Braze, dating all the way back to our beta release in 2012, has been building on, you know, mobile and email experience, as well as in-product messaging, which included both a persistent in-product message type through our newsfeed, as well as a slide-up message that was interactive with the customer. And so our first version launched with four different channels, which included some that were pushed by their nature, some that were pulled by their nature, some that was integrated into a product, and email obviously being outside of the product. And the pressures that having that multidimensional channel set place on the segmentation and the orchestration and the personalization capabilities, as well as the nature of being able to maintain the invariant of keeping everything interactive in real time across all those different channel types, meant that, you know, it was definitely harder for us to build in the early days, because every time we rolled out a new targeting feature, we had to make sure it works across all those different channels. But now we find ourselves in a position where, as we've gone from four to five to six to, you know, a dozen or more channels, depending on how you want to count them, that our foundations anticipated all those different dimensions that message types would have. And so I think when you compare that then to a lot of our competitors, that, you know, they either started in a single channel or they started in channels that were not integrated into the products. You know, we have a lot of competitors who are focused on things like email or SMS, which doesn't require any sort of integration into a code base, you know, where you're actually living inside of a product. And that means that they don't have pre-existing relationships with the engineering and the product teams. And, you know, that's a really big gulf for them to get over, being able to do push-based or broadcast-based messaging and switch that to, you know, an individual customer opening up a product experience and needing to interactively load a personalized feed inside their product. Just very different demands on, you know, even on just like the database.

Yeah. So I'd first correct history, a little bit and note that we actually started across four separate channels and the very first version of our product that we launched included email and so you know braze dating all the way back to our beta release in 2012 has been building on mobile and email experience as well as in product messaging.

Which included both a persistent and product message type through our news feed as well as a slight up message that was interactive with the customer and so our first version launch with four different channels, which included some that were pushed by their nature. Some that were pulled by their nature are something that was integrated into our product and email obviously being outside of the product and the pressure.

Or is that having that multi dimensional channel set a place on the segmentation in the orchestration and the personalization capabilities as well as the nature of being able to maintain the invariant of keeping everything interactive in real time across all those different channel types meant that I you know it was definitely harder for us to build in the early days.

Because every time, we rolled out a new targeting feature we had to make sure. It works across all of those different channels, but now we find ourselves in a position where as we've gone from four to five to six you know a dozen or more channels, depending on how you want to count them that our foundations anticipated all those different dimensions that message types would have and so I think when you compare that then too.

A lot of our competitors that you know they either started in a single channel or they started in channels that were not integrated into the products. We have a lot of competitors, who are focused on things like E mail or SMS, which doesn't require any sort of integration into the into a codebase, you know where you're actually living inside of a product and that means that they don't have preexisting.

<unk> relationships with the with the engineering and the product teams and you know that's a really big golf for them to get over being able to do push base or broadcast based messaging and switch that to you know an individual customer opening up a product experience and needing to interactively load a personalized feed inside their product is very different demands on you know even on just like the database.

And being able to deliver that ability to personalize and so you know when we look at the competitive set and we see them any any competitor that really grew up on a single channel or they grew up outside of the product or they grew up tied to a specific vertical over time, we just know that there's a there's some pretty.

Big chasm that theyre going to have to get over and they're gonna be even harder to cross because they painted themselves into corners that they don't even realize right now and so I think that Braves chose to build a really diversified business I've talked about all the dimensions of that across the customer base, but the same thing is true across our platform and channel set as well and.

Speaker 2: I'll just reiterate that, well, I think that's harder in the early days that it creates more opportunity in the long term, and we're excited about what that means for our enduring differentiation.

And I'll, just reiterate that while I think that's harder in the early days that it creates more opportunity in the long term and we're excited about what that means for our enduring differentiation.

Yeah I appreciate the color. Thank you.

Speaker 11: We have time for one more question. The final question will come from Andrew Sherman with Cohen. Please unmute yourself and ask your question. Oh, great. Thanks. It's Andrew. I'm for Derek. Isabel, if you talk about growth trends and MAUs, I think this is about half of the contract structure for customers, what are you seeing there from your larger customers? And if the consumer improves, can that be a growth driver for you over the next couple of quarters? Yeah.

We have time for one more question.

She will come from Andrew Sherman with Cowen Please limit yourself and ask your question.

Oh, great, thanks, et cetera, or there.

It's about you talked about growth trends in <unk> business about half of our contract structure for customers. What are you seeing there from your larger customers consumer improve growth driver neuro over the several quarters.

Yeah, So we don't really.

Speaker 7: tie our future view of economic performance specifically to the MAU. If you look at the MAU growth, actually, it's been more slow than our overall revenue growth.

Tires for future sort of view of kind of economic performance to specifically to kind of be the MAA. If you look at the Mou growth actually it's been more slow than our overall revenue growth and I know people are focused on this number we generally try to kind of pull people away from it and what we've noticed in terms of just general buying patterns.

Today versus kind of pre when the market started to fall apart people used to buy sort of FERC for growth expectations Youre seeing some of this play out actually in the dollar based net retention and people would buy are based on expectations of growth and just knowing that they would sort of grow into what they had purchased and we are definitely seeing renewals.

Speaker 2: people used to buy sort of for gross expectations. You're seeing some of this play out actually in the dollar-based net retention. People would buy based on expectations of growth and just knowing that they would sort of grow into what they had purchased. We are definitely seeing renewals and purchases come in more in line with where they actually think they're going to be using in the near term, and then they will upsell over time as the growth warrants it. So, you know, maybe you're seeing some of that in the monthly active user. We are, you know, very happy with the overall performance of the business, but not really overly scrutinizing the monthly evolution or the quarterly evolution of the MAU. Thank you. I will now pass the call back to Bill for closing remarks. Thank you, Operator. And I just want to thank everyone.

And purchases come in more in line with where they actually think theyre going to be using in the near term and then they will upsell over time as the growth at warrants it and so you know maybe you're seeing some of that in in the monthly active user we are very happy with the overall performance of the business, but not really overly scrutinizing.

Speaker 2: in more in line with where they actually think they're going to be using in the near-term, and then they will upsell over time as the growth warrants it. So, you know, maybe you're seeing some of that in the monthly active user. We are, you know, very happy with the overall performance of the business, but not really overly scrutinizing the monthly evolution or the quarterly evolution of the MAU. I will now pass the call back to Bill for closing remarks. Thank you, Operator, and I just want to thank everyone for joining the call today. We appreciate your continued support and are looking forward to seeing you at a conference or on the road soon.

<unk> are the monthly evolution or the quarterly evolution of the Mou.

Speaker 12: Thank you.

Yeah.

I will now pass the call basketball for closing remarks.

Speaker 2: Thank you, Operator, and I just want to thank everyone for joining the call today. We appreciate your continued support and are looking forward to seeing you at a conference or on the road soon.

Thank you operator, and I just want to thank everyone for joining the call. Today. We appreciate your continued support and are looking forward to seeing you at a conference or on the road soon.