Q1 2025 Braze Inc Earnings Call

Unnamed Speaker: our anticipated customer behaviors, including vendor consolidation trends and their impact on Braze, the timing and benefits of our global expansion efforts, our potential market opportunity, 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. 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.

Vendor consolidation trends and their impact on braze, the timing and benefits from our global expansion efforts, our potential market opportunity 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. These.

Speaker Change: 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.

Unnamed Speaker: For a discussion of the material risks and uncertainties that could affect our actual results, please refer to the risks identified in today's press release and our SEC filings, both available on the Investor Relations section of our website. I'd also like to remind you that today's call will include certain non-GAAP financial measures used by management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal first quarter 2025 performance in addition to the impact these items have on the financial results.

Speaker Change: And our SEC filings both available on the Investor Relations section of our website.

Speaker Change: I'd also like to remind you that today's call will include certain non-GAAP financial measures used by management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal first quarter 2000, and twenty-five performance. In addition to the impact these items have on our financial results. Please refer to the reconciliations of our non-GAAP.

Unnamed Speaker: Please refer to the reconciliations of our non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with U.S. GAAP included in our earnings release under the Investor Relations section of our website. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with U.S. GAAP.

Speaker Change: Measures to the most directly comparable financial measures calculated in accordance with U S. GAAP included in our earnings release under the Investor Relations section of our website. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with U S. GAAP and now I'd like to turn.

Bill: And now, I'd like to turn the call over to Bill. Thank you, Chris, and good afternoon, everyone. We are pleased with our first quarter results, which again demonstrated the strength of the Braze customer engagement platform in a challenging macroeconomic environment. We got off to a solid start to the year, generating $135.5 million of revenue, up 33% compared to the prior year. Excluding the $750,000 impact of a service outage we experienced in April, revenue would have been approximately $136.3 million.

Speaker Change: The call over to Bill.

Thank you Chris and good afternoon, everyone. We are pleased with our first quarter results, which again demonstrated the strength of the brace customer engagement platform and a challenging macroeconomic environment, we got off to a solid start to the year generating $135 $5 million of revenue up 33% compared to the prior year.

Speaker Change: Excluding the 750000 dollar impact of a service outage, we experienced in April revenue would've been approximately $136 $3 million.

Bill: This quarter, we again demonstrated strong leverage, improving non-GAAP operating margins by over 800 basis points year-over-year and generating strong cash flow from operations of approximately $19 million, driven by Collections in our fourth quarter. As we progress through 2025, we plan to continue investing to support our top-line growth and our long-term opportunities, all while staying focused on improving our efficiency and hitting our profitability. Brands continue to recognize the high ROI that can be achieved through personalized cross-channel customer engagement enabled by the Braze platform.

This quarter, we again demonstrated strong leverage improving non-GAAP operating margins by over 800 basis points year over year and generating strong cash flow from operations of approximately $19 million driven by collections on our fourth quarter bookings.

Speaker Change: As we progress through 2025, we plan to continue investing to support our topline growth and our long term opportunity all while staying focused on improving our efficiency and hitting our profitability goals.

Speaker Change: Brands continue to recognize the high ROI that can be achieved through personalized cross channel customer engagement enabled by the <unk> platform in the first quarter, we increased our customer count by 58 sequentially to a total of 2102 as we continue to win against legacy marketing clouds and point solutions with our industry leading platform our enterprise business was strong.

Bill: In the first quarter, we increased our customer count by 58 sequentially to a total of 2,102 as we continue to win against legacy marketing clouds and point solutions with our industry-leading platform. Our enterprise business was strong, with $500,000 plus ARR customers continuing to grow, rising 29% year-over-year to 212. Notable new business wins include Bauer Media Group, Bolt Technology, Country Road Group, Leonardo.ai, Property Finder, Solaris Notable upsells in the quarter include Etsy, Lime, Mr. iDoctor, Talkspace, and the rewards credit card.

Speaker Change: With $500000 plus are our customers continuing to grow rising 29% year over year to 212.

Speaker Change: Notable new business wins include Bauer Media group Bolt technology Country Road group, Leonardo Dot AI property Binder, So Lars Bank AG and many others. Notable upsells in the quarter include Etsy line, Mr Eye Doctor talk space and the rewards credit card Yonder.

Bill: In the quarter, we again benefited from the vendor consolidation trend that we have highlighted, securing new business wins that simultaneously replace legacy marketing clouds, channel-specific point solutions, and homegrown tools across diverse customers, including a German e-commerce brand, an Australian fintech app, a specialty fashion retailer in APAC, and an American workforce manager. These are just a few examples of the many in which Braze has placed legacy marketing clouds, siloed point solutions, and regionally fragmented technical architectures as brands look to combine capabilities and centralize administration of their customer engagement technology.

Speaker Change: In the quarter, we again benefited from the vendor consolidation trend that we have highlighted in recent quarters, securing new business wins that simultaneously replace legacy marketing clouds channel specific point solutions and homegrown tools across diverse customer examples, including a German E Commerce brand in Australia, and Fintech App, a specialty fashion retailer in APAC and an American workforce management solutions firm.

Speaker Change: These are just a few examples of the many in which Frazer placed legacy marketing clouds, Siloed point solutions and regionally fragmented technical architectures as brands looks the combined capabilities and centralized administration of their customer engagement technology ecosystem. We believe that both the legacy replacement cycle and vendor consolidation trends can lead to share gains for brace as brands look to capitalize.

Bill: We believe that both the legacy replacement cycle and vendor consolidation trends can lead to share gains for Braze as brands look to capitalize on new AI-driven advancements in customer engagement capabilities. As marketers become increasingly agile, ambitious, and experimental with their customer engagement initiatives, we believe Braves stands to benefit and position itself as the dominant player in customer engagement while delivering increased relevance and personalization to consumers. As we've stated on previous calls, even as we are pleased with our ex... The macro environment remains. We have not seen a meaningful improvement in the qualitative characteristics of our demand environment and continue to see cautious buyer behaviors, long decision-making cycles, and enhanced scrutiny on both budget and personnel.

Speaker Change: On new AI, driven advancements in customer engagement capabilities as marketers become increasingly agile ambitious and experimental with their customer engagement initiatives. We believe <unk> stands to benefit and position itself as a dominant player and customer engagement, while delivering increased relevance and personalization to consumers at scale as we've stated on previous calls even as we are pleased with our execute.

Speaker Change: <unk> the macro environment remains uncertain, we have not seen a meaningful improvement in the qualitative characteristics of our demand environment and continue to see cautious buyer behaviors long decision, making cycles and enhanced scrutiny on both budget and personnel resources. However, we remain confident that the cultivation of strong and well understood first party customer relationships will continue to.

Bill: However, we remain confident that the cultivation of strong and well-understood first-party customer relationships will continue to rise in value and importance for modern brands. As we all embark on the third year of operating through an environment with heightened... Brands must continue their value conscious focus on high ROI initiatives like life cycle optimization and, both core strengths of Braze's primary off, Building on that foundation and looking into the future, we believe that it takes much more than optimizing existing strategy for brands to remain competitive, particularly as more industries are turned upside down by the dual forces of globalization and rapid technological change, driven by AI, and enhanced by the continued convergence of our digital and physical.

Speaker Change: Horizon value and importance for modern brands.

Speaker Change: As we all embark on the third year of operating through an environment with heightened interest rates brands must continue their value conscious focus on high ROI initiatives like lifecycle optimization and retention both core strengths abrasives primary offering building.

Speaker Change: Building on that foundation and looking into the future. We believe that it takes much more than optimizing existing strategy for brands to remain competitive, particularly as more industries are turned upside down by the dual forces of globalization and rapid technological change driven by AI and enhanced by the continued convergence of our digital and physical lives and this is why we continue to invest in R&D to drive it.

Bill: And this is why we continue to invest in R&D to drive innovation in the Braze customer engagement platform. We are relentlessly focused on using product innovation to enhance our competitive differentiation, gain market share, and accelerate enterprise consolidation and replacement. As we grow, we are also expanding the global community of Braze-trained marketers and customer engagement professionals, strengthening a long-term moat rooted in the adoption of a sophisticated, interdisciplinary, and cross-channel approach to marketing that is driven by first-party data, enhanced by agility, experimentation, and AI, and comprehensively applied throughout the customer life cycle.

Speaker Change: Innovation in the brace customer engagement platform, we are relentlessly focused on using product innovation to enhance our competitive differentiation gained market share and accelerate the enterprise consolidation and replacement cycles. As we grow we are also expanding the global community of brace trained marketers and customer engagement professionals strengthening our long term moat rooted in the adoption of a sophisticated interdisciplinary.

Larry and cross channel approach to marketing that is driven by first party data enhanced by agility experimentation and AI and comprehensively applied throughout the customer lifecycle with our longstanding focus on enhancing marketer productivity. We launched an early version of our AI Copywriting assistant last year, and it's been adopted and effectively employed by hundreds of customers. We recently expanded the.

Bill: With a long-standing focus on enhancing marketer productivity, we launched an early version of our AI Copywriting Assistant last year, and it has been adopted and effectively employed by hundreds of companies. We recently expanded this feature set with on-brand copy generation, allowing customers to quickly customize new cross-channel campaigns by using retrieval-augmented generative AI to mine their historical Braze campaign content and automatically generate new messages, all while keeping strong guardrails on the Gen-AI outputs to maintain appropriate brand personality, reputation, values, and standards.

Speaker Change: Feature set with on brand coffee generation, allowing customers to quickly customize new cross channel campaigns by using retrieval augmented generative AI to mine their historical brace campaign content and automatically generate new message variance all while keeping strong guardrails on the gen II outputs to maintain appropriate brand personality reputation values and voice this pairs.

Unnamed Speaker: This pairs well with our generative tone control, which helps marketers adapt and control the tone of AI or human-generated copy throughout Braze. And we have increasingly seen customers using both features in tandem to save time in content production and create more authentic brand experiences, all while eliminating marketing.

Speaker Change: Well with our generative tone control feature which helps marketers adapt and control the tone of AI or human generated copied throughout race and we are increasingly seeing customers using both features in tandem to save time and content production and create more authentic brand experiences all well eliminating marketing missteps as we continue expanding sage AI, we are doing so carefully and methodically.

Unnamed Speaker: As we continue expanding SAGE AI, we are doing so carefully and methodically to ensure that we are also increasing marketer competence in the quality of automatically generated outputs and orchestras. We believe the success on this path will lead us to a future where marketers can trust Braves to fully optimize the orchestration, relevance, and personalization dimensions of their first-party data investments and customer engagement. While we continue to inject AI throughout our platform, we are also hard at work to evolve and expand Braze's channel selection in order to maximize the value that our customers can derive from the sophistication available further up the line.

Speaker Change: To ensure that we are also increasing market our confidence in the quality of automatically generated outputs and orchestration decisions. We believe the success on this path will lead us to a future where marketers can trust sprays to fully optimize the orchestration relevance and personalization dimensions of their first party data investments and customer engagement strategies.

Speaker Change: While we continue injecting AI throughout our platform. We're also hard at work to evolve and expand braces channel selection in order to maximize the value that our customers can derive from the sophistication available further up the brace stack, we've spoken a lot about SMS on Whatsapp in the last few earnings calls and today I wanted to highlight recent evolution in a channel that bracer supported since our founding mobile push.

Unnamed Speaker: We've spoken a lot about SMS and WhatsApp in the last few earnings calls, and today I wanted to highlight the recent evolution in a channel that Brace has supported, Mobile Push. Most iPhone users have by now experienced the power of live, iOS 17 upgraded live activities, and they now allow for persistent real-time updates right on the lock screen.

Speaker Change: <unk>.

Most iPhone users have by now experienced the power of live activity notifications I O.

Speaker Change: 17 upgraded live activities and they now allow for persistent real time updates right on the lock screen to keep users informed about deliveries rideshare status sports scores and other time sensitive activities relying on our SDK and vertical integration raise makes it simple for brands to use live activities, allowing them to easily update and manage the activity lifecycle using real time first.

Bill: Keep users informed about deliveries, rideshare status, sports scores, and other time-sensitive information. Relying on our SDKs and vertical integration, Braze makes it simple for brands to use Live, allowing them to easily update and manage the activity lifecycle using real-time first-party data while also taking advantage of our advanced targeting, testing, orchestration, and personalization capabilities. In addition, Braze makes it easy to pair live activities with other channels like in-app messages and content cards, advancing a brand's cross-channel engagement strategy.

Speaker Change: Party data, while also taking advantage of our advanced targeting testing orchestration and personalization capabilities. In addition, brace makes it easy to pair live activities with other channels like inept messages and contact cards advancing our brands Cross channel engagement strategies. This feature is particularly exciting for brands and media Entertainment Sports and gaming we're live activities help fans.

Bill: This feature is particularly exciting for brands and media, entertainment, sports, and gaming, where live activities help fans keep a prize for In-the-Moment updates for events like the ongoing NBA or NHL playoffs or the T20 Cricket World Cup and even the Olympics later. These are just a few examples of the myriad of enhancements we have been adding in order to enhance our platform and help our customers drive higher ROI. We believe these are efficient investments in our future and will help drive additional usage and new customers to Braze in the coming years. Zooming out to look at our operation.

Speaker Change: Keep apprised of the in the moment updates for events like the ongoing NBA or NHL playoffs, or the T 20 Cricket World Cup and even the Olympics later this summer.

Speaker Change: These are just a few examples of the myriad of enhancements, we have been adding in order to enhance our platform and help our customers drive higher ROI. We believe these are efficient investments in our future and will help drive additional usage and new customers to raise in the coming quarters and years.

Speaker Change: Zooming out to look at our operational footprint. We're also excited by the increasingly global nature of our addressable market and continue making investments to support braces growth with an expanding roster of multinational brands and the enterprise. This opportunity is enhanced by both the technology consolidation trend that I referenced earlier and by the continued expansion of enterprise direct to consumer offering.

Bill: We are also excited by the increasingly global nature of our addressable market and continue making investments to support Braze's growth with an expanding roster of multi-nationals, and the Enterprise. This opportunity is enhanced by both the technology consolidation trend that I represent and by the continued expansion of enterprise direct-to-consumer offerings into new and fast, particularly in regions like AIPAC. In May, we announced progress on our plan, team, and office. Apollo, Bucharest, Dubai, and, The month prior, we announced our plans to open a new data center in... Our second non-U.S. data center and our first, We expect this investment in our global data center footprint to accelerate, enabling us to better navigate the increasingly complex data residency and privacy, particularly for our customers and prospects in heavily regulated services, Health Care, and, allowing customers flexible workflow options to manage translations, test and preview multi-language messaging, and derive new data insights across locales. We also announced the availability of the Braze dashboard in Spanish and Brazilian.

Speaker Change: <unk> into new and fast growing markets, particularly in regions like APAC and Latam and.

Speaker Change: In May we announced progress on our planned team and office expansions into saw Paulo, Bucharest, Dubai and soul the month prior we announced our plans to open a new data center in Indonesia, Our second non U S data center and our first in APAC. We expect this investment in our global data center footprint to accelerate in future years, enabling us to better navigate the increasingly complex.

Speaker Change: Data residency and privacy landscape, particularly for our customers and prospects in heavily regulated industries, such as financial services healthcare and the public sector. We have also continued making localization investments that make life easier for marketers working across multiple languages or diverse regions recently, we launched major upgrades to our multi language competition capabilities.

Speaker Change: Aligning customers flexible workflow options to manage translations testing preview multi-language messaging and drive new data insights across locales and languages. We also announced availability of the brace dashboard and Spanish and Brazilian Portuguese and have made enhancements to the existing Japanese and Korean dashboard and documentation translations.

Bill: And have made enhancements to the existing Japanese and Korean dashboards, and has operated globally from its and revenue outside the U.S. continues to be a substantial portion of our total at 44% in the. As we look to the future, we see large greenfield growth opportunities in fast-growing global markets and are excited to be preparing. You may have also noticed that just this week we added Yvonne Wassenaar, a seasoned SAS executive, to our board of directors.

Speaker Change: Racist operated globally from its early years in revenue outside the U S continues to be a substantial portion of our total at 44% in the current quarter as we look to the future. We see large greenfield growth opportunities in these fast growing global markets and are excited to be preparing for that future today.

Speaker Change: You may have also seen that just this week, we added Yvonne Wassenaar, a seasoned executive to our board of directors for over 30 years, Ivan has advice leaders on scaling diversifying and transforming their businesses throughout the Americas, Europe and Asia. She replaces Doug Pepper, who served on our board for nearly a decade and he will remain on the team as a board observer, we look forward to.

Bill: For over 30 years, Yvonne has advised leaders on scaling, diversifying, and transforming their businesses throughout the Americas, Europe, and the world. She replaces Doug Pepper, who served on our board for nearly a decade and who will remain on the team as a board member.

Bill: We look forward to all the contributions Yvonne will make to Braze's strategy and, Before I turn it over to Isabelle, I'd like to update you on our latest ESO... We are excited to announce that Braze has formally committed to setting a near-term science-based target of reducing our carbon emissions... Marking a significant step in our, This commitment aligns our emissions reduction targets with the global goal of limiting warming to 1.5 degrees Celsius above pre-industrial temperatures, in line with the U.N. By committing to setting a science-based target, we pledge to reduce our greenhouse gas emissions in line with the latest scientific research.

Bond: All of the contributions of bond will make to <unk> strategy and next stage of growth.

Bond: Before I turn it over to Isabelle I'd like to update you on our latest ESG initiatives. We're excited to announce that braces formally committed to setting a near term science based target of reducing our carbon emissions, marking a significant step in our sustainability journey. This commitment aligns our emissions reduction targets with the global goal of limiting warming to one five degrees Celsius above preindustrial levels.

Bond: <unk> in line with the UN Paris agreement.

Isabelle: By committing just setting a science based target we pledged to reduce our greenhouse gas emissions in line with the latest climate Science, we will be publishing our third annual ESG report and launching our ESG Microsite later this summer.

Bill: We'll be publishing our third annual ESG report and launching our ESG Microsoft. I'll close my remarks by reiterating our confidence and excitement in the simultaneous execution of our long-term growth, efficiency, and profitability. Difficult execution environments enhance the opportunity to create long-term differentiation and separation from our customers, and we are committed to capitalizing on this time to solidify our position as a global leader. Thank you for your interest and support in Braze, and now, I'll turn the call over to... Thank you, Bill, and thank you everyone for joining us today.

Isabelle: I'll close my remarks by reiterating our confidence and excitement in the simultaneous execution of our long term growth efficiency and profitability goals difficult execution environments enhance the opportunity to create long term differentiation and separation from our competition and we are committed to capitalizing on this time to solidify our position as a global leader in customer engagement. Thank you for your <unk>.

Isabelle: Tryst and support embrace and now I will turn the call over to Isabelle.

Isabelle: Thank you Bill and thank you everyone for joining us today as Bill stated, we reported a strong first quarter with revenue, increasing 33% year over year to $135.5 million driven by a combination of existing customer contract expansions renewals and new business revenue was negatively impacted by a revenue reserve of approximately.

Isabelle: As Bill stated, we reported a strong first quarter with revenue increasing 33% year-over-year to $135 million, driven by a combination of existing customer contract expansions, renewals, and new business. However, revenue was negatively impacted by a revenue reserve of approximately $750,000 related to a service outage we experienced at the end of April. Excluding the reserve, revenue would have been approximately $136.3 million.

Isabelle: <unk> $750000 related to a service outage, we experienced at the end of April excluding the reserve revenue would've been approximately $136 $3 million revenue also included a contribution of slightly more than $3 million from the Northstar acquisition, which closed on June 1st of last year.

Isabelle: Revenue also included a contribution of slightly more than $3 million from the North Star acquisition, which closed on June 1st of last year. Subscription revenue remains the primary component of our total top line, contributing 96% of our first quarter revenue, while the remaining 4% represents a combination of recurring professional services and one-time configuration and onboarding. The total customer count increased 13% year-over-year to 2,102 customers as of April 30th, up 236 from the same period last year and up 58 from the prior quarter.

Speaker Change: Subscription revenue remains the primary component of our total top line contributing 96% of our first quarter revenue, while the remaining 4% represents a combination of recurring professional services and one time configuration and onboarding fees.

Speaker Change: Total customer count increased 13% year over year to 2102 customers as of April 30th up 236 from the same period last year and up 58 from the prior quarter. Our total number of large customers, which we define as those spending at least $500000 annually grew 29% year over year to 212.

Isabelle: Our total number of large customers, which we define as those spending at least $500,000 annually, grew 29% year-over-year to 212 and, as of April 30th, contributed 60% to our total ARR. This compares to a 57% contribution as of the same quarter last year. Measured across all customers, dollar-based net retention was 117%, while dollar-based net retention for our large customers was 119%. Expansion was again broadly distributed across industries and geographic regions. Revenue outside the U.S. contributed 44% to our total top line in the first quarter, compared to 43% in the prior year quarter and 44% in the fourth quarter of fiscal year 2020. In the first quarter, our total remaining performance obligation was $657 million, up 38% year-over-year and up 3% sequentially.

Speaker Change: And as of April 30th contributed 60% to our total <unk>. This compares to a 57% contribution as of the same quarter last year.

Speaker Change: Measured across all customers dollar based net retention was 117% while dollar based net retention for our large customers was 119%.

Speaker Change: Expansion was again broadly distributed across industries and geographic regions.

Speaker Change: Revenue outside the U S contributed 44% to our total top line in the first quarter compared to 43% in the prior year quarter and 44% in the fourth quarter of fiscal year 2024.

Speaker Change: In the first quarter, our total remaining performance obligation was $657 million up 38% year over year and up 3% sequentially current Rps was $420 million up 29% year over year and also up 3% sequentially.

Isabelle: Current RPO was $420 million, up 29% year-over-year and also up 3% sequentially. The year-over-year increases were driven by contract renewals and upsells and the signing of new customer contracts. Overall, our dollar-weighted contract length remains at just over two years.

The year over year increases were driven by contract renewals and Upsells and the signing of new customer contracts overall, our dollar weighted contract length remains at just over two years.

Isabelle: Non-gap gross profit in the quarter was $91.9 million, representing a non-gap gross margin of 67.9%. However, this number was impaired by 20 basis points due to the one-time revenue reserve related to the April outage. This compares to a non-gap gross profit of $70 million and a non-gap gross margin of 68.8% in the first quarter of last year. The modest year-over-year decline in the margin percent was driven by increased adoption of premium message channels and the impact of the one-time revenue reserve attributable to the April outage, partially offset by ongoing personnel efficiencies and the continued cost optimization of our technology staff.

Speaker Change: non-GAAP gross profit in the quarter was $91 $9 million, representing a non-GAAP gross margin of 67, 9%.

Speaker Change: This number was impaired by 20 basis points due to the onetime revenue reserve related to the April outage. This compares to a non-GAAP gross profit of $70 million and non-GAAP gross margin of 68, 8% in the first quarter of last year.

Speaker Change: The modest year over year decline in the margin percent was driven by increased adoption of premium message channels and the impact of the onetime revenue reserve attributable to the April outage, partially offset by ongoing personnel efficiencies and the continued cost optimization of our technology stack, we continue to realize strong leverage across our three operating expense bucket.

Isabelle: We continue to realize strong leverage across our three operating expense buckets, making meaningful progress towards the long-term targets outlined in our 2021 IPO and reiterated at our 2022 Analyst Day. Non-GAAP sales and marketing expenses were $59.8 million, or 44% of revenue, compared to $49.3 million, or 48% of revenue, in the prior year quarter.

Making meaningful progress towards the long term targets outlined in our 2021, IPO and reiterated at our 2022 analyst day, non-GAAP sales and marketing expenses were $59 $8 million or 44% of revenue compared to $49 $3 million or 48% of revenue in the prior year quarter, while the <unk>.

Isabelle: While the dollar increase reflects our year-over-year investment in headcount costs to support our ongoing growth and global expansion, the improved efficiency reflects our disciplined investment approach to resource deployment across our go-to-market organizations. As a reminder, our long-term sales and marketing percent of revenue range is 23 to 25%. Non-GAAP G&A expense was $19.4 million, or 14% of revenue, compared to $17.1 million, or 17% of revenue, in the prior year quarter.

Speaker Change: The increase reflects our year over year investment in head count costs to support our ongoing growth and global expansion. The improved efficiency. It reflects our disciplined investment approach to resource deployment across our go to market organization.

Speaker Change: As a reminder, our long term sales and marketing percent of revenue range is 23% to 25%.

Speaker Change: non-GAAP G&A expense was $19 $4 million or 14% of revenue compared to $17 $1 million or 17% of revenue in the prior year quarter. While the dollar increase was driven by investments to support our overall company growth, including head count costs and increases in software subscription and licenses, we continue to make progress.

Isabelle: While the dollar increase was driven by investments to support our overall company growth, including headcount costs and increases in software subscriptions and licenses, we continue to make progress towards our long-term non-GAAP G&A percent of revenue target of 8% to 10%. Non-GAAP R&D expense was $22.7 million, or 17% of revenue, compared to $19.6 million, or 19% of revenue, in the prior year quarter. The dollar increase was primarily driven by increased headcount costs to support the expansion of our existing offerings, as well as to develop new products and features to drive growth.

Speaker Change: Towards our long term non-GAAP G&A percent of revenue target of 8% to 10%.

Speaker Change: non-GAAP R&D expense was $22 $7 million or 17% of revenue compared to $19 $6 million or 19% of revenue in the prior year quarter.

Speaker Change: The dollar increase was primarily driven by increased head count costs to support the expansion of our existing offerings as well as to develop new products and features to drive growth.

Isabelle: R&D is a percent of revenue declined by fewer basis points relative to the other operating expense line items, which reflects our intentional yet disciplined reinvestment in our technology stack as we approach our long-term non-GAAP R&D percent of revenue target range of 13 to 15 percent. The non-GAAP operating loss was $10 million, or 7.4% of revenue, compared to a non-GAAP operating loss of $16 million, or 15.

Speaker Change: R&D as a percent of revenue declined by fewer basis points relative to the other operating expense line items, which reflects our intentional yet disciplined reinvestment in our technology stack as we approach our long term non-GAAP R&D percent of revenue target range of 13% to 15%.

Speaker Change: non-GAAP operating loss was $10 million or seven 4% of revenue compared to a non-GAAP operating loss of $16 million or 15, 7% of revenue in the prior year quarter non-GAAP net loss attributable to <unk> shareholders in the quarter with $5.5 million or a loss of five cents per share compared to a loss of $12 six.

Isabelle: Non-GAAP net loss attributable to Braze shareholders in the quarter was $5.5 million, or a loss of 5 cents per share, compared to a loss of $12.6 million, or a loss of 13 cents per share, in the prior year quarter. Now turning to the balance sheet and cash flow statement. We ended the quarter with $487.7 million in cash, cash equivalents, restricted cash, and marketable securities. Cash provided by operations during the quarter was $19.4 million, compared to $22.5 million in the prior year quarter. Including the cash impact of capitalized costs, free cash flow was approximately $11.4 million, compared to free cash flow of $21.7 million in the prior year quarter.

Speaker Change: <unk> million dollars or a loss of 13 cents per share in the prior year quarter now turning to the balance sheet and cash flow statement. We ended the quarter with $487.7 million in cash cash equivalents restricted cash and marketable securities cash provided by operations during the quarter was $19 $4 million compared to $22 $5 million in.

Speaker Change: The prior year quarter, including the cash impact of capitalized costs free cash flow was approximately $11.4 million compared to free cash flow of $21.7 million in the prior year quarter. The first quarter's free cash flow includes capital expenditures of $5 $8 million associated with opening the company's New New York headquarters and as we have known.

Isabelle: The first quarter's free cash flow includes capital expenditures of $5.8 million associated with opening the company's new New York headquarters. And, as we have noted in the past, we expect our free cash flow to fluctuate from quarter to quarter, given the timing of customer and vendor payments. Before turning to the forecast, I'd like to briefly comment on the macroeconomic environment. As Bill noted, we continue to operate in a challenging selling environment characterized by constrained marketing budgets and greater buyer scrutiny. Our guidance assumes that the environment does not change in fiscal year 2025.

Speaker Change: In the past, we expect our free cash flow to fluctuate from quarter to quarter, given the timing of customer and vendor payments before turning to the forecast I'd like to briefly comment on the macroeconomic environment. As Bill noted we continue to operate in a challenging selling environment characterized by constrained marketing budgets and greater buyer scrutiny our guidance is.

Speaker Change: Seems that the environment does not change in fiscal year 2025, and as always we approach our guidance with a prudent and risk adjusted methodology for the second quarter of fiscal 2025, we expect revenue to be in the range of 145 to $141 $5 million, which represents a year over year growth rate of approximately 23% at the.

Isabelle: And as always, we approach our guidance with a prudent and risk-adjusted methodology. For the second quarter of fiscal 2025, we expect revenue to be in the range of $140.5 to $141.5 million, which represents a year-over-year growth rate of approximately 23% at the mid-term. Second quarter non-GAAP operating loss is expected to be in the range of $6.5 million to $7.5 million.

Speaker Change: Midpoint.

Speaker Change: Second quarter non-GAAP operating loss is expected to be in the range of $6 5 million to $7 $5 million at the midpoint. This implies an operating margin of approximately negative 5%.

Isabelle: At the midpoint, this implies an operating margin of approximately negative 5 percent. Second quarter non-GAAP net loss is expected to be $3 to $4 million, and second quarter non-GAAP net loss per share in the range of $0.03 to $0.04 per share, based on approximately 101.5 million weighted average basic shares outstanding during the period. Please note that for the full fiscal year 2025, all guided metrics include the negative impact of the Q1 revenue reserve.

Speaker Change: Second quarter non-GAAP net loss is expected to be $3 million to $4 million and second quarter non-GAAP net loss per share in the range of three to four cents per share based on approximately 101.5 million weighted average basic shares outstanding during the period. Please note that for the full fiscal year 2025, all guided metrics include.

Speaker Change: The negative impact of the Q1 revenue reserve.

Isabelle: For the full year 2025, we expect total revenue to be in the range of $577 million to $581 million, which represents a year-over-year growth rate of approximately 23% at the midpoint. For fiscal year 2025, non-GAP operating losses are expected to be in the range of $19.5 to $23.5 million.

Speaker Change: For the full year 2025, we expect total revenue to be in the range of 577 million to $581 million, which represents a year over year growth rate of approximately 23% at the midpoint fiscal year 2025, non-GAAP operating loss is expected to be in the range of 19.5 to $23 5 million.

Isabelle: At the midpoint, this implies a non-GAP operating margin of approximately negative 4%, or more than a 450 basis point improvement versus fiscal year 2024. Non-GAP net loss for the same period is expected to be in the range of $6 to $10 million. Fiscal year 2025, the non-GAAP net loss per share is expected to be $0.06 to $0.10 per share based on a full year weighted average basic share count of approximately 102 million shares.

Speaker Change: At the midpoint. This implies a non-GAAP operating margin of approximately negative 4% or more than a 450 basis point improvement versus fiscal year 2024, non-GAAP net loss for the same period is expected to be in the range of $6 million to $10 million fiscal year 2025, non-GAAP net loss per share is expected to.

Speaker Change: Be six to 10 cents per share based on a full year weighted average basic share count of approximately 102 million shares we remain on track to achieve positive quarterly non-GAAP operating income and positive free cash flow in Q4 of this year I'll wrap up my remarks by reiterating our commitment to delivering world class customer engagement solutions, while effectively managing.

Operator: We remain on track to achieve positive quarterly non-GAAP operating income and positive free cash flow in Q4 of this year. I'll wrap up my remarks by reiterating our commitment to delivering world-class customer engagement solutions while effectively managing costs to achieve our profitability goals. 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 click on the raise hand button, which can be found on the black bar at the bottom of the zoom window. You may remove yourself from the queue at any time by lowering your hand.

Speaker Change: Cost to achieve our profitability targets and with that we'll now open the call for questions. Operator, please begin the Q&A.

Operator: When it is your turn, you will hear your name called and receive a message on your screen notifying you that you may unmute your line. Please then unmute your audio and ask your question. We'll wait one moment while the queue assembles. Our first question comes from Derek Wood with TD Cohen. You may now unmute your audio and ask your question. Great, thank you, and congrats on a solid quarter. First question for Bill, you guys were called out at Snowflake's keynote this week as a notable strategic partner.

Operator: Can you give us an update on how you're working with Snowflake from a technology and go-to-market standpoint? Maybe just give us a sense of demand for your cloud data ingestion capabilities, and now that you have Sage AI and bring that to more data flows, how customers are looking to leverage that capability? Yeah, absolutely.

Speaker Change: We will now begin the Q&A session, if you'd like to ask a question. Please click on the raise hand button, which can be found on the black bar at the bottom of the gem window.

Speaker Change: You may remove yourself from the queue at any time by lowering your hand.

Speaker Change: It is your turn you'll hear your name called and receive a message on your screen notifying you that you may have your mute. Your line. Please then your audio and ask your question, we'll wait one moment, while the queue assembles.

Speaker Change: Our first question comes from Derrick Wood with TD Cohen.

Speaker Change: You May now a mute your audio and ask your question.

James Derrick Wood: Great. Thank you and congrats on a solid quarter first question for Bill you guys were called out at that Snowflake keynote. This week is a notable strategic partner can you give us an update on how youre working with Bill play from a technology and go to market standpoint, maybe just give us a sense around.

Speaker Change: Demand for your cloud data ingestion capabilities and now that you have stage AI and then bring that to more data flows how customers are looking at the leverage that capability.

Bill: And I'm really happy to expound on that as Snowflake has been a really important, both technical and go-to-market partner for us for several years now. As you're probably aware, we were very early adopters of Snowflake Data Sharing. We were on stage with them when they announced that to announce our interconnection. And that was really the beginning of Braise and defining our role, not just as a consumer of data but also as a producer of data.

Speaker Change: Yeah, absolutely and really happy to expound on that as.

Bill: Snowflake has been a really important both technical and go to market partner for us for several years now as you're probably aware we were very early adopters of snowflake data sharing we were on stage with them when they announce that to announce our interconnection and that was really the beginning of Braves embracing our role not just as a consumer of data, but also as a producer of data when we see.

Bill: When we send trillions of messages in a year, we're also producing a lot of very valuable engagement data that we use, not just to train our own AI and machine learning and automated decision-making processes but that our customers also use when they're doing their own bespoke development. That cycle then gets completed when you pull data back into Braze through things like cloud data ingestion and through a number of other extensions that we've added to capabilities like our segment extensions and our product catalog automatic syncing, which are all working toward a goal of making sure that the data that Braze needs to make is available to us quickly, completely, and with a low total cost of ownership.

Speaker Change: And trillions of messages in a year. We're also producing a lot of very valuable engagement data that we use not just to train our own AI and machine learning in automated decision, making processes, but our customers also use when theyre doing their own bespoke development that that.

Speaker Change: That cycle, then gets completed when you pull data back into break through things like cloud data ingestion and through a number of other extensions that we've added two capabilities like our segment extensions in our product catalog automatic syncing, which are all working toward our goal of making sure that the data that phrase needs to make decisions is available to us quickly.

Speaker Change: <unk> and with a low total cost of ownership and so it's snowflake has continued to expand their own capabilities and expand their options for being able to move data in a fully managed way in and out of partners like phrase we've been quick to adopt all of those capabilities throughout and that of course has also helped drive the go to market partnership as well when brazen snowflake are.

Bill: And so as Snowflake has continued to expand its own capabilities and expand its options for being able to move data in a fully managed way in and out of partners like Braze, we've been quick to adopt all of those capabilities throughout. And that, of course, has also helped drive the go-to-market partnership as well. When Braze and Snowflake are deployed together in an environment, Braze customers can do more with more comprehensive data.

Speaker Change: Lloyd together in an environment, where customers can do more with more comprehensive data. They can do they can deploy more use cases more quickly and the ongoing burden to primarily their technical teams of maintaining those data pipelines goes to near zero because it is handled between res and snowflake directly and so it creates a win win win.

Isabelle: They can deploy more use cases more quickly, and the ongoing burden on their technical teams of maintaining those data pipelines goes to near zero because it's handled between Braze and Snowflake directly. And so it creates a win-win-win condition where Snowflake is getting stickier customers with more usage, and Braze is getting a more comprehensive view of data more quickly and more completely, which lets customers deploy new use cases and try new ideas for personalization or targeting intelligence or orchestration or what have you.

Speaker Change: Condition, where you know snowflake is getting stickier customers with more usage Brazos getting a more comprehensive view of data more quickly and more completely which lets customers deploy new use cases and try new ideas for personalization are targeting intelligence or orchestration or what have you I and together, we're able to realize.

Isabelle: And together, we're able to realize that vision of being able to consistently act on a complete and current picture of a customer's context as we're engaging with them to try to shape their journey toward more positive outcomes. Okay, great. That's a great color.

Speaker Change: That vision of being able to be consistently acting on a complete and current picture of a customer's context, as we're engaging with them to try to shape their journey towards more positive outcomes.

Isabelle: Isabelle, one for you. Can you talk about just growth trends and monthly active users? I believe this makes up roughly half of the contract structure for your customers. Just wondering what you're seeing at renewals and how you think about renewal behavior and the direction of malgrowth through the year, given the kind of continued mixed data points around the macro. Yeah, thanks for that.

Speaker Change: Okay great.

Speaker Change: Great color Isabelle one for you.

Speaker Change: Talk about just growth trends and monthly active users I believe this makes up.

Speaker Change: Roughly half of Contra.

Isabelle: Contract structure for your customers, just wondering what youre seeing at renewals and how youre thinking about renewal behavior in the direction of MAU growth through the year, given the kind of continued mixed data points around the macro.

Isabelle: So look, we've said this a few times, we don't sort of focus overly, we don't overly scrutinize the focus here on MAU growth. And actually, if you look at our MAU growth, our revenue growth has been outpacing MAU growth for quite some time. And so we are and actually, if you look in our disclosure, something that happened actually in Q2 of last year, we reversed the order of what comprises our top line.

Speaker Change: Yeah, Thanks for that and so look we've said this a few times, we don't sort of focus overly overly.

Speaker Change: Overly scrutinize the focus here on the Mou growth and actually if you look at our Mou growth. Our revenue growth has been outpacing miu growth for quite some time and so we are and actually if you look in our disclosure or something that's happened actually about Q2 of last year is we reverse the order of what comprises our topline and so we.

Speaker Change: He used to say that I'm, a you was the single largest component of our topline actually now it's the the premium messages that the messaging that that folks pay for and I know he was moved to a kind of second in our in the ordering and so we don't worry so much about the contract composition, we're really just trying to create a contracts and structures that work best for our customers.

Isabelle: And so we used to say that MAU was the single largest component of our top line. Actually, now it's the premium messages, the messaging that folks pay for, and MAU has moved to kind of second in the ordering.

Speaker Change: For them to to be able to use the product to the best of its ability and to maintain that high ROI that phrase delivers on a consistent basis.

Isabelle: And so we don't worry so much about the contract composition. We're really just trying to create contracts and structures that work best for our customers for them to be able to use the product to the best of its ability and to maintain that high ROI that Braze delivers on a consistent, Okay, thank you. Our next question comes from Vijay Hynes from Canaccord. Please unmute your line and ask your question. Hey guys.

Speaker Change: Understood. Okay. Thank you.

Speaker Change: Okay.

Speaker Change: Our next question comes from DJ Hynes from Canaccord. Please UN mute your line and ask your question.

Bill: Congratulations on the nice quarter. Bill, you alluded to the outage a couple of times and talked about some of the revenue impacts. I thought the blog post did a really nice job kind of going deep on the technical explanation of what happened. I'd love to just hear kind of what the customer reaction has been to your response to the outage. Like, is there any brand tarnish we should be worried about here?

David E. Hynes: Hey, guys congrats on the nice quarter.

David E. Hynes: Bill you alluded to the outage a couple of times I'm talking about.

David E. Hynes: Some of the revenue impacts.

Speaker Change: The blog posted a really nice job kind of going deep on the technical explanation of what happened I'd love to just hear kind.

Speaker Change: What the customer reaction has been to your response to the outage like is there any brand tarnished we should be worried about here just what has the feedback been since that.

Bill: Just what has the feedback been since that? Yeah, of course. And, you know, for those that are not aware, we had a large outage. It happened right at the end of April, which was also right at the end of Q1. And it was actually the longest full outage in our history.

Yeah of course, and you know for those who are not aware, we had a large outage that happened right at the end of April which was also right at the end of Q1 and it was actually the longest full outage in our history and as he just mentioned we rapidly published a full postmortem on our blog and I would encourage anyone interested to read the blog post I think that the reaction after word has been.

Then for.

Speaker Change: For most customers its been one of understanding I would say technical systems no matter, how resilient Lee you build them experience novel failure conditions and throughout the entirety of the outage, we communicated with urgency with reliability.

Bill: And, as you just mentioned, we rapidly published a full postmortem on our blog, and I would encourage anyone interested to read that blog post. I think that the reaction afterward has been, for most customers, it's been one of understanding. I would say, you know, technical systems, no matter how resiliently you build them, experience novel failure conditions. And throughout the entirety of the outage, we communicated with urgency and reliability. You know, we didn't always have the answer that people wanted because the systems were down, obviously. But we were as transparent as we could be.

Speaker Change: Didn't always have the answer to the people wanted because the systems were down obviously, but we were as transparent as we could be we got you know there was a full recovery there was no data loss or fail over systems.

Speaker Change: The fill over systems, all operated as intended which was great to be able to see and we ultimately were able to have the system be fully healed and it's been stable ever since that incident and I'm knocking on wood in the room right now and so you know I think that it's it's one of these circumstances, where it it's a big deal it's unfortunate that it happened.

But I think that what our customers were able to see is how we really operate through a difficult circumstance and we did so with integrity and transparency and honesty I and you know I think that.

Speaker Change: I think that in the long run that can be a very helpful thing one of the other things that I would say is that.

Bill: We got, you know, there was a full recovery, there was no data loss, our failover systems, the failover systems all operated as intended, which was great to be able to see. One of the other things that I would say is that, you know, we obviously learned a lot from working through the incident and have been able to make a number of changes to both harden our systems and enhance our ability to recover rapidly when issues do arise because both things were at play in this outage.

Bill: We experienced a novel failure condition that caused our failover capabilities and our secondaries to not be able to invoke themselves. And then the systems were not able to self-heal due to the novel nature of the failure.

Speaker Change: We obviously learned a lot from working through the incident had it been able to make a number of changes to both harden our systems and enhance our ability to recover rapidly when issues do arise because both things were at play in this outage, we experienced a novel failure condition that.

Speaker Change: That caused our fail over our capabilities and our secondaries to not be able to invoke themselves.

Speaker Change: And then the systems were not able to sell fuel due to the novel nature of the failure and then the amount of time that it took to recover from that led to a long recovery period as well as our systems needed to catch up on literally billions of jobs that were backlog that represented either data there'd be processor messages to be sent or both and so.

Bill: And then the amount of time that it then took to recover from that led to a long recovery period as well, as our systems needed to catch up on literally billions of jobs that were backlogs that represented either data to be processed or messages to be sent or both. And so, as I mentioned, there's good news in that the data was never lost and that many other parts of the system came back up sooner than the full recovery.

Speaker Change: As I mentioned, there's good news there and that that data was never lost and that you know many other parts of the system came back up sooner than the full recovery, but one of the other things that I would celebrate as an outcome is that while the recovery what's happening we actually successfully brought online more infrastructure than we've ever had simultaneously online by a factor of almost 50.

Bill: But one of the other things that I would celebrate as an outcome is that while the recovery was happening, we actually successfully brought online more infrastructure than we've ever had simultaneously online by a factor of almost 50%. And so that means that a huge amount of the work that we've done on the DevOps front from a scalability, observability, and monitoring perspective as well as just generally the automation around all of those systems has all been a very successful investment for us to be able to not just operate but recover from these novel circumstances.

Speaker Change: Per cent and so that means that a huge amount of the work that we've done on the Dev ops front from a scalability and observe ability and monitoring perspective as well as just generally the automation around that all of those systems has all been a very successful investment for us to be able to not just operate but recover from these novel circumstances.

Bill: And in many ways, this was actually a stress test for what are going to be some really big events later this year as we look ahead to things like the Olympics and the U.S. presidential election and Black Friday Cyber Monday. We had more infrastructure online as we recovered from this outage than we anticipate probably even bringing up for Black Friday later. Great. Yeah, that's a really helpful explanation. And then, Isabelle, a follow-up for you. I just want to touch on NRR dynamics.

Speaker Change: And in many ways. This was actually a stress test for what are going to be some really big events. Later this year as we look ahead to things like the Olympics and the U S presidential election, and Black Friday, Cyber Monday, we had more infrastructure online as we recovered from this outage then we anticipate probably even bringing up for Black Friday later this year.

Isabelle: I mean, it's great to see the blended metric has seemingly stabilized. However, the enterprise, a large customer, continues to drift a little bit lower. Just curious what's driving that.

Speaker Change: Great.

Speaker Change: Helpful explanation and then there's about a follow up for you I just want to hit on an IRR dynamics I mean, it's great to see the blended metric has seemingly stabilized.

Speaker Change: The enterprise the large customer continues to drift a little bit lower just just curious what's driving that is it that the enterprise kind of starting to see macro pressures, maybe a little bit later than SMB, and we're still kind of feeling the tail effects of that in the trailing 12 month metric or maybe you could just speak to kind of expansion dynamics enterprise versus SMB is it sounds like.

Speaker Change: Prices a lot healthier yeah sure. So I think first of all I will say that on a rounded basis. The consolidated company I did appear to hold up it is down on an unrounded basis. So I'd sort of just indicate that that there are we are still continuing to see some levels of pressure at sort of the rest of the organization.

Isabelle: Is it that the enterprise kind of started to see macro pressures maybe a little bit later than SMB, and we're still kind of feeling the tail effects of that in the trailing 12-month metric? Or maybe you could just speak to kind of expansion dynamics between enterprises and SMB, as it sounds like enterprise is a lot healthier. Yeah, sure. So, first of all, I will say that, on a rounded basis, the consolidated company did appear to hold up. It is down on an unrounded basis.

Speaker Change: And I would say that embedded in our guide is an assumption that you know this is this number has not hit the floor, yet and so that I know that question is probably coming so I'll just preempt that this this number has not hit the floor, yet and that is absolutely embedded in our guide. So I think when we think about the enterprise. There's a couple of additional dynamics at play.

Speaker Change: Remember that the way, we count a customer is that the ultimate parent level and so when we do an upsell with a new brand within an existing parent company that counts as positive dollar based net retention. It is hard. These days. It is just as hard to do that knew that upsell that behavior behaves a lot like.

Speaker Change: Net new business, because a lot of times, it's new budget, that's new stakeholders, it's a new process.

Speaker Change: And so the dynamics that we're seeing relative to the broader macro we face them equally in that upsell motion within the enterprise, So you're definitely seeing that at play.

Isabelle: So, I'd sort of just indicate that we are still continuing to see some levels of pressure at sort of the rest of the organization. In addition, we're still working our way out of some contracts that were previously bought for some expected higher levels of growth. And therefore, at renewal, maybe you're not seeing the same level of upsell at that moment because they have already purchased for a higher level of growth and are still working their way into those volumes. Makes sense. Thank you guys for the color.

In addition, our.

Speaker Change: We're still working our way out of some contracts that had previously bought for some expected higher levels of growth and therefore at renewal and maybe you're not seeing the same level of upsell in that moment, because they had purchased for already a higher level of growth and are still working their way into those volumes. Yeah makes sense. Thank you guys for the color.

Bill: Our next call comes from Ryan MacWilliams from Barclays. Please unmute your line and ask your question. Excellent. Next segment question. Bill, I know it's still early days here, but some of your advanced customers who are already incorporating generative AI into their marketing content or their marketing process, are you seeing these customers run more campaigns or utilize the Braze platform further as a result of generative AI adoption at this point? Yeah, it's a great question.

Speaker Change: Our next call comes from Ryan Macwilliams from Barclays. Please Amit your line and ask your question.

Speaker Change: Excellent next thing the question.

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

Bill: And I think that, you know, the things that are enhancing marketer productivity, we absolutely see our customers moving through their own roadmaps for customer engagement more quickly. And we're also seeing people test and experiment more often. Heard me talk about this a lot in, you know, prior earnings calls, which is that one of the key areas of differentiation in Braze is really how much a team stands to gain when they are consistently experimenting with, you know, new variants, new engagement strategies, new tones of voice, new, you know, personalization concepts, new orchestration ideas, incorporating in different channel mixes, you know, these are all things that sound great on paper, but do take a lot of work to actually go and execute.

Bill: Yeah, It's a great question and I think that you know the things that are enhancing marketer productivity, we absolutely see our customers moving through their own roadmaps for customer engagement more quickly and we're also seeing people test and experiment more often heard me talk about this a lot I in prior earnings calls, which is that one of the key areas of <unk>.

Bill: <unk> and Breeze is really how much a team stands to gain when they are consistently experimenting with new variance new engagement strategies, new tones of boys, new personalization concepts, new orchestration ideas incorporating in different channel mixes. You know these are all things that sound great on paper, but do take a lot of work to actually go and execute.

Bill: And we know that when our customers execute on these more sophisticated and more experimental approaches, and they do so in an agile way, they compound results, they, you know, certainly find the differentiation in Braze that not only justifies but really pays back our premium price point in a very meaningful way for them. But the amount of effort required for that, especially in, you know, the current environment where a lot of these teams are not growing, some of them are shrinking, etc., they don't have a lot of resources available to bring in outside agencies, etc.

Speaker Change: And we know that when our customers when our customers execute on these more sophisticated and more experimental approaches and they do so in an agile way. They confound results. They certainly find the differentiation in Braves that not only justifies, but really pays back our premium price point I'm in a very meaningful way for them, but the amount of effort required for that especially.

Speaker Change: In the current environment, where a lot of these teams are not growing some of them are shrinking and you know they don't have a lot of resourcing available to bring in outside agencies et cetera that the tools of generative I have been really important productivity enhancers for them to be able to do the same with less in many cases or do more with the same team you know for those.

Bill: That the tools of generative AI have been really important productivity enhancers for them to be able to do the same with less in many cases or do more with the same team, you know, for those who appreciate that. And then how is the rollout of new pricing and packaging around premium messaging channels going at this point? Are you noticing more customers testing new channels as a result? And have you noticed any trends in the mix of channel usage with your customers so far this year? Maybe it's like push, email, and SMS. Thanks.

Speaker Change: Who are still you know have a constant amount of resourcing and their teams.

Speaker Change: I appreciate that and then how is the rollout of new pricing and packaging around premium messaging channels going at this point are noticing more customers testing new channels. As a result, and have you noticed any trends in the mix and channel use vision with your customers. So far this year, we've been doing push email SMS.

Bill: Yeah, so the rollout of the credits program has been successful so far, but the official transition to message credits only went live on May 1st. So we only have about a month of data. I would say that early indicators are that it is absolutely working as expected, in the sense that a customer doesn't need to process a new order form or go through a new buying cycle just to experiment with a new channel, and that is leading to them being able to experiment with those new channels. If you'll recall, the way that we were selling global SMS before was on a country by country basis.

Speaker Change: Yeah. So the rollout of the credits program has been successful so far but the official transition to message credits only went live me first so we only have about a month of data I would say that early indicators are that I. It is absolutely working as expected in the sense that a customer doesn't need a process a new order form or go through a new buying cycle just to experiment with a new channel and that is leading to them.

Speaker Change: Able to experiment with those new channels, if you'll recall the way that we were selling global SMS before as well with like on a country by country basis, and so when I say new channels. I also would include in that simply just sending to all of Europe. As an example, when maybe you would have only purchased a small number of countries in the past or otherwise engaging with that kind of global premium audience.

Bill: And so when I say new channels, I would also include in that, you know, simply just sending to all of Europe as an example, and maybe you would have only purchased a small number of countries in the past or otherwise engaged with that kind of global premium audience. Overall, with the margin profile, you know, I have a lot of the margin profile, and I would say that on the SMS front, we're continuing to see similar dynamics as we've spoken about in the past. Definitely, the competition amongst the CPAS providers is giving us a bit more room to be able to negotiate with those vendors, but nothing that's structured.

Speaker Change: Overall with the margin profile I would say that on the SMS front, we're continuing to see Sim.

Speaker Change: Similar dynamics as we spoken about in the past definitely the competition amongst the C pass providers is giving us a bit more room to be able to negotiate with those vendors, but nothing that's structurally changing that also just take this opportunity because I'm sure. This will come up later around the Whatsapp side are met I actually made an announcement earlier today in a direction that we previously predicted.

Speaker Change: Which is that they are continuing to expand their monetization of whatsapp, but theyre doing so while keeping a really tight control and the resulting whatsapp consumer experience and they're doing that by making sure that whatsapp users are never inundated with messages that are not performing well when delivered to them and so they're loss, making changes, which focus on prioritizing engagement and the quality of the messaging which translates to.

Bill: And so they're thus making changes that focus on prioritizing engagement and the quality of the messaging, which translates to them not necessarily guaranteeing that any particular marketing message we request them to send actually gets delivered, and they're going to shift to a more dynamic pricing model that will interact with that. Now, interestingly, if you just take a step back from that, that direction of travel is actually not dissimilar to the present reality for email. You can send any email you want to any email address, but it doesn't necessarily end up in a user's inbox.

Speaker Change: I'm not necessarily guaranteeing that any particular marketing message, we requested them to send actually gets delivered and that theyre going to shift to a more dynamic pricing model that will interact with that kind of message guarantee now interestingly. If you just take a step back from that that direction of travel is actually not dissimilar to the present reality for email you can.

Speaker Change: Send any email you want to any email address but it doesn't necessarily end up in a user's inbox and that depends on a variety of factors related to the content of the email and whether other people are engaging with it and so in many ways Whatsapp is following in some well treaded footsteps in order to try to keep noise out of the channel, especially as they want to be able to continue to drive a really.

Bill: And that depends on a variety of factors related to the content of the email and whether other people are engaging with it. And so, in many ways, WhatsApp is following in some well-trod footsteps in order to try to keep noise out of a channel, especially as they want to be able to drive really great Inside of WhatsApp, and I refer to that broadly as, And as we've spoken about a lot of other times in the past, you know, anything which provides a platform for people to share content and interact with each other is a good thing. Now, getting back to your gross margin question, then, for a business model perspective, the pricing changes with WhatsApp messages being more dynamic and not having guaranteed delivery will likely shift the way that we monetize that channel.

Speaker Change: Right user experience inside of Whatsapp, and I refer to that broadly as an increase in the complexity of the deliverability environment for Whatsapp and as we've spoken about a lot of other times in the past you know anything which provides returns sophistication and targeting our content relevance or anything which requires the management of more complexity in a channel is ultimately good for <unk>.

Speaker Change: In the long run because of where we sit in the stack and the sophistication that we can deliver to our customers now getting back to your gross margin question then for a business model perspective, the pricing changes with whatsapp messages being more dynamic and not having guaranteed delivery.

Speaker Change: Will likely shift the way that we monetize that channel, we're still working through the details of that but to give you a bit of flavor. We expect that we're ultimately going to land in a setup where more of the message cost flows directly through meta and then braze operates higher up the value stack.

Bill: We're still working through the details of that. But to give you a bit of flavor, we expect that we're ultimately going to land in a setup where more of the message cost flows directly through meta, and then Braze operates higher up the value stack, which means smaller dollar values for WhatsApp on any individual Braze order form, but a higher gross margin percent and likely an easier way to sustainably grow the channel, especially as Meta levels the playing field for the underlying message costs across their early partners as they've been experimenting with this program in the early days.

Speaker Change: Which means smaller dollar values for whatsapp in any individual braze order form, but higher gross margin percent and likely an easier way to sustainably grow the channel, especially as meta levels, the playing field for the underlying message costs across their early partners as they've been experimenting with this program in the early days and so that's going to take new R&D investment some changes to our TTM motion.

Bill: And so that's going to take new R&D investment, some changes to our GTM strategy, but WhatsApp is actually just a low single-digit percentage of our revenue today, and while it's growing fast, its present revenue is not material to the overall revenue numbers in the overall business. So I think we have plenty of flexibility to navigate these changes without material disruption. And we also think on the upside, in addition to the velocity that I referenced earlier and just leveling the playing field and making this an easier channel to scalably sell, we also think it may unlock some new budgets in the performance marketing space and open up some new options for channelists.

Speaker Change: But whatsapp is actually just a low single digit percentage of our revenue today and while it is growing fast. It's present revenue is not material to the overall revenue numbers and the overall business. So I think we have plenty of flexibility to navigate these changes without material disruption and we also think on the upside. It in addition to the velocity that I referenced.

Speaker Change: Earlier, and just leveling the playing field and making this an easier channel to scalable itself. We also think it may unlock some new budgets in the performance marketing space and open up some new options for channel expansion. So I can't speculate about the details of where that goes from a product perspective, and we obviously don't know enough at this point to quantify the impacts of these things, but I hope that that gives you.

Bill: So I can't speculate about, you know, the details of where that goes from a product perspective, and we obviously don't know enough at this point to quantify the impacts of these things. But I hope that that gives you some color on all the different directions of travel for the different aspects of that channel, because it will be important.

Some color on all the different direction of travel for for the different aspects of that channel because it will be important in our future.

Speaker Change: The color. Thank you.

Bill: Thank you. Our next question comes from Arjun Bhatia with William Blair. Please unmute your line and ask your question.

Speaker Change: Our next question comes from Arjun Bhatia with William Blair. Please on mute your line and ask your question.

Bill: Thank you. Thanks for taking the questions. Bill, maybe the first one for you, just as we're thinking about the macroeconomic backdrop, the tougher selling conditions, how are you seeing the kind of rate of deals that are coming into the pipeline? Because for customers that are thinking of replatforming at this time, it seems like a unique time to do it when there is uncertainty. And they're also dealing with this generative AI technological shift that's taking place.

Speaker Change: Thank you and thanks for taking my questions.

Arjun Rohit Bhatia: So maybe the first one for you just.

Arjun Rohit Bhatia: As we're thinking about the macroeconomic backdrop, the tougher selling conditions.

Arjun Rohit Bhatia: Well.

Speaker Change #100: Are you seeing that kind of rate of deals that are coming into the pipeline because for customers that are thinking of re platforming at this time. It seems like a unique time to do it when there is uncertainty and they're also dealing with this generative AI technological shift that's taking place or do you see that in the pipeline or is that actually helping you.

Bill: So do you see that in the pipeline, or is that actually helping you in this moment to convert more customers over? Yeah, so I think that, you know, the qualitative challenges that I mentioned earlier in the call of more deal scrutiny, longer evaluation cycles, and simply teams having less resources available to them, in general. Those are all present, and they're actually present across both the S&B and the enterprise categories. But I think that the big thing that we started alluding to about a year ago, and I think that continues to be the case, is that a lot of the big risks to the downside are relatively more controlled than they were a year or two, a year ago, and certainly more than two years ago.

Speaker Change #100: In this moment convert more customers over.

Speaker Change #101: Yeah. So I think that you know the qualitative challenges that I mentioned earlier in the call more deal scrutiny longer evaluation cycles, and simply teams, having less resources available to be ambitious in general those are all president and they're actually present across both the SMB and the enterprise categories, but I think that the big thing that we started alluding to about a year ago.

Speaker Change #101: And I think that continues to be the case is that a lot of the big risk to the downside or relatively more control than they were a year or two a year ago and certainly more than two years ago, and that's both giving us the conviction to continue investing in go to market expansion as you've seen but it's also as you alluded to leading to a lot of rfps that are coming in you know theres a lot of people taking advantage of.

Bill: And that's both giving us the conviction to continue investing in go-to-market expansion, as you've seen. But it's also, as you alluded to, leading to a lot of our. There are a lot of people taking advantage of this time of relative quiet to be able to reevaluate the kind of messy architectures that many of them developed during the breakneck growth pace of the late teens and into 2020 and into 2021. And we're certainly benefiting from this being a time of reflection and being able to go back. It's like, you talk about scrutinizing a budget and scrutinizing architecture. Of course, the outcome of scrutiny is often change.

Speaker Change #101: At this time of relative quiet ought to be able to reevaluate what there.

Speaker Change #101: Kind of messy architectures that many of them develop during the breakneck growth pace of the late teens and into 2020 and into 2021 and we're certainly benefiting from this being a time of reflection and being able to go back. It's like when you talk about scrutinizing of budget and scrutinizing architecture of course, the outcome of scrutiny as often change.

Bill: And that change leads to our fees, and that is certainly a good thing for us. But that is against the backdrop of a macro that is, of course, more challenged, like as they go through that change, they're not doing so with bigger budgets, they're not doing so with bigger teams, and there are still places where people and businesses are shrinking instead of even having stabilized.

Speaker Change #101: And that change leads rfps and that is certainly a good thing for us.

Speaker Change #102: That is against the backdrop of a macro that is of course more challenge like as they go through that change, they're not doing so with bigger budgets theyre not doing so with bigger teams.

Speaker Change #102: And you know there are still places where people are people and businesses are shrinking instead have you been having stabilized and so I think when you net it out across the entire environment you still see these qualitative challenges you still see a difficult macro but I do think that those mechanisms that are within that which include scrutiny leading to.

Bill: And so I think when you net it out across the entire environment, you still see these qualitative challenges; you still see a difficult macro. But I do think that those mechanisms that are within that, which include scrutiny, leading to change, leading to our fees, leading to opportunities to unseat legacy architectures. We actually just had a legacy takeaway recently that I think had been on one of the legacy marketing clouds for over 14 years. When we did the takeaway,

Speaker Change #102: Change leading to rfps, leading to opportunities to unseat legacy architectures, we actually just had a legacy takeaway recently that I think had been on one of the legacy marketing clouds for over 14 years, when we adjusted the takeaway I and so seeing opportunities like that showing up in the broader environment right. Now is obviously a really good.

Bill: And so, you know, seeing opportunities like that show up in the broader environment right now is obviously a really good sign. And then for the second question, you talked a lot about, I think, international investments in your prepared remarks. It sounds like, you know, you're expanding your data center footprint, maybe some go-to-market investments there as well. But with all the, you know, kind of incremental investment in international, how should we think about the growth opportunity there?

Speaker Change #102: Fine for us.

Speaker Change #102: Okay.

Speaker Change #103: State that and then.

Speaker Change #104: For the second question, just you talked a lot about I think international investments in your in your prepared remarks, it sounds like you're expanding your datacenter footprint, maybe some go to market investments, there as well, but with all the.

Speaker Change #105: Kind of incremental investment in international how should we think about kind of the growth opportunity there and as you think about the balance of this year and maybe even next year.

Bill: And as you think about the balance of this year and maybe even next year, what's the potential for growth acceleration in international markets as we just think about performance over the coming years? Yeah, so, first of all...

Speaker Change #106: What's the potential of growth acceleration in.

Speaker Change #106: International markets.

Speaker Change #106: As we just think about performance over the coming years.

Speaker Change #107: Yeah. So.

Speaker Change #108: First of all I think that the primary thesis behind this is that the trend toward globalization and the trends that I referenced above are not going anywhere. It's also a great time to be hiring new talent and we're excited about being able to build foundations for future growth, but we're not in hyper growth mode. In any of these places and we're making sure that we have a multitude of foundations and <unk>.

Bill: I think that the primary pieces behind this is that the trend toward global warming.., that I referenced above are It's also a great time to be hiring new talent, and we're excited about being able to build, But we're not in hyper growth mode in any of these places. And we're making sure that you know, we have a multitude of foundations. So that we have optionality and so there's a few different major goals that we have one is that we want to better serve our, And their operations and customer bases are increasingly globalized, and we wanna be able to be there to support them, whether that means data centers, https://www.youtube.com.uk The second thing is we want to be learning more about these markets to ensure that our product and our partnership portfolio and the operational footprint, like our data centers, are well suited to grow into them more meaningfully into the future.

Speaker Change #108: Place so that we have optionality and so theres a few different major goals that we have one is that we want to better serve our existing customers and their operations and customer bases are increasingly globalized and we wanted to be able to be there to support them whether that means datacenters. It means regional teams that are maybe non English speaking or it means like literally having them go to market.

Speaker Change #108: Resources are our community or training available and enablement available in these different regions and countries and languages and the second thing is we want to be learning more about these markets to ensure that our product and our partnership portfolio and the operational footprint like our data centers are well suited to grow into them more meaningfully into the future and then thinking about next year on expansion of capacity.

Bill: And then thinking about, you know, next year, an extension of capacity, we want both. And we want to have optionality and diversification in the likely case that the global recovery is uneven. And so, you know, if we start to see signs of strength in one part of the world earlier than the other, we want to make sure that we have the right foundations in place to be able to, you know, deploy that new sales capacity or those new marketing dollars in those areas so quickly and.

Speaker Change #109: We want to both provide more overall room for us to accelerate scaling when the macro does start to improve and we want to have the optionality and diversification and the likely case or the global recovery is uneven and so if we start to see signs of strength in one part of the world earlier than the other we want to make sure that we have the right foundations in place to be able to.

Speaker Change #109: Deploy that new sales capacity or are those new marketing dollars in those places do so quickly and efficiently, but I think it's too early to say exactly where meaningful recovery from the current macro will happen first on exactly what timeline that will happen to what extent the capacity will be there and so I think what you're seeing from us is a strong.

Bill: But, you know, I think it's too early to say exactly where meaningful recovery from the current macro will happen first and on exactly what timeline it will happen, to what extent the capacity will be there.

Bill: And so I think what you're seeing from us is a strong conviction in the long-term trends, a strong, you know, a strong increase in the amount of globalization being demanded of global partners like Braze, you know, particularly in the enterprise, as they continue to grow their first party investments, both in data and in building up new audiences with new products and services. And we want to be able to meet that evolving, you know, customer demand where it is and already be there where it is. But we're obviously doing so against a backdrop of improving profitability, continuing to work toward our goals of sales and marketing.

Speaker Change #109: And in the long term trends a strong a strong increase in the amount of globalization being demanded of global partners like raise you know, particularly in the enterprise as they continue to grow their first party.

Speaker Change #109: Investments both in data and in building up new audiences with new products and services and we want to be able to meet that evolving customer demand where it is in an already be there where it's going to be but we're obviously doing so against the backdrop of improving profitability are continuing to work toward our goals of sales and marketing efficiency I in many cases star.

Bill: In many cases, starting anew and building a new foundation is less efficient than putting an incremental dollar in a place that's already mature and already working really well. But I think that we're in a position where we're early enough in our market, we have the balance sheet to do so, and we have conviction in the future opportunity to make sure that we aren't shortchanging the building of foundations for future growth even while we navigate this difficult macro and do so with ease. All right, perfect.

Speaker Change #110: Being a new and building a new foundation is less efficient than putting an incremental dollar in a place that's already mature and already working really well, but I think that we're in a position where we're early enough in our market. We have the balance sheet to do so and we have conviction in the future opportunity to make sure that we arent shortchanging the building out of foundations for future growth even well.

Speaker Change #111: As we navigate this difficult macro and do so with an eye towards increasing profitability.

Bill: Very helpful. Thank you, and congratulations on the next quarter here. Our next question comes from Scott Berg with Needham & Co. Please unmute your line and ask your question.

Speaker Change #112: Alright, perfect very helpful. Thank you and congrats on the nice quarter here.

Speaker Change #113: Our next question comes from Scott Berg with Needham <unk> co. Please on mute your line and ask your question.

Speaker Change #112: Yeah.

Bill: Hi, everyone. Next quarter here. Bill, I want to start off with a theme that we wrote about a couple months ago coming off the annual Top Talk Conference. The primary theme of that show was talking about personalization and how the fever around these AI trends last year, year and a half, is kind of benefiting how these brands and companies want to go to market because they want to personalize, you know, their marketing messages or e-commerce sites more.

Speaker Change #114: Hi, everyone nice quarter here.

Speaker Change #115: I wanted to start off with the theme that we wrote about a couple of months ago coming off the annual conference.

Joe: Primary theme of that Joe was talking about personal data and how the kind of the.

Joe: Fever around these AI trends last year year, and a half kind of benefiting how these brands and companies wanted to go to market is still in a personalized marketing message or ecommerce sites for.

Bill: Do you see that trend helping you right now? Because your numbers certainly kind of buck the trend that we've seen from other April quarter reports in the last couple weeks, where, you know, AI seems to be pushing or delaying their opportunities. It almost seems like some of this AI interest is helping you because that's effectively what your product does; you personalize email.

Speaker Change #117: Do you see that has been helping you right now because your numbers certainly kind of Buck the trend that we've seen from other April quarter reports last couple a couple of weeks.

Speaker Change #118: There seems to be pushing or delaying their opportunities. It almost seems like this AI interest is helping your cause.

Speaker Change #119: I believe what your product does you personalize emails.

Bill: Yeah, and I would actually maybe use one part of our product to explain the general trend that we're seeing here. And that would be our AI item recommendations, which I spoke about in last quarter's earnings call. And this is a really interesting example where what it is, is, you know, effectively being able to take a catalog, whether that's a catalog of music or a catalog of travel destinations or all of the items in your Shopify store, and be able to provide better and more personalized and higher performing recommendations when you have an opportunity to communicate with someone, whether that's an email, or maybe it's in a carousel when someone hits your website or comes into your mobile app and goes in their inbox, etc.

Speaker Change #120: And I would actually maybe use one part of our product to explain the general trend that we're seeing here and that would be our AI item recommendations, which I spoke about in last quarter's earnings call and this is a really interesting example, where what it is is effectively being able to take a catalog whether that's a catalog of music or a catalog of travel destinations or all of the <unk>.

And your shopify store and be able to provide better and more personalized and higher performing recommendations. When you have an opportunity to communicate with someone whether that's an email or maybe it's in a carousel when someone hits your website or comes into your mobile app and because their inbox et cetera, obviously, the versatility of Brazos channel said lets you injector.

Bill: Obviously, the versatility of Braze's channel set lets you inject recommendations like that into all different parts of the customer journey. But one of the reasons we didn't build that, you know, 10 years ago and that we actually waited to build it until more recently was that it required a very bespoke approach. Now, when I just walked through the catalogs, I use the term catalog very generically to mean things from music to movies to experiences to products and, you know, having massive product catalogs and being able to navigate a whole bunch of nuances in that.

Speaker Change #120: Commendations like that into all different parts of the customer journey, but one of the reasons. We didn't build that 10 years ago, and then we actually waited to build it and tell more recently is because of the state of the art in recommendation capabilities.

Bill: And it's actually really incredible that the new AI item recommendations that Braze built using transformers work across all of those different domains because if you took an approach for item recommendation from, you know, five years ago, state-of-the-art, it would really need to be specifically trained and tweaked and constantly babysat in order to work in a very bespoke domain area, and then if you tried to apply it to another vertical or another category And so that means that we, because of the state-of-the-art, have the ability to solve this in a more generalizable way and, therefore, can build it into Braze and sell it to customers and get it up and running with it quickly.

Speaker Change #120: Required a very bespoke approach now when I just walked through catalogs I use the term catalog very generically to mean things for music to movies to experiences to products and and you know, having massive product catalogs and being able to navigate a whole bunch of nuance in that and it's actually really incredible that the new AI item recommendations.

Speaker Change #120: <unk> built using Transformers works across all of those different domain areas. Because if you took an approach for item recommendation from five years ago state of the art it would really need to be specifically trained and tweaked and constantly babysat in order to work in a very bespoke domain area and then if you tried to apply it to another.

Speaker Change #120: Vertical or another category. It just wouldn't travel very well and so that means that we because of the advance of the state of the art had the ability to solve this in a more generalizable way and therefore can build it into Braves and sell it to customers and get up and running with it quickly, but it's also a bellwether for the fact that a lot of these capabilities are finally working their finally delivering on.

Bill: But it's also a bellwether for the fact that a lot of these capabilities are finally working. They're finally delivering on their promise. And so if you go back, you know, five or six years ago, everyone talked about the importance of personalization, but the vast majority of CMOs were still pretty skeptical that they would be able to successfully implement and deploy something that could do content recommendation, you know, on the order of what your Spotify Discover playlist is capable of in terms of introducing you to new music, is really going to resonate from a massive product catalog or kind of pick your personalization challenge

Speaker Change #120: Their promise and so if you go out you know five or six years ago, everyone talked about the importance of personalization, but the vast majority of C. M. O's, we're still pretty skeptical that they would be able to successfully implement and deploy something that could do content recommendation you know on the order of what you're Spotify discover playlist is capable of in terms of introducing you to do music that.

Speaker Change #120: It was really going to resonate from a massive product catalog or kind of pick your pick your personalization challenge and so what you're seeing right now from buyers is that I think that the lingering scepticism that they as an organization regardless of where they are in their technical sophistication or what their their product I mean is can quickly and easily take.

Bill: And so what you're seeing right now from buyers is that I think the lingering skepticism that they, as an organization, regardless of where they are in their technical sophistication or what their product domain is, can quickly and easily take advantage of these new capabilities. And then, of course, Braze's new product development is right there to hand that to them. And going back to the Snowflake question that we started this call with, actually, one of the challenges before being able to run a product recommendation system was getting access to the data. As product catalogs change, as inventory changes, as price changes, and all these other properties, you know, a recommendation system needs to keep pace with all of that change.

Speaker Change #120: <unk> of these new capabilities and then of course Braises new product development is right there to hand that to them and going back to the Snowflake question that we started this call with actually one of the challenges before being able to run a product recommendation system was getting access to the data as product catalogs change as inventory changes as price changes and all these other properties.

Speaker Change #120: A a recommendation system needs to keep pace with all of that change, but that is now also very easy to do as well because we can seamlessly St catalog information directly from our customers don't play cluster as an example into the Braves item recommend your system and then our models are able to run on top of that real time easily updated data.

Bill: But that is now also very easy to do as well because we can seamlessly sync catalog information directly from a customer's Snowflake cluster, as an example, into the Braze item recommender system. And then our models are able to run on top of that real-time, easily updated data in a way that's a low total cost of ownership for the customer and is driving really good results. So it's a great story where everything really is coming together to deliver on the promise that everyone's been talking about for a long time. And I think that is certainly leading to, you know, positive momentum for us. Super helpful.

Speaker Change #120: In a way that's low total cost of ownership for the customer and it's driving really good results. So it's it's a it's a great story, where everything really is coming together to deliver on the promise that everyone's been talking about for a long time and I think that is certainly leading to you know.

Speaker Change #120: Positive momentum for us.

Speaker Change #121: Super helpful. Thank you Bill and then.

Bill: Thank you, Bill. And then, Isabelle, just from a follow-up perspective, can you talk about linearity in the quarter? Your subscription revenue growth rate accelerated, not just quarter over quarter, but it was higher this quarter than the last two, even after the revenue reserve release. Just didn't know if there was something unique in the quarter to kind of drive that upside. It's just good booking. Thank you. Yeah, no, there's nothing particularly unique.

Speaker Change #122: Is it all just from a follow up perspective can you talk about linearity in the quarter. Your subscription revenue growth rate accelerated not just quarter over quarter, but it was higher this quarter than both the last two even after the revenue reserve release I just didn't know if there's something unique in the quarter to kind of drive that outside of just good bookings. Thank you yeah, I know, there's nothing particularly unique.

Isabelle: I mean, Northstar, you know, added $3.5 million to the quarter. We had improved linearity last year relative to the prior year. So that was a tailwind that we saw last year.

Speaker Change #123: I mean north sorry.

Speaker Change #124: Got it.

Speaker Change #124: Three and a half through the three and a half million dollars a quarter.

Speaker Change #125: We had improved linearity.

Speaker Change #125: Last year relative to the prior year. So that was a tailwind that we saw last year than this year actually that we're seeing kind of similar levels of of linearity versus versus where we were last year. So we're very pleased to be kind of back to these more normalized linearity levels.

Isabelle: This year, actually, we're seeing kind of similar levels of linearity versus where we were last year. So we're very pleased to be kind of back to these more normalized linearity levels, but not, you know, currently, certainly in our guide, not forecasting any kind of further revenue acceleration associated with that. Otherwise, nothing, you know, particularly unique in the quarter. So just expect the quarter to perform as expected from our perspective, even with the revenue reserve that we had. Very helpful. Thanks again.

Speaker Change #125: But not you know it's currently certainly in our guide not forecasting any kind of further revenue acceleration associated with that are otherwise nothing particularly unique in the quarter.

Speaker Change #125: So just I just expect that.

Speaker Change #125: Or was it performed as expected from our perspective, even with the the revenue reserve that we had to take.

Speaker Change #126: Very helpful. Thanks, again and congrats.

Isabelle: Congratulations. Our next question comes from Hannah Rudoff with Piper Sandler. Please unmute your line and ask your question. Thank you. This is Brent Bracelin on behalf of Hannah here.

Speaker Change #127: Our next question comes from Hana Rudolph with Piper Sandler Please limit your line and ask your question.

Bill: Bill, I wanted to go back to the strong start here. It is a little different from what we're hearing from your large competitors and just trying to double-click into what you're seeing. Is there any sort of change? Because it does feel like enterprise software demands are very mixed.

Brent Alan Bracelin: Thank you this is brent pricing on for Hana here.

Bill: Bill I wanted to go back to the strong start here. It is a little different from what we're hearing from your large competitors and just trying to double click into what you're seeing is there any sort of change.

Bill: Because it does feel like enterprise software demands are very mixed so are you seeing existing customers starting to lean a little more in the brain is this a function of your go to market efforts starting to drive a little more new customer activity walk us through why you think.

Bill: So are you seeing existing customers starting to lean a little more into Braze? Is this a function of your go-to-market efforts starting to drive a little more new customer activity? Walk us through why you think Q1 is off to a pretty healthy start here and what drove that. You know, I think execution is a really big part of it.

Bill: Q1 is off to a pretty healthy start here and what drove that.

Speaker Change #129: I think execution is a really big part of it you know when we're talking about these macro challenges. It is still a very challenging macro but braised has over the last you know five or six quarters as we've been experiencing this really difficult macro really been buckling down I'm, making meaningful internal changes, making big investments in.

Bill: You know, when we're talking about these macro challenges, it is still a very challenging macro. But Braze has, over the last, you know, five or six quarters, as we've been experiencing this really difficult macro, really been buckling down, making meaningful internal changes, making big investments in, you know, our go-to-market enablement, our partnership ecosystem, our event footprint, our community building. We launched a new brand earlier this year, and we've done some of our first meaningful out-of-home campaigns to be able to help build awareness for that brand.

Speaker Change #129: Our go to market enablement, and our partnership ecosystem and our event footprint and our community building, we launched a new brand earlier. This year, we've done some of our first meaningful out of home campaigns to be able to help build awareness in that brand you know, we posted events and brought thousands of people through brazeau events around the world in Q1, and we continued that momentum into Q2.

Bill: You know, we've hosted events and brought thousands of people through Braze at events around the world in Q1, and we continued that momentum into Q2. The investments that we've made in enabling our sales team have been really effective. But, you know, from that floor, you know, all the way up into the enterprise, over the last four quarters, you know, we've seen bright spots throughout that stack, and we've seen bright spots throughout the world or across certain verticals, but none of them have managed to really sustain themselves for more than a couple quarters.

Speaker Change #129: We the investments that we've made in enabling our sales team have been really effective and we've seen great improvements in productivity there and so just a lot of things to be proud of from an internal execution standpoint, but it is still really hard out there and you know one of the other things that I would say is that we haven't seen momentum really some.

Speaker Change #129: Staining itself in any category of the market that we see so you know whether youre looking at it from a Geo perspective across America Europe Asia, If youre looking at enterprise versus SMB and I'll remind everyone that you know for US SMB is not the long tail of Smbs since we still have that price floor and an annual that price floor in the 20, thousands and an annual contract.

Speaker Change #129: On track requirement.

You know from that floor, all the way up into the enterprise over the last four quarters, we've seen bright spots throughout that stack and we've seen bright spots throughout the world are across certain verticals, but none of them have managed to really sustain themselves for more than a couple of quarters at a time and so I think that what you're seeing in Brazos business and in our consistency is the burner.

Bill: And so I think that what you're seeing in Braze's business and in our, you know, consistency is the benefit of the diversification that we have around the world and across use cases and across verticals and across company sizes. But, you know, you're also seeing that macro is not really enabling anyone to make a big, consistent bet on any part of the market and expect that bet to return really well for two or three sustained quarters, even.

Speaker Change #129: <unk> of the diversification that we have around the world and across use cases and across verticals and across company sizes, but you're also seeing that the macro is not really enabling anyone to make a big consistent bad in any part of the market and expect that bad to return really well for two or three sustained quarters, even because it.

Bill: Because it is still difficult across the board, and we're finding these great pockets of opportunity, which are available to us because of our diversification. But we haven't been able to see anything, you know, really sustain itself and start to build momentum toward a really positive market condition, nor have we seen those pockets of optimism really sustain themselves for more than a quarter or two.

Speaker Change #129: It is still difficult across the board and we're finding these great pockets of opportunity, which are available to us because of our diversification, but we haven't been able to see anything really sustain itself and start to build momentum toward a really positive market condition, nor have we seen those pockets of those pockets of optimism really sustain.

Speaker Change #129: Themselves are more than a quarter or two helpful color. There and then Isabel as you think about this kind of new normal environment, you've been executing through here. The last five six quarters, you did talk about leaning into the go to market, adding additional sales capacity to try to better position. The company next year for growth, but it looks like.

Isabelle: And then, Isabelle, as you think about this kind of new normal environment you've been executing through here for the last five, six quarters, you did talk about leaning into go-to-market, adding additional sales capacity to try to better position the company next year for growth, but it looks like Q1 came in a little better from an operating efficiency standpoint. Did you spread out or pause the hiring there or walk through what drove some of the improvement in efficiencies there in the quarter versus the plan to hire? Yeah, no.

Speaker Change #130: Q1 came in a little better from an operating efficiency standpoint did you spread out or pause the hiring there or walk through what drove some of the improving the efficiencies there in the quarter versus the plan that to higher.

Isabelle: So I think we have started to bring back hiring, our hiring capacity. Over the course of the prior year, you'll remember we did put that headcount pause on. And you can see, actually, in the statistics, our headcount growth was pretty anemic.

Speaker Change #131: Yeah, no. So I think we have started to bring back hiring or.

Speaker Change #131: Our hiring capacity over the course of the prior year, you'll remember we did put that head count pause on and you can see actually in the statistics, our head count growth was pretty anemic. We are we are now starting to ramp that back up.

Speaker Change #131: And so we are we are bringing more capacity online and I would say there are as we enter some of these new markets. There are just there's timing considerations of people give notice and how long it actually takes to sort of from signature to start date. So we're seeing some of that at play as we enter some of these new markets.

Isabelle: We are now starting to ramp that back up, and so we are bringing more capacity online. I would say, as we enter some of these new markets, there are just timing considerations as people give notice, and how long it actually takes, sort of from signature to start date.

And I think there are just other efficiencies that we were able to capitalize on whether it was across a teeny or in our core tech stack them and there are plenty of places where we are forcefully trying to be as efficient as possible I think I mentioned last quarter that in my opinion a team I was working on.

Isabelle: So we're seeing some of that at play as we enter some of these new markets, and I think there are just other efficiencies that we are able to capitalize on, whether it was across T&E or in our core tech stack. And there are plenty of places where we are forcefully trying to be as efficient as possible. I think I mentioned last quarter that in my FP&A team, I was working on being a little bit quicker on the twitch.

Speaker Change #131: Being a little bit quicker twitch and that quicker twitch is going to enable us to make a to pull in the reins where necessary and then also be able to take capital that's been saved in certain areas and redeploy it in higher ROI ways, and so I think what youre seeing in some of the benefits of some of that click or Twitch motion that we that we experienced in.

Isabelle: And that quicker twitch is going to enable us to make, to pull in the reins where necessary, and then also be able to take capital that's been saved in certain areas and redeploy it in higher ROI ways. And so I think what you're seeing is some of the benefits of some of that quicker twitch motion that we experienced in Q1. A couple of colors.

Speaker Change #132: Q1 couple of color. Thank you.

Isabelle: Thank you. Our next question comes from Brian Schwartz of Oppenheimer. Please unmute your line and ask your question.

Speaker Change #133: Our next question comes from Brian Schwartz Oppenheimer. Please on mute your line and ask your question.

Bill: Thank you for taking my questions this afternoon. Bill, on the topic of AI, you gave good color on how it's impacting productivity and resources and personalization. I wanted to ask you about deal cycles. Is your sense, whether it's new logos or your customer spending, is AI helping or elongating deal cycles? I don't think I'd be able to discern a material impact.

Brian Jeffrey Schwartz: Thank you for taking my questions. This afternoon Bill on the topic of AI you gave good color on how it is impacting productivity in resources and personalization I wanted to ask you about deal cycles is is it your sense, whether its new logos or your customer spending is that helping or elongate.

Speaker Change #135: <unk> deal cycles.

Speaker Change #136: I don't think I'd be able to discern a material impact it's definitely involved in every deal cycle the.

Bill: It's definitely involved in every aspect of every. It's obviously in every RFP; we present our AI roadmap vision in basically every deal cycle. And I think one of the most important parts for a buyer right now is that, well, I think that there is an understanding that the tangible use of AI, generative AI, et cetera, especially the newer capabilities that are being driven by agents and LLMs and such, is still in its early days. But they want to make sure that if they're going to make a platform shift, especially one that is part of the consolidation cycle and part of the enterprise replacement cycle, that they're betting on a horse that is going to have a frontier-leading vision that has the right ingredients in place in order to be a winner in AI and to be able to deliver those new capabilities to them quickly and comprehensively. Fire alarm that just came on here in a second, which I'll try to talk through.

Speaker Change #136: It's obviously in every RFP, we present, our AI roadmap vision in basically every deal cycle I and I think what are the most important parts for a buyer right. Now is that well you know I think that there's an understanding that the tangible use of AI generative AI et cetera, especially that can.

Speaker Change #136: Newer capabilities that are being driven by agents in our labs and such I is still in its early days, but they want to make sure that if they're going to make a platform shift, especially one that is part of the consolidation cycle and part of the enterprise replacement cycle that they are betting on a horse that is going to have a frontier leading vision that has the right ingredients and <unk>.

Speaker Change #136: In order to be a winner in AI and to be able to deliver those new capabilities to them in quickly and comprehensively and so.

Speaker Change #136: We have a fire alarm that just came on here in a second but I'll try to talk through and so I don't think that those are necessarily leading to a strong difference in deal cycles, but it is absolutely an important part of every single one of them.

Bill: And so I don't think that those are necessarily leading to a strong difference in deal cycles, but it's absolutely an important part of every single one of them. The follow-up question I had, it's either for Bill or Isabelle. You know, Braze is a horizontal business. So just wanted to ask you about the industries and if any industry surprised you in terms of strength or weakness in the quarter. Thanks again for taking my question.

Speaker Change #137: The follow up question I had is it's either for bill or is about.

Speaker Change #138: A brief as the horizontal business. So just wanted to ask you about the industries that any industry has surprised you in terms of strength or weakness in the quarter. Thanks again for taking my questions.

Bill: Yeah, so I think across our, and I think Bill mentioned, you know, one of the strengths of the organization is diversity, the diversity in geographic region, the diversity in our customer size and classification, the diversity in the industry. And, you know, we saw this a little bit in COVID, and I think this kind of continues. There are industries that were doing sort of gangbusters during the times of COVID, and then there are industries that sort of came back post-COVID.

Speaker Change #139: Yeah, So I think across all right and I think Bill mentioned you know one of the strengths of the organization is the diversity the diversity and geographic region. The diversity in our customer size and classification the diversity.

Speaker Change #140: The industry and you know we saw this a little bit in Covid and I think this kind of continues there are industries that are we're doing for gangbusters during kind of the Covid times, and then industries that sort of came back post COVID-19.

Isabelle: We're continuing to see sort of that diversity. I don't know that there are any particular trends that are persistent, I think, as Bill previously mentioned, but I think that diversity, that diversity specifically across so many different dimensions, is what does help us with a certain level of resilience across these different conditions. Our next question comes from Michael Berg with Wells Fargo. In the interest of time, we do ask that everyone limit themselves to one question moving forward. Michael, you may now unmute your line and ask your question. Hey, thanks for taking my question here. I wanted to ask one on macro and the budget, but in a slightly different way here.

Speaker Change #140: We're continuing to see sort of that diversity I don't know that there's any particular trends that are persistent I think is as bill previously mentioned think that diversity Ah that diversity, specifically across so many different dimensions is what does help us with a certain level of resilience across.

Speaker Change #140: Across these different conditions.

Speaker Change #141: Our next question comes from Michael Berg with Wells Fargo in the interest of time, we do ask that everyone limit themselves to one question moving forward. Michael you May know on your line and ask your question.

Speaker Change #140: Sure.

Speaker Change #140: Okay.

Bill: So, like others have alluded to, you guys perform relatively well to others in broader software and, I'm just curious if you believe or are seeing in your conversations that MarTech investments are seeing a higher relative priority to other areas of software, or maybe some of the other soft secular trends are driving that. Anything to point to there? So I would say, I don't have great visibility into exactly how, you know, the spend is being prioritized in the stack, other than to say that, you know, we continue to believe that in particular, the part of the marketing software spend that Braze represents, that we are, you know, amongst the highest value propositions that a customer has, specifically because of the ability to invest in improved retention and enhancing the long term value of already acquired relationships, and generally improving the unit economics of any business that really focuses on customer engagement.

Speaker Change #140: Okay.

Michael H. Berg: Hey, Thanks for taking my question here.

Michael H. Berg: I wanted to ask one on the macro and the budgets, but slightly different way here. So like others have alluded to you guys performed relatively well to others and broader software.

Michael H. Berg:

Michael H. Berg: I'm just curious if you believe or seeing in your conversations that Mar Tech investments are seeing a higher relative priority to other areas of software or maybe some of the others saw secular trends are driving that anything to point to there.

Speaker Change #143: And so I would say I don't have great visibility into exactly how the spend has been prioritizing the stack other than to say that we continue to believe that in particular, the part of the marketing software span. The Braves represents that we are amongst the highest value propositions that a customer has specifically because of the ability to.

Speaker Change #144: Invest in improved retention and enhancing the long term value of already acquired relationships and generally improving the unit economics of any business that really focuses on customer engagement and so in a time like this we think it's the exact right investment for our brands to be increasing even as they may be lowering discretionary marketing spend at other places.

Bill: And so in a time like this, you know, we think it's the exact right investment for brands to be making, even as they may be lowering discretionary marketing spend at other places. I would also say that, you know, we talk a lot about the secular trends that are driving a lot of Braze's opportunity around investment in first-party data, in the building of first-party relationships, and in retooling product and service ecosystems in order to enable a greater level of more persistent connection with the customer.

Speaker Change #144: I'd also say that we talk a lot about the secular trends that are driving a lot of braces opportunity around investment and first party data and the building of first party relationships in retooling product and service ecosystems in order to enable a greater level of more persistent connection with the customer and by that I would call out examples.

Bill: By that I would call out examples, you know, like any of the quick service restaurant chains with their mobile wallets and ordering and loyalty, automotive, you know, in places where you go from never interacting with the automobile manufacturer to using a mobile app to unlock and start your car every single day, right, I can kind of go around a lot of industries and verticals and provide you examples of these investments that are being made by these companies to deepen their connection with their existing customers to be able to understand that connection better, and then be able to communicate with them.

Speaker Change #145: You know like any of the quick service restaurant chains with their mobile wallets in ordering and loyalty automotive. It you know in places where you go from never interacting with the automobile manufacturer to using a mobile app to unlock and start your car every single day, Alright, I can kind of go around a lot of industries and verticals and provide you. Examples of these investments that are being made by these companies to deepen.

Speaker Change #145: Their connection with their existing customers to be able to understand the connection better and then be able to communicate with them and so I think that is a secular trend that's not just being driven by short term mechanicians in the overall budgets and budget Sac, but is actually an imperative for businesses to remain competitive as we continued to digitize.

Bill: And so I think that is a secular trend that's not just being driven by short-term, you know, machinations in the overall budgets and budget stack but is actually an imperative for businesses to remain competitive as we continue to digitize more of the world and as customer experience continues to get put at the center of what drives brand loyalty and brand connection. And ultimately, that connection is where, you know, businesses are going to find a profitable way out of this current macro environment. Our next question comes from Brian Peterson at Raymond James. Please unmute your line and ask your question.

Speaker Change #145: More of the world and as customer experience continues to get put at the center of what drives brand loyalty and brand connection and then ultimately that connection is where businesses are gonna find they're profitable.

Speaker Change #145: Out of this current macro environment.

Speaker Change #146: Our next question comes from Brian Peterson at Raymond James Please on mute your line and ask your question.

Bill: Well, hey guys, thanks for taking the question. So Bill, just wanted to give a quick update on the Parker Channel. How's that going in terms of capacity?

Brian Christopher Peterson: Oh, Hey, guys. Thanks for taking the question. So Bill just wanted to get a quick update on the Arbor channel how is that ramping in terms of capacity and any thoughts on the potential contribution to bookings. This year. Thanks guys.

Bill: Any thoughts of the potential contribution to boatloads this year? Thanks, guys. Hey, yeah, thanks for asking for an update on that. You know, I would say that the status is roughly the same as it was last quarter. Leading indicators are all good. You know, Accenture and Deloitte have dramatically increased the level of resources and focus, in particular, over the last couple of quarters. We've also been talking about WPP quite a bit over the last year.

Bill: And I would say that the level of investment, partnership, and coordination that we have with them has been really fantastic. And so we've been working with, you know, all three of them on better levels of coordination, on deal cycles, on new opportunities. And we continue to be excited by the momentum there. But, you know, against that backdrop of the difficult macro, you're seeing that macro hit those particular sectors as well.

Bill: Hey, yeah. Thanks for asking for an update on that you know I would say that the the status is roughly the same as it was last quarter, leading indicators are all good accenture and Deloitte have dramatically increased the level of resources and focus I you know in particular for the last couple of quarters. We've also been talking about W. P. P quite a bit for the last year and I would say that the level of <unk>.

Bill: Best Man in partnership and coordination that we have with them has been really fantastic and so we've been working with all three of them on a better levels of coordination on deal cycles on new opportunities and we continue to be excited by the momentum there, but you know I think against that backdrop of the difficult macro you're seeing that macro hit though.

Bill: And so the overall levels of activity that we see there are not, you know, you shouldn't underwrite that to anything in particular, but qualitatively, we've been really happy with the progress. Our next question comes from Pinjalim Bora at J.P. Morgan. Please unmute your line and ask your question.

Bill: His particular sectors as well and so the overall levels of activity that we see there are not.

Bill: You shouldn't underwrite that to anything in particular, but quantitatively, we've been really happy with the progress.

Bill: Oh, great. Thanks for squeezing me in, and congrats on the quarter. Just a quick one.

Speaker Change #148: Our next question comes from pin gentlemen, Bora at J P. Morgan. Please on mute your line and ask your question.

Bill: Maybe talk about the pipeline and the demand trends that you're seeing so far in Q2. Is there a change versus how you exited Q1 at this point? Thank you. Yeah, we started the year a little bit light on late stage pipeline after a really strong Q4 that was focused on closing, but we've been off to a great start so far this year.

Speaker Change #149: Oh, great. Thanks for squeezing me in and congrats on the quarter just a quick one maybe talk about the pipeline and the demand trends that youre seeing so far in Q2 is there a change versus how you exited Q1 at this point thanks.

Bill: You know, I just mentioned a bunch of things that have been happening this year for new pipeline development, things like our rebrand that launched right at the beginning of the calendar year, big investments and awareness, and a strong global events program that's activated thousands of customers and prospects around the world. And, you know, I think that pipeline opportunity is certainly available out there. It's harder to find than it would have been, you know, in the COVID era.

Speaker Change #150: Yeah. We so we started the year a little bit light on late stage pipeline. After a really strong Q4 that was focused on closing, but we've been off to a great start so far this year.

Speaker Change #150: I've just mentioned a bunch of the things that had been happening this year for new pipeline development things like our rebrand that launch right at the beginning of the calendar year big investments in awareness and a strong global events program, that's activated thousands of customers and prospects around the world and you know I think that pipeline opportunity is certainly available out there it's harder to five.

Bill: But because of the diversification of the business, we have a lot more places to go and hunt for opportunities. You know, Braze's versatility across verticals, across company sizes, across use cases all over the world. You hear me talk about this a lot, but it's really a fantastic property of what we've built here at Braze that it's able to so readily deploy itself and be used by different organizations.

Speaker Change #150: And then it would have been you know in the in the Covid era, but because of the diversification of the business. We have a lot more places to go and hunt for opportunities Braises versatility across verticals across company sizes across use cases, all over the World you hear me talk about this a lot, but it's a it's really a fantastic property of what we've built here.

Speaker Change #150: [noise] appraise that it's able to sober suitably deploy itself and be used by different organizations and that means that our go to market teams are able to continue to operate a very diversified portfolio of potential opportunities and go find pipeline wherever wherever it is available.

Bill: And that means that our go-to-market teams are, you know, able to continue to operate a very diversified portfolio of potential opportunities and go find pipeline wherever, you know, wherever it is available. Our next question comes from Tyler Radke at Citi. Please unmute your line and ask your question.

Speaker Change #151: Thank you.

Speaker Change #152: Our next question comes from Tyler Iraq at Citi. Please on mute your line and ask your question.

Speaker Change #151: Okay.

Isabelle: So, you know, last quarter, we talked about the progression of gross margins throughout the year, and it was nice to see gross margins come in a little bit better than we expected in Q1. Can you just talk about the gross margin side for the rest of the year, especially given some of the changes that Bill alluded to on the WhatsApp channel? Are you still expecting it to sequentially increase each quarter? What are you contemplating in terms of how those WhatsApp contracts ramp up and the structure from a cost side perspective?

Speaker Change #153: Great. Thanks for taking the question.

Speaker Change #154: Wanted to direct this at Isabel so.

Speaker Change #155: Last quarter, we talked about the progression of gross margins throughout the year.

Speaker Change #156: It was nice to see gross margins come in a little bit better than we expected in Q1 can you just talk about the gross margin side for the rest of the year, especially given some of the changes.

Speaker Change #157: Bill alluded to on the Whatsapp channel are you still expecting them to sequentially increase each quarter.

What are you contemplating in terms of how those whatsapp contracts ramp in <unk> and.

Speaker Change #158: And the structure from a cost side perspective, thank you.

Isabelle: Thank you. Yeah, so thanks for the question. So I will go back to the comments that I made last quarter and just reiterate. We are happy with where things came in from a gross margin perspective in Q1. We do expect to see improvement over the coming quarters for that metric. I would say that the comments that Bill made with respect to WhatsApp, I think that's going to have a little bit more of a longer term.

Yeah. So thanks for the question. So I will go back to the comment that I made last quarter and just to reiterate so we are happy with where they things came in from a gross margin perspective in Q1, we do expect to see a improvement.

Speaker Change #158: Improvement air over the coming quarters.

Speaker Change #159: For for that metric and I would say that the comments that bill made with respect to Whatsapp I think that is that's going to have a little bit more of a longer term because they take a little bit more time for that to really play out I think within that comment that he made where that we don't really know exactly how all of this is going to shake out.

Isabelle: It's going to take a little bit more time for that to really play out. I think some of the comments that he made were that we don't really know exactly how all of this is going to shake out, and it's going to take time for that to sort of work its way through how our go-to-market motion evolves there. Also, I'll reiterate, currently, the dollar value of WhatsApp remains very small as a proportion of our total.

Speaker Change #159: It's going to take time for that to sort of work its way through how our go to market motion evolves there.

Speaker Change #159: Also I'll reiterate currently the dollar value of Whatsapp I. It remains very small as a proportion of our total and so while it has had sort of some of the utilization of whatsapp that was fairly concentrated over the last couple of months with what sort of drove some of that pressure that we saw in Q1 some of that is.

Isabelle: And so while some of the utilization of WhatsApp that was fairly concentrated over the last couple of months was what sort of drove some of that pressure that we saw in Q1, some of that has sort of been relieved at this point, which is that and some concerted efforts to work on core spend generally are what is going to drive the increases in gross margin over the balance of this year. But it's a little early to give specific margin commentary. The only thing I would say is, for now, we remain comfortable with the long-term guided range of 67 to 72 percent.

Speaker Change #159: Sort of been relieved at this point, which is that and some concerted efforts to work on core spend generally.

Speaker Change #159: Is what is going to drive the increases in gross margin over the balance of this year, but it's a little early to give.

Speaker Change #159: Specific margin commentary the only thing I would say as for now we remain comfortable with the long term guided range of 67% to 72%.

Operator: Thank you. Our Q&A has come to an end. All right, well, we're sorry we couldn't get to everyone due to time, but we'll be talking to you all soon, callbacks. And thank you to everybody for attending the earnings call today. I hope you found it informative. And we continue to reiterate that we're super excited about the future opportunity for Braze. And we thank you for being investors. See you next quarter.

Speaker Change #160: Thank you.

Speaker Change #161: Our Q&A has come to an end.

Alright, well, we're sorry, we couldn't get to everyone due to time, but we'll be talking to you all soon and callbacks and thank you to everybody for attending the earnings call. Today I Hope you found it informative and we continue to reiterate that we're super excited about the future opportunity for Braves and we thank you for being investors.

Speaker Change #161: See you next quarter.