Q2 2025 Braze Inc Earnings Call
Initiatives, and our long term financial targets and goals.
Speaker Change: These statements are subject to a variety of recent 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.
Speaker Change: For a discussion of the material risk and uncertainties that could affect our actual results, please refer to the risks identified in today's press release and our SEC filings, both available on the Investor Relations section of our website.
Speaker Change: I'd also like to remind you that today's call will include certain non-gap financial measures used by a management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal second quarter 2020 by performance in addition to the impact these items have on the financial results.
Speaker Change: Please refer to the reconciliations of our non-gap financial measures to the most directly comparable financial measures calculated in accordance with U.S. cap.
Speaker Change: included in our earnings release under the Investor Relations section of our website. The non-gap financial measures provided should not be considered as a substitute for or superior to the measures that financial performance prepared in accordance with US gap. And now, I'd like to turn the call over to Bill.
Bill: Thank you Chris, and good afternoon everyone. We were very pleased with our second quarter results, which again demonstrated the high ROI and long-term value of the brace customer engagement platform, along with strong execution from our teams around the world.
Bill: We were encouraged by the new business one in the quarter, the progress made in our product investments, and the continued development of our AI initiatives.
Speaker Change: We generated $145.5 million of revenue. Up 26% year over year, we'll drive and continue to efficiency across our business.
Speaker Change: Non-Gap Gross Margin was 70.9% a rise of 90 basis points compared to the previous year, and we demonstrated strong operating leverage, realizing our first ever quarter of non-Gap operating income profitability and non-Gap net income profitability.
Speaker Change: We take pride in achieving these milestones, and look forward to continuing to grow our business efficiently in the coming quarters and years, generating more meaningful, non-gap operating income and free cash flow for shareholders, will also thoughtfully reinvesting in our business.
Speaker Change: We've highlighted the legacy vendor replacement cycle and point solution consolidation trends over the last few quarters and we're excited to see those trends continue. As marketers realize that the antiquated technology and pilot architectures of the legacy marketing clouds and email service providers are unsuited for modern customer engagement use cases.
Speaker Change: Customer Growth in the Corridor was solid, with our total customer count reaching 2163 and increase of 61 during the quarter and 205 year over year.
Speaker Change: New Business Wins and Upsells included Azeana Airlines, Bell Media, Gumtree, Lone Depot, and 26 Papa John's Pizza, Strawberry Hotels, Supercell, TF1, Zalando and many others.
Speaker Change: Tutu also saw the diversification of our customer base on full display as we want new customers around the world and across a range of diverse industry.
Speaker Change: and including a European hotel chain, an American professional sports franchise, a European advertising marketplace, a QSR chain in APAC, a major American media conglomerate, a European TV network, an international food and beverage company, a German neobank, and an American home design company, among many others.
Speaker Change: In the coming years, we believe that both the legacy replacement cycle and vendor consolidation trends will drive increased share gains or braze, as brands put even greater emphasis on customer engagement strategies and seek to capitalize on new AI-driven advancement.
Speaker Change: As marketers become increasingly sophisticated and ambitious with their customer engagement efforts, we believe Brace will benefit.
Speaker Change: and through the growth of our customer community and the successful execution of our product roadmap and global expansion strategy, raise composition itself as a global category leader in customer engagement, delivering increased relevance and personalization to consumers at scale.
Speaker Change: Upsell is also strong this quarter, as existing customers continue to grow with braze, adopting more channels, deploying more use cases, increasing their messaging volumes, and adding new business units and geographies to their braze deployments.
Speaker Change: This quarter, we also secured our second and third eight-figure customers, first with a long-tenured global quick service restaurant group, and next with the large technology can glamour it, the strong presence in the gaming space.
Speaker Change: The realization of continued expansion opportunities with long-term customers such as these is a strong testament to Brace's pace of product innovation, our performance stability and reliability at scale, and our leadership in the customer engagement category.
Speaker Change: and her prize remains a strength for braze.
Speaker Change: with our $500,000 plus ARR customers growing to 222, up 28% year over year. A testament to the strong return and investment available to those brands who invest in first-party data and use sophisticated customer engagement strategies and advanced AI to enhance and enrich the customer relationships at scale.
Speaker Change: What the macroeconomic environment continues to present challenges, we are effectively navigating them and staying focused on executing against our long-term product operational and financial goals.
Speaker Change: We believe difficult environments present valuable opportunities to create long-term differentiation and separation from our competition, and we are committed to capitalizing on this period to cement our position as a global leader in customer engagement.
Speaker Change: As such, we are investing in our brand and our business by strengthening our global teams, enhancing our channel offerings, improving system performance, smoothing the on-ramp into brace for new customers and elevating our AI offerings.
Speaker Change: In July, Brace celebrated two important milestones as we observed our 13-year anniversary and introduced the Brace data platform to the world.
Speaker Change: With more than a decade of experience and focus on customer engagement, we deeply understand the importance of high performance data activation and flexible governance in order to deliver sophisticated relevance and revenue optimization, especially as the challenge of modern customer engagement has spread across an increasingly ubiquitous set of customer touchpoints.
Speaker Change: The Brace Data Platform is a comprehensive set of data capabilities and partner integrations designed to streamline data unification, activation, and distribution.
Speaker Change: Built with flexibility, interoperability and modularity in mind, the Brace Data Platform helps brands easily integrate and leverage their data regardless of their preferred technologies and workflows. With the Brace Data Platform, brands can simplify the process of collecting and bringing first-party data together from any source.
Speaker Change: Recent additions to the Brace Data Platform include an extension to cloud data injection, which allows customers to generate audience segments directly from data warehouse partners like Amazon Redshift, Databricks and Snowflake, giving brands the flexibility to use zero copy technology whenever their use cases demanded.
Speaker Change: and by utilizing existing capabilities such as data transformations, catalogs, or SDKs, and or APIs.
Speaker Change: Grands can strike the right balance of security, performance, and architectural considerations.
Speaker Change: will efficiently organizing their data and empowering marketers to bring their creative ideas to life more quickly while also reducing their dependence on expensive technical teams.
Speaker Change: We also launched new data management capabilities and our highly flexible catalogs offering to help customers take advantage of recently integrated AI features while maintaining rapid time to value and a low total cost of ownership.
Speaker Change: Combining these data features with Brays AI and our robust partner community helps customers test and deliver more personalized experiences to more customers in more places and do it with confidence.
Speaker Change: We're very excited to continue building the future of the Brace Data Platform and collaboration with the broader data ecosystem, including our Brace Data Platform launch partners, and parody, amplitude, census, high touch, and particle, rudder sack, Simon Data, Tealium, treasure data, and Tuleo segment.
Speaker Change: As we worked out our goal of becoming the category leader in customer engagement, we will continue investing to expand the size and diversity of our customer community, aiming to establish Braise as both the premier skill set for customer engagement practitioners and as the reference architecture for the modern customer engagement technology stack.
Speaker Change: Just yesterday, we announced two new initiatives to accelerate our customer community growth, while also making it easier for teams of all sizes to experience Braves first hand.
Speaker Change: The first is Brace for Startups, which supports the next generation of BC back startups to power sustainable customer center growth from day one by providing them with exclusive access to the Brace platform, services and community. The goal of the program is to win the business of the next generation of digital leaders driving long-term new business opportunities.
Speaker Change: Start-ups can grow with confidence knowing the braze is the only customer engaged in platform bill ever need to buy.
Speaker Change: Second, we announced a free trial program, allowing brands to test the platform, including our dashboard and APIs for 14 days without charge.
Speaker Change: This will provide marketers with the opportunity to dive into special guided walkters, test pre-built campaigns and journey templates and preview Brace AI features, seeing firsthand how they can drive meaningful engagement and business results.
Speaker Change: We believe this will help win more business across customer types and expand more quickly into new business units within existing customers.
Speaker Change: Later this month we'll be unveiling even more product innovation at our annual flagship customer conference forge, which takes place from September 23rd to 25th in Las Vegas.
Speaker Change: You'll hear more about our approach to investing in the Brace Data Platform, Data Unification, Activation and Distribution, as well as enhancements to orchestration and AI capabilities, designed to make experimentation and content generation easier and more effective at scale.
Speaker Change: You'll also hear more about how we're increasing the depth and breadth of our channels and helping brands stay ahead of evolving consumer needs.
Speaker Change: We hope that many of you will join us at Forgues to learn about these updates live. And also experience exciting customer engagement innovations through live workshops and here from some of our outstanding customers and partners.
Speaker Change: We also be hosting an investor event on Monday, September 23rd, before Forge, during which we will share more of our product and market vision as well as more details about our financial outlook.
Speaker Change: Finally, I want to update you on our social impact initiative.
Speaker Change: To all stakeholders to visit our newly launched ESG website for additional information on our efforts I'll wrap my remarks by reiterating our commitment to driving long term growth efficiency and profitability in our business. Thank you for your interest 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 solid second quarter with revenue, increasing 26% year over year to $145 $5 million driven by a combination of existing customer contract expansions renewals and new business.
Isabelle: Description revenue remains the primary component of our total top line contributing 96% of our second quarter revenue, while the remaining 4% represents a combination of recurring professional services and one time configuration and onboarding fees.
Total customer count increased 10% year over year to 2163 customers as of July 31 up 205 from the same period last year and up 61 from the prior quarter. Our total number of large customers, which we define as those spending at least $500000 annually grew 28% year over year to 222 and as.
Isabelle: As of July 31 contributed 61% to our total <unk>.
Isabelle: This compares to a 57% contribution as of the same quarter last year.
Isabelle: Measured across all customers dollar based net retention was 114% while dollar base net retention for our large customers with 117% expansion was again broadly distributed across industries and geographic regions.
Isabelle: Revenue outside the U S contributed 45% to our total revenue in the second quarter compared to 43% in the prior year quarter and 44% in the first quarter of fiscal 2025.
Isabelle: In the second quarter, our total remaining performance obligation was $690 million up 32% year over year and up 5% sequentially.
Isabelle: Current RPI was $438 million up 24% year over year and up 4% 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.
Isabelle: non-GAAP gross profit in the quarter was $103 million, representing a non-GAAP gross margin of 79%. This compares to a non-GAAP gross profit of $81 million and non-GAAP gross margin of 70% in the second quarter of last year.
Isabelle: The year over year margin improvement was primarily driven by the continued cost optimization of our technology stack with additional benefits from personnel efficiencies.
Isabelle: non-GAAP sales and marketing expenses were $58 million or 40% of revenue compared to $52 million or 45% of revenue in the prior year quarter. While the dollar increase reflects our year over year investments in head count to support our ongoing global growth and expansion. The improved efficiency reflects our disciplined investment approach to resource deployment okay.
Isabelle: Cross our go to market organization.
non-GAAP R&D expense was $21 million or 15% of revenue compared to $19 million or 16% 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.
Isabelle: non-GAAP G&A expense was $19 million or 13% of revenue compared to $17 million or 15% of revenue in the prior year quarter. While the dollar increase was driven by investments to support our overall company growth. The improved efficiency continues to reflect our disciplined approach to investment and resource deployment as we continue to scale.
Isabelle: non-GAAP operating income was $4 $2 million or 3% of revenue compared to a non-GAAP operating loss of $7.6 million or 7% of revenue in the prior year quarter non-GAAP net income attributable to <unk> shareholders in the quarter was $9 $1 million or nine cents per share compared to a loss of $3 nine.
Isabelle: $10 million or a loss of four cents per share in the prior year quarter.
Speaker Change: Now turning to the balance sheet and cash flow statement, we ended the quarter with $504 million in cash cash equivalents restricted cash and marketable securities cash provided by operations during the quarter was $11.6 million compared to cash used of $17 $5 million in the prior year quarter. This marks our third straight quarter.
Speaker Change: Of positive operating cash flow.
Speaker Change: Including the impact of capitalized costs free cash flow in the second quarter was approximately $7 $2 million compared to negative free cash flow of $18 $7 million in the prior year quarter and as we have noted in the past we expect our free cash flow to continue to fluctuate from quarter to quarter, given the timing of customer and vendor payments.
Speaker Change: Now turning to guidance for the third quarter of fiscal 2025, we expect revenue to be in the range of 147.5 to $148 5 million, which represents a year over year growth rate of approximately 19% at the midpoint.
Speaker Change: Third quarter non-GAAP operating loss is expected to be in the range of $3 5 million to $4 $5 million at the midpoint. This implies an operating margin of approximately negative 2.5%.
Speaker Change: Third quarter operating income will be affected by the cost of forge our annual customer conference as well as several global customer events scheduled during the quarter taken together. These events will impact the third quarter operating expenses by an estimated $5 million to $6 million. In addition, the back half of the year will be impacted by our mid year.
Speaker Change: <unk>.
Speaker Change: Oh for which comp increases were effective August 1st.
Speaker Change: Third quarter non-GAAP net loss is expected to be half a million to $1 $5 million and third quarter non-GAAP net loss per share in the range of zero cents to a loss of one cent per share based on approximately 102 million weighted average basic shares outstanding during the period.
Speaker Change: For the full fiscal year 2025, we expect total revenue to be in the range of $582 5 million to $585 $5 million, which represents a year over year growth rate of approximately 24% at the midpoint.
Speaker Change: Fiscal year 2025, non-GAAP operating loss is expected to be in the range of $7 5 million to $8 $5 million.
Speaker Change: At the midpoint this implies a non-GAAP operating margin of approximately negative 1%.
Speaker Change: Our roughly 750 basis point improvement versus fiscal year 2024.
Speaker Change: non-GAAP net income for the same period is expected to be in the range of $6 5 million to $7 $5 million.
Speaker Change: Fiscal year 2025, non-GAAP net income per share is expected to be six to seven cents per share based on a full year weighted average diluted share count of approximately 108 million shares.
Speaker Change: I'll end by reiterating Brazos commitment to providing world class customer engagement solutions, while effectively managing cost to achieve our profitability targets and with that we'll now open the call for questions. Operator, please begin the Q&A.
We will now begin the Q&A session. If you would like to ask a question. Please use the raise hand feature at the bottom of your assumed Linda we will wait one moment, while the queue assembles.
Speaker Change: Our first question comes from Ryan Macwilliams from Barclays.
Ryan Macwilliams: Thanks for taking the question.
Ryan Macwilliams: Bill with Apple supporting Rcs in iOS 18 have you seen any customer interest yet on Rcs and how could you see this as a channel for Braves since Rcs seems more complex in SMS and has the ability to be more personalized for individual users.
Speaker Change: Yes. So first we're excited for Rcs and actively preparing full support and we're excited to share more about that at forge in just a few weeks some aspects of Rcs support are going to be strictly better than SMS, sending even for text only messages and so I think that's something that'll really help marketers worked through some of the additional complexity is that they can just lift and shift.
Speaker Change: [noise] prior SMS strategies, and then they're actually going to get access to authentication and branding is a center or theyre going to get richer analytics and and then they'll also then be able to progressively leg into these new content types and while theres going to be work to do on the brain side, both for ops, because like SMS and carrier ops because of the carrier complexity and on the go to market side as we ensure.
Speaker Change: Just which surely is going to be a dynamic pricing environment in the early innings of Rcs's global rollout most of the R&D needs to support things like composition previewing testing and reporting on Rcs have already been done in some fashion due to our support of Whatsapp line or other Braves owned and operated channels like contact cards and in product messaging and similarly for any customers that are already adopting.
A richer content formats, even if they're just didn't push notifications, but obviously also with whatsapp in line that makes the shift over to Rcs, a lot easier and from an R&D perspective. It obviously increases the leverage that we get on that investment and as a good reminder of the compounding benefits of Brazos comprehensive channel support provides us as the consume.
Speaker Change: <unk> message, sending landscape continues to grow more complex over time, but we're also well prepared for it with the launch of our more flexible credits model. So if you remember.
Speaker Change: Until the end of Q1, we actually used to require that customers made commitments on a country by country basis for SMS and MMS, sending separately now any customer who's actually bought the credits from braze starting at the end of Q1, and then into Q2, where we saw a great uptake on that both for renewals as well as new business, we'll be able to use those same.
Speaker Change: Credits, just with different conversion ratios as Rcs support becomes available. So that's that's definitely something to look forward to his braids continues to launch new channels into the future, including Rcs is that the go to market complexity and the ability for our existing customer base to adopt them quickly I will be able to skip past any sort of stage it involves new contracting.
Isabella: Excellent hit the color and then for Isabella how should we think about net retention for the rest of this year do you feel like we're at the right level at this point and was there any impact to this metric based on the acquisition from a year ago. Thanks. So much yeah. So thanks for the question so.
Speaker Change: So I've been asked this question over the last couple of quarters of sort of when can we see that the bottom here and I think again I think we're not quite yet at the bottom and if you think about how we're guiding them think about the guide is embedding some element of kind of continued pressure on this metric. So I don't think we are key.
Speaker Change: White stabilizing here, yet, we lagged out of sort of another quarter historically that had some stronger numbers and so that's part of it is continuing to leg out of some of these stronger historical quarters.
Speaker Change: I'm not a huge impact here from from the acquisition a small percentage points from the impact of having lapped the acquisition, but really more just lagging out of historically stronger quarters.
Speaker Change: That makes sense.
Speaker Change: Our next question comes from that pendulum Bora from J P. Morgan.
Bora: Oh, great. Thanks for taking the question Bill.
Speaker Change: Maybe you touched on the legacy marketing cloud replacement cycle, maybe talk about how often is AI audio roadmap around here is being cited by customers. In these deals is kind of a point of differentiation and is the intensity. There in terms of the displacement cycle have you seen that in.
Speaker Change: Please recently or are people holding on more to their incumbent solution given the challenging macro.
Speaker Change: Yeah. So I think we're seeing both attitudes depending on you know the posture of the company that we're working with are selling to in some places there are especially driven by things like vendor consolidation as well as just a bit of breathing room from slower growth rates. The companies are experiencing right now, they're taking as an opportunity to go and shore up there.
Speaker Change: Prior foundations embark on transformation journeys and other places because the teams are static or there's not new projects launching and such there sticking with the status quo and so I think youre seeing both of them at play from an AI perspective, I think it continues to be an incredibly important part of every deal cycle when you're going through.
Speaker Change: A legacy replacement you, obviously want to make sure that the vendor that youre moving onto is going to be future proofed as well, especially if you're a more traditional enterprise. It maybe only makes a change in their technology stack like this every five or 10 years and so you know that's a there's a bit of a double edge sword. There in the sense that there's obviously still a lot of noise in the AI space and it's an import.
Speaker Change: Part of every deal cycle, but our customers are still in prospects.
Speaker Change: Still have a hard time getting full conviction behind it there's a lot of great product marketing around AI from the legacy clouds and being able to.
See the you know what's real from what's noise.
Speaker Change: It's still very difficult for a lot of prospects and we take that on to try to take a very pragmatic approach and a very transparent approach about what's possible, what's not where our advantages are and we worked through that with customers and so I think it's a it's a complicated landscape, but I think that when we look at the long term our legacy replacement cycle that what we're seeing is there's no means.
Speaker Change: <unk>, new innovation or investment I really going into any of these legacy marketing cloud offerings that compete specifically with braised. There is seems to be off the ball on this from a marketing and a customer engagement space and they don't have the right foundations to be able to compete with us over the longer term, we still see them leveraging things like their ecosystem relationships through places like the GSI.
Speaker Change: Or with aggressive pricing tactics, but we feel really good about our position against legacy marketing clouds, especially as we continue to look at the advantages that we have in AI adoption and AI development because of our stronger foundations around real time capability around our comprehensive.
Speaker Change: The comprehensive data ingestion governance and management that we have through the <unk> data platform and also the comprehensive touch points that we have across all of our channel breadth in order to take the outcomes of those decisions that are being made with AI and bring them to life for the customer.
Speaker Change: Yeah understood. Thank you very much one question from Isabella.
Speaker Change: And maybe you yourself as others, but maybe.
Speaker Change: Maybe talk about the macro environment tactically versus versus last quarter. When I look at the numbers. It seems like NRO took a bigger step down this quarter sequentially.
Speaker Change: Some of the bookings number as our <unk> base seems like slowed a bit.
Speaker Change: So love to hear if the macro environment do you feel like it took a step down or are there. Some other dynamic sandys labelle can talk about on the deferred revenue side, which kind of sequentially seems like it's more.
Speaker Change: While the drag down this quarter than previous Q2's, yeah, yeah, absolutely. So on the RP O C. R. P O. The thing to keep in mind is we.
Speaker Change: There that having lapped the acquisition that is having an impact so having lapped the Northstar acquisition you can see that in our in the RP O N C. R. P O.
Speaker Change: In addition, I'm not from a dollar based net retention perspective, as I mentioned in a previous question that I answered a weed leg out of some sort of higher numbers that you're seeing from historical quarters that are rolling off and then from a billings perspective and in particular, the deferred revenue that you're that you specifically asked about this.
Speaker Change: This metric is impacted by the contracting terms that we have with our customers, which is why it's a noisy metric and we don't typically point people to it.
Speaker Change: And so one quarter ago, we had a bit of a dip in the proportion of our net new business that was an annual upfront terms, which means the invoices that went out during Q2, our arguably smaller not because the contract is necessarily smaller of it because it's more divided up into smaller increments and so you're seeing that play out in the change in deferred revenue.
Speaker Change: On the balance sheet.
Speaker Change: Understood very clear thank you.
Speaker Change: Our next question comes from Gabriela Borges from Goldman Sachs.
Speaker Change: Hi, good afternoon. Thank you Noah.
Gabriela Borges: Normalized scrap question, which is let's assume we're in a similar macro environment.
Gabriela Borges: How do you think about some of the company specific initiatives that they're introducing like startups from free trials and then the sales and marketing productivity improvements you are making if you think about everything and get how do you think about the potential for that business to reaccelerate over let's say the next 12 to 18 months. Thank you.
Speaker Change: Yes, Thanks, Great question, and we're thinking a lot about the business's acquisition efficiency across the different sectors and what youre seeing in releases like the brace for startups as well as broadly the building that we've been doing under the product led growth umbrella is really looking at the business over the long term and saying that we think we have a strong right to win.
Speaker Change: In the commercial segments. If you recall actually if you go back 12 months ago, We did do a reduction in the size of our sales team at a lot of that was focused on the SMB in the commercial side. We have since started to grow that capacity again, it's been a little bit more focused in the enterprise, where we feel good about the acquisition efficiency that we've achieved there and we obviously continue to lean.
Speaker Change: And to that and that's why you're seeing the great operating income and net income results this quarter and the trajectory that we've been on there, but when we when we look at the SMB in the commercial side. We think there's also a strong right to win in that market and Additionally, achieving higher just sheer volume of customers as well as higher levels of mindshare in the two goals that I referenced in.
Speaker Change: The prepared remarks about making braised the premier skill set for customer engagement and being the reference architecture from a technical perspective. Those are both goals that we think will lead to category dominance for braised that leads to a lot of amazing positive feedback loops in terms of our ecosystem being able to support our future growth and a more efficient way leading.
Two more brand preference and skill set preference within the customer engagement practitioner community and so what you're seeing within those investments that we're making right. Now is that we're taking advantage of this time period, even though the demand environment is challenged even though the macro has in a challenging place. There's a lot of scrutiny on spend to really improve the efficiency in our foundations.
Speaker Change: And set the right stage to build those long term competitive moats around our ecosystem around the skill set in around our product advantage as well obviously as we've continued to invest heavily in R&D and so we think that the ingredients are there across.
Speaker Change: Both places, where we have frontier investment and you're seeing that frontier investment as we continue to push into both like literal frontiers with new geographies as well as penetrate more deeply into various verticals in particular in the enterprises, we're focusing in places like travel and hospitality and financial services and looking at retail and commerce and so you're.
What you're seeing from Braze right now is a strong balancing of looking at the places that we have strength right now in order to drive efficient acquisition of new business that allows us to simultaneously achieve our goals of growth and growth and profitability, while also making foundational investments to improve our future acquisition efficiency that will allow for.
Speaker Change: To achieve category dominance in customer engagement.
Speaker Change: No that now is not the right time to be drastically expanding you know an SMB sales team as an example, but being able to build out improved efficiency in that space through investments in product led growth motions like the free trials have been super important.
Speaker Change: And so you should expect to continue to see us balancing both the investment in foundational efficiency the creation of new opportunities for us in the future through investment in various frontiers, whether those are G O product or vertical related as well as continuing to deepen our focus in the areas of existing strength that we have.
Perez: Yes that makes a lot of attention bill maybe on that question upfront Perez and specifically on the product front can remind us a little bit on how you're thinking about the next milestones to hit on the product roadmap not just in your core market of marketing, but also maybe more than that how do you think about your journey.
Perez: Even more dominant across adjacent categories.
Speaker Change: Thank you yeah. So first I'd say in the short term I'm just going to give a another preview that we're really looking forward to forge in a few weeks to share a lot more about the product roadmap at a high level I'm really excited about our continued leadership in the customer engagement category. The compounding gains that we're achieving as we simultaneously expand it enhanced our channel offerings, while also increasing the <unk>.
Speaker Change: <unk> and usability higher up the stack and we combine that with the breeze data platform and augmented with our partner ecosystem I think brazos continuing delay to deliver more capability to be more broadly integrated into our customers' technical ecosystem to be trusted for more and more workloads. You know today, obviously those continue to be focused within customer engage.
Speaker Change: But customer engagement is also very broad you know and even in these customers that we've grown to be eight figure contracts over the course of the last over the last couple of quarters that we've talked about them even within those customers. We still don't own every customer touch point and so I think theres a lot of room for us to continue to run when it comes to customer engage.
Speaker Change: I think it's also important to remember that the definition of customer engagement as a category has grown and expanded you know each year of our history. It obviously didn't exist. When we first started and has continued to take on more and more responsibility more aspects of the product journey more aspects of obviously, there's the marketing journey looking at things like performance market.
Speaker Change: And then just having data and optimization and the delivery of the the experience and the brand promise to customers and so continuing to build on the performance and the stability and the reliability of Braises underlying engine is exactly what it will take for us to be able to have that right to expand into other aspects of enterprise workloads and we're really excited about what the.
It means for our longer term future potential, but we also have amazing line of sight to incredible growth I think still within customer engagement, we're very focused on establishing a dominant position.
Speaker Change: Absolutely thanks for the call.
Our next question comes from Arjun Bhatia with William Blair.
Your line is open. Please go ahead.
Speaker Change: Yep can you hear me Hello.
Speaker Change: Yep.
Arjun Bhatia: Okay perfect.
Arjun Bhatia: Thank you Bill for you.
Speaker Change: Can you touch a little bit.
Bill: The Braves data platform and the role you think it might end up playing in.
Speaker Change: Delivering additional value to customers and how you might end up monetizing that for customers that have existing.
Speaker Change: Cloud data warehouses.
Speaker Change: Mentally.
Speaker Change: <unk> as a complement to that.
Speaker Change: What role does it play a more overarching data stack up or where your questions.
Speaker Change: Yeah. So we launched the Braves data platform to serve as a platform for continued development of both our in house data capabilities and the partner ecosystem that enhances them and so the goal is to ensure that all data relevant to the targeting orchestration personalization or measurement of customer messaging can get to brace quickly completely and with a low total cost of ownership.
Speaker Change: And so those three things quickly you completely low total cost of ownership have driven our decision making around what we build in house, where we go to the partner ecosystem and then how we interact with the architectures of our customers which include things like data warehouses CDP is I reversed E. T L providers product analytics companies et cetera, and you can.
Speaker Change: See examples of partners across all those categories within the data platform launch now in order to achieve those goals across a wide range of customers requires a data platform that simultaneously flexible and powerful while also being comprehensive and well integrated and so I think that when you look at the data platform today, it's the only comprehensive.
Speaker Change: It's been growing very quickly, it's been adapting really well to changes to the privacy and the security and the governance ecosystem. It's also been growing and developing as we continued to see things like the rise of the data science teams and the closer integrations that they have with customer engagement teams moving.
Speaker Change: Moving far beyond just an analyst looking at basic reporting, which you would have expected something like our marketing cloud to deliver years ago and really moving into teams where there is full on data science teams that are working with advanced statistical and machine learning models in order to enhance outcomes and continue to drive better personalization or better audience building or what have you and that but that ultimately.
Speaker Change: When we look at Brazos position in that value stack, we know that value is generated through the interactions with the customers and that's where we're going to continue to focus our pricing as we share in the value that we create for the brands that we work with when they improve the value of their customer relationships and so I think that we broadly see the data platform is in service to the <unk>.
Customer engagement outcomes that we are <unk>.
Speaker Change: Driving for our customers and there are aspects of it that obviously get charged for things like our product catalogs and the advanced AI features that we're building on top of that through things like our predictive churn models as well as item recommendations that build on top of the product catalogs, but a really big goal of the data platform is to make sure that you can get data integration.
Speaker Change: <unk> completely and with a low total cost of ownership and when that happens customers adopt new use cases embrace more quickly they expanded new channels more comprehensively and that continues to drive increases in there in their lifetime contract value and increases their stickiness with grace.
Speaker Change: Okay helpful and then.
Speaker Change: When I when I look at your results I think it seems like the enterprise is doing.
Speaker Change: Very well.
Speaker Change: We're getting more and more.
Speaker Change: Customers are U K customers are going up and they seem to be maybe some headwinds Oklahoma business. When you just think about it internally from a resource allocation perspective.
Speaker Change: As it relates particularly to the go to market.
Speaker Change: Or are you, making any changes to maybe lean in.
Speaker Change: And one place over another to maybe pour fuel on the fire on the enterprise side like how are you thinking about that.
Charlie: Charlie to maximizing our growth potential.
Charlie: The macro environment. Yeah. So you know I I just spoke about this about that balance of preexisting acquisition efficiency with investing into new frontiers, it'll give us.
Speaker Change: New opportunities and strong depth of new opportunities as we move into future years as well as investments it'll foundational U. We think improve the acquisition efficiency and other places now acquisition efficiency, it's historically been stronger in our enterprise business and while we've obviously been investing to make further improvements in that sector and you see that in our improvements in profitability. We also.
Speaker Change: I think that there are step function changes in efficiency that are available to us in the lower end and we're excited about that for our future and we'd actually had a year long focus area in product around product led growth efforts and you've heard me referenced things like usability improvements and customer education and you obviously saw the launch of the free trials and while we're still far from something like a self serve credit card sign up offering.
Speaker Change: Where we are making incremental steps that are compatible with our existing go to market engine that we think are going to provide structural improvements to our efficiency. There I also wanted to just call out that you know well the kind of free trial environment has an obvious benefit in the SMB side that it's also important to remember that the existence of something like a sandbox or a trial environment.
Speaker Change: Our increasingly take table stakes for evaluations with technical stakeholders and so if you go to that second goal I mentioned before for category dominance of being you know the reference architecture from a technical perspective for customer engagement as well as understanding that those technical stakeholders are almost always involved in enterprise buying cycles and that has an important interplay with the current dip.
Speaker Change: And environment, you've heard us mention many times that deal scrutiny is higher in this macro there's more stakeholders and frequently what that means is that theres technical stakeholders. Similarly in order to win something where you have a vendor consolidation play or legacy replacement cycle that also involves the technical stakeholders and they're simply not interested in sticking to the legacy <unk>.
Speaker Change: <unk> sales model that disallowed kicking the tires before a contract was signed and so Brazos product historically has not made that available and in many ways. You know the legacy marketing clouds do not either but we know that Brazos product has the technical excellence to satisfy those stakeholders and we but we historically haven't had a great way to prove that to them and now we do so we're excited about.
Speaker Change: What that means for our ability to differentiate and sales cycles against copycat competitors who've created shallow copies of us and that ability to go deeper than the demo and slide decks. We think is a really great advantage for us because we've always lived by the outage of doing what you say you're going to do and we think that the speed the reliability and the performance that braised delivers is you know it.
Speaker Change: Do what it says on the turn if you will pick your pick your analogy I think that we're just reliable and we have got a lot of integrity and what we sell and how we position. It and you know this is something that will only help us when we both look at it from a multiple stakeholder buying cycle in the enterprise as well as that volume play them on the lower end and achieving structural improvement in.
Speaker Change: Acquisition efficiency within the commercial segments.
Speaker Change: Alright, thank you.
Speaker Change: You.
Speaker Change: Our next question comes from D J Hynes with Canaccord.
Speaker Change: Hey, guys. Thanks for taking the question a couple of follow ups actually go to some of the answers you just gave origin.
Speaker Change: As I think about kind of the positioning for grades like in many ways. I think of you guys is acting a lot like a CDP for customers right, which kind of obviates the need for a third party vendor to be in there, but then I hear the list of like the launch partners for the data platform and there are a number of CDP guys in there.
Speaker Change: Can you just help me understand like when a customer might need a CDP.
Speaker Change: When they might not like what dictates that difference I mean, I would think that CDP what might be one of those point solutions that you guys can consolidate so just help me think through that.
Speaker Change: Yeah. So I think that it's important to realize how when thinking through that how diversified brazos customer bases and that applies across verticals across geos across levels of sophistication, but also across the technical ecosystems that we integrate into and so there are if you take a step back from the use case of the CDP in many cases, what its try.
Speaker Change: To do is clean up the complexity of a data ecosystem and Theres a lot of places where that complexity can come from maybe people are trying to think together a lot of third party data sources that are coming in with less than deterministic identity, they're trying to bring in D. M. P audiences and cookie data, maybe they've got horrific based matching or <unk>.
Speaker Change: Other sorts of data science and machine learning groups that are doing probabilistic targeting and things like that and those are those are all kind of data signals that can in many ways pollute. Our first party dataset and it's helpful to have a separate system to be able to keep those things managed in and separated. Similarly, if you look at you know within the retail space or with <unk> or a lot of times there might be.
Speaker Change: I kind of legacy deployments of old P. O S systems that are not gonna be upgraded for a very long time, maybe there's old parts of a data warehousing ecosystem or a lot of heterogeneity across the technology choices being made across our multinational you know those are all places where complexity you can come into a data ecosystem and a CDP, whether it's one off the shelf and one of them.
Speaker Change: The ones that we've highlighted as partners or its something that a company would call a CDP and build on their own on top of AWS services or on top of him you know.
Speaker Change: Data warehouses, like snowflake or data bricks or what have you at a at the end of the day you know what it's trying to do is kind of managing cleanup complexity and so theres a lot that the Braves data platform can do to help manage that complexity within the customer engagement sphere, but there's also a lot of other operations and and kind of responsibilities that exists across products and customer support.
Speaker Change: And across other.
Speaker Change: Other areas of performance marketing and such where the res data platform doesn't aim to kind of fully integrated all those places as well as just the simple reality that you know a lot of these a lot of the data ecosystem has a high level of stickiness and in many cases, it's better to be able to adapt and connect to those so that we can just get data into braised quickly.
Speaker Change: Completely you know reliably low total cost of ownership I went back to those goals.
Speaker Change: Want to make sure that those things are accomplished so that we can deliver messages to customers and so that they can be well personalized and so that they can be highly responsive to new user actions or changes in the context around them changes in inventory or what have you we want to be able to just get that data that data into Braves as it generated as it changes so that we can add.
Speaker Change: On those insights and.
Speaker Change: And so what you're seeing in the Breeze data platform is really you know us being in control vertically integrating a lot of aspects of this but still also understanding that theres a lot of sources of complexity out there and at the end of the day, what we want to do is deliver great customer experiences and be able to really own this customer engagement space and that data platform is at a very important aspect of that.
Speaker Change: But so is the partner ecosystem within it yeah, Okay that makes a ton of sense. It's a helpful explanation and then just going back to the free trial.
Speaker Change: Can you give me some color on the the depth of platform capabilities that trial customer might be able to realize in 14 days I mean, it's a narrow window. When you talk about technical decision makers, just trying to think about the potential effectiveness of that program.
Speaker Change: Yeah. So we've already been seeing this actually because we had before the launch of the free trial, we've had what we refer to as a guided sandbox experience, which has allowed for technical teams that go in and build implementations against our API has ensured that our SDK is theyre going to work within their product be able to to just send text messages and test things end to end.
Speaker Change: You know I think this is a competitive space, where there's a lot of noise. There's a lot of copycats out there.
It's easy to copy product marketing and there's just not a lot of trust for technical teams buying marketing software and so you know what this is is we're really just saying hey, we stand behind that this product does what we say, it's gonna do I and that you know, there's there's strong integrity and reliability and high performance available you know, it's pretty easy for people to act.
Speaker Change: Say that something is real time, and when we look at the definition of real time across the environment. It varies from milliseconds to you know 24 hours in terms of what people say and a lot of times a lot of our competitor products have totally different latency, depending on what part of the product you're using as an example, I and I think that a lot of buyers have just had a hard time getting conviction.
Speaker Change: Really when you have a premium priced product like res does that.
Speaker Change: And in other people can easily kind of clone our messaging that just letting the product stand on its own has really benefited us in particular, those technical stakeholders that are evaluating the product and so it's not that you need to run a long running campaign over the course of 60 days improved yourself that SMS marketing works that you know or something like that as an example.
Speaker Change: I think that customers in general understand the value of these channels, it's really about sorting through the noise. That's in the competitive marketplace and us being able to I'm really just just show it to them instead of needing to do these things that are higher lifts with our solutions consultants or with things like guide at sandbox and what have you were really just letting the product shine on its own.
Speaker Change: Yeah, Okay, great. Thank you guys.
Speaker Change: Moving forward to please limit yourself to one question per analyst.
Speaker Change: Our next question comes from Tyler Radke from Citi. Please go ahead.
Isabel: Hi. Thank you. This is Ashley Kim on for Tyler, maybe a question for Isabel <unk> on the gross margin apart from the person personnel and tech stack efficiencies would there be anything to call out and you see that level of improvement being sustainable through the balance of the year. Yeah. Thanks for the question. So if we rewind the.
Speaker Change: Clark to Q1, we had mentioned that we were experiencing a bit of a low <unk> for the year in Q1 related primarily to some concentration of a premium message volume that was happening during that quarter.
Speaker Change: So what I would say is a the achievement that we had in Q2 in terms of the improvement I think we we we definitely overachieve, even on sort of our own internal expectations and we're very very pleased with how quickly we were able to capitalize on some of the efficiencies that we put into place.
Speaker Change: What I mentioned in Q1 is look for us to kind of increase quarter over quarter I think that the achievement that we have in Q Q2 here has surpassed that and so while we believe that everything that we've put into place is sustainable I would not look for that number to continue to increase certainly at the same clip that we experienced.
Todd: Chile from Q1 to Q2, so so I would definitely think about that in the context of the model that Todd that you put into place, but we're very pleased with the results that we had visa V that margin improvement between Q1 and Q2.
Speaker Change: Alright, thank you.
Speaker Change: I'll go back in the queue. Thank you.
Speaker Change: Our next question comes from Scott Berg with Needham <unk> Company.
Scott Berg: Hi, everyone nice quarter here.
Scott Berg: Bill you mentioned very briefly I think it was to Ryan's question about.
Scott Berg: Your new credit strategy within the premium messaging platforms. It's only been a couple of months since you made the change I guess what are you seeing.
Speaker Change: Across buyer behavior, and trying to buy and hopefully expand channel usage in two different countries, so far with the new strategy.
Speaker Change: Yeah, I would say that other than some of the noise that you would expect just in the early innings of it as we had some deal cycles, where people were already projecting their country volumes. When we showed up with a new credit model to be able to sell them and the training that we had to do for our go to market organization and such that you know.
Speaker Change: Those that little bit of noise, notwithstanding that it's just been great Super well received by customers I think it's a win win win change for us and I've been really happy that we've been able to deploy more quickly even more excited about the fact that as we launch new channels moving into the future you know and I mentioned Rcs you know Whatsapp is obviously going to be changing and we talked a lot about that on the lab.
Speaker Change: Quarters call are that you know the bringing line into general availability, we've got active centers doing that sending line messages in Japan in beta right now and so we're excited for that to launch all of these things just get easier to launch they're easier to sell as we move into this flexible credits model. We also think that it's gonna be beneficial from a unused entitled.
Speaker Change: Perspective, you know we've spoken in the last few quarters about how one of the sources of churn that we've seen is that a lot of the contracts, particularly those that were signed during the zero interest rate environment included entitlements that were that were purchased with very optimistic or like you know kind of aggressive purchasing of entitlements that people had been right sizing and.
Speaker Change: With the flexible credits model, we think that customers are going to be able to purchase more more closely to what theyre going to buy because they don't need to make those predictions with air margins of error on every individual channel, but also over the course of the contract length. We will even if there are strategies change or they ended up purchasing more or they didn't grow.
Speaker Change: As much as they expected, we will be progressively adding more and more ways for them to use those credits over the course of the contract lengths and so we think it's just going to put us in a much healthier position as we continue to move into the future.
Speaker Change: Yeah. That's helpful. Thank you for taking the question.
Speaker Change: Yeah.
Speaker Change #100: Our next question comes from.
Brett Bracelin: Brett bracelet with Piper Sandler.
Brett Bracelin: Thank you good afternoon Isabella.
Brett Bracelin: Isabella I don't want to overlook the first quarter of profitability here is six months ahead of our model fantastic to see.
Brett bracelet: My question really is around new customer activity it sounds robust even in a tough macro.
Speaker Change #103: How is the vendor consolidation appetite impacted the size of lands I know historically, you land may be smaller with a large brand and then gain share over time is that starting to change now or are you seeing maybe larger land opportunities show up in the pipeline just given the the legacy replacement.
Speaker Change #103: Narrative, you're talking about thanks.
Yeah, I mean, it continues to be.
Speaker Change #105: They are a bit of a mix in our our lands are definitely incentivizing, our sales force just to land and so there's no incentive to kind of make the land as big as possible. We certainly don't want to try to you know forest product down to our our buyers and we want to make sure that we're allowing the buyers to kind of.
Speaker Change #105: Grow naturally and have them put together products, our product sets that makes sense for them over the long term.
Speaker Change #105: But we I you know I wouldn't I wouldn't necessarily say that theres been any directional trend are that that is sustained or meaningful to kind of change that.
Speaker Change #106: Sounds good great see profitability. Thanks.
Our next question comes from Derrick Wood from TD Cowen.
Great. Thanks.
Derrick Wood: For I guess, either one of you guys. You just could you touch on the relative strength across verticals, which ones are healthier, which ones may be seen more pressure or just any notable change in demand across any particular vertical and then.
Speaker Change #108: International growth has been a bit stronger than U S. Could you kind of compare and contrast domestic versus international and <unk> International maybe on a bit of a stronger trend.
Speaker Change #109: Yeah. So a few things there first we've had more expansionary investments into new G. O us globally, and so we would expect to see that ticking up and you've you've seen it kind of picking up a percentage point at a time here or there in a lot of that just reflects us moving into markets that we werent in before and being able to rapidly grow those at faster rates than the more core business.
Speaker Change #109: You also do you see that in in reflection. Some other places like for instance, you may have seen in Salesforce for Salesforce as a result, they actually saw faster growth across EMEA than they have in the United States faster growth in Japan, we're seeing some similar geographic trends there, they're not big differences from place to place you know I think broadly the macro is under pressure.
Speaker Change #109: You know everywhere, but we are seeing some pockets of strength and we're investing accordingly in terms of both our event strategy as well as our go to market resource deployment there.
Speaker Change #109: Within the <unk> customer base things like consumables in CPG I have been on the rise for US you know I mentioned that a little bit before and we've also seen good increased penetration into financial services and travel and hospitality as we continue to move through the adoption.
Speaker Change #109: Cycle. There, we've obviously had great progress from a financial services perspective for many years with a lot of the startups in the Fintech world, but starting to break into more traditional banks and insurance companies and credit unions and in other parts of that financial services Universe has been great for US I think that's less of a reflection of the relative strengths of those verticals and really more.
Speaker Change #109: Of how we've been prioritizing our own go to market and you should continue to expect to see a very diversified expansion in operations customer base, but I going back to that acquisition efficiency point that I spoke about earlier, we are being very choice all about where we are investing our efforts in places where we're developing new frontiers its.
Obviously more expensive to get those first reference customers in a given new vertical or a given new G O than it is to leverage those reference customers to go deeper penetrate more deeply into a vertical where we already have the proof points in the case studies and so what we've been doing is just making sure that we've got a good healthy balance of that so that we're.
Speaker Change #109: So that were taking advantage of those pre existing areas of strength in order to grow efficiently. While also reinvesting into those frontiers, whether those are geo or vertical or use case oriented.
Understood. Thank you yep.
Speaker Change #109: Our next question comes from Nick Altmann with Scotiabank.
Speaker Change #109: Yeah.
Nick Altmann: Thanks, guys.
Speaker Change #111: Just to build out their last question on international.
Speaker Change #112: No meaningful difference in the land versus the expand side internationally.
Speaker Change #113: Domestic and then.
Speaker Change #114: When you look at sort of the international customers hardware stores are buying program city.
Speaker Change #114: Compared to the U S market in terms of kind of their willingness to replace legacy systems.
Speaker Change #115: Yeah, a few things there you know first I think that the land and expand is more correlated with the customer size you know you're much more likely to land in a narrower use case in the enterprise just because of the complexity of those organizations and a lot of the kind of the the incumbent advantages and just simple things like corporate politics, and what have you.
Speaker Change #115: Whereas in a smaller company, it's more available to come in and just kind of fully transform an organization all at once when we look at the.
Speaker Change #115: When we look at the individual markets. There are some changes in behavior that result from just the adoption of different channels in those places it tends to be the case of the developing world. As an example is less reliant on email and and they use things like Whatsapp and other sorts of text based messaging I'm a lot more reliably when you look at Mark.
Speaker Change #116: Like the U S and Europe, obviously those are places that have very mature emo markets and a big part of that is because consumers adopt and use email and it's just a very effective channel from an enterprise perspective, as well, we definitely see things, where I think the worst it tends to kind of start on the west coast of the United States and move East when you look at things like <unk>.
Speaker Change #116: This to adopt new technology and that includes kind of hopping I'm hopping over the Atlantic and so some of the buyer trends that you know that we saw in Silicon Valley Tech companies. Several years ago. You know, we're now starting to see in more conservative industries in more kind of conservative parts of the world and we do a great job I think of transferring the learnings across.
Speaker Change #116: <unk> G OS and across verticals and across time horizons, depending on where different.
Speaker Change #116: Different parts of the economy or in terms of their transformation or are there ways of thinking about customer engagement. It also sometimes literally includes like humans and their skill sets and their ways of working and their ways of structuring teams moving from startups to enterprises from some geos to another from one vertical that tends to be a little bit more innovative to.
Speaker Change #116: Moving into places that are more insulated from competition had moved more slowly and so we get a lot of benefit out of seeing simultaneously a lot of different parts of the economy across those splits and they do behave in different ways, but we try to make that a strength because we've seen those movies play out before and if we can effectively bring those learnings into a new era.
Speaker Change #116: As you know, we're able to leverage our global footprint as a massive competitive strength in order to be more efficient in those places.
Speaker Change #117: Great. Thank you.
Speaker Change #117: Our next question comes from Brian Peterson with Raymond James.
Speaker Change #118: Your line is open Brian feel free to one minute.
Speaker Change #118: Yeah.
Brian Peterson: Oh, I'm, sorry, guys I got a couple of let me put the game, So hey, bill great to see the expansion of the eight figure customers I'm curious if there's any commonality in what drove that in terms of volume channels, New Geos any perspective, there would be helpful. Thanks, guys.
Speaker Change #120: Yeah across the three of them actually are different stories in each place you know one of them, primarily driven by Geo expansion and other one driven by our expansion into new parts of the business in the us and the third really driven by more channel expansion and the growth of existing kind of are of existing new projects and so I think even.
Speaker Change #120: Within that without going into a tremendous amount of detail you see a great example of the diversification of raises opportunities and within all three of them. There's actually still a lot of room to run. So I think we're excited about them both as a testament to the comprehensiveness of braces offering and the value that we deliver as well as the opportunity that still lies ahead of us.
Speaker Change #121: Great. Thanks, Bill Yep.
Speaker Change #121: Our next question comes from Gil Luria at D. A Davidson.
Speaker Change #122: Your line is open calcified you're on mute.
Speaker Change #122: Yeah.
Speaker Change #123: Alright, well take a question from.
Speaker Change #123: Matt Vanvliet from BTG.
Matt VanVliet: Yeah, great. Thanks for taking the question.
Matt VanVliet: I guess around the free trials.
Any impact that you're expecting to have an overall deal sizes for new customers and then maybe more importantly on the expansionary capabilities within existing customers.
Speaker Change #125: Do you think the speeds things up or just maybe gets into other areas and use cases that maybe were a little hesitant to spend budget when they can get their hands on the product immediately and then make a decision.
Speaker Change #126: Yeah. So I think we're not expecting it to have any sort of material change in average sale prices because as I mentioned before you know things like our sandbox environment have actually been more utilized an enterprise deal cycles than they were in a commercial deal cycles and so over the longer term maybe that puts some downward pressure on it as we see more volume kind of come into the commercial side, but.
Speaker Change #126: We're not anticipating or expecting any sort of big change there and then I think within other organizations. Yeah. We've seen some great proof points of this so far as we've moved product led growth our emotions into some other parts of the product. So as we've allowed things like we have a freemium model on our product catalogs offering we have Ah trial option for <unk>.
Speaker Change #126: Cards are that allows for customers to existing customers to test that out and so we've already seen some great examples where being able to trial new parts of the product allows for a customer to be it allows for us to be able to expand into an existing customer more efficiently and more quickly and so we're certainly expecting a lot of those same things to be at play with the overall free try.
Speaker Change #126: And then also I think theres a lot of ancillary benefits to the work that gets done around this you know the usability the kind of self serve onboarding theres, a bunch of requirements to be able to build a great free trial environment that are also going to just make our integration and onboarding more efficient, we think it's going to improve customer satisfaction and it is going to speed up those integrations.
Speaker Change #126: So the customers get up and running more quickly and more easily and we think that will also benefit our partner ecosystem as well I remember that a lot of our integrations and Onboarding are delivered by the partner ecosystem and when those agencies are going to be able to focus more on new campaign ideas in the building out of new content, rather than you know that.
Speaker Change #126: The the kind of early ramp of the onboarding into the products that a customer will be able to do in a more self serve manner that that just helps all boats boats rise from that perspective.
Thank you.
Speaker Change #126: Our next question comes from Michael Berg with Wells Fargo.
Michael Berg: Hey, Thanks for taking my question a quick one for either one of you guys here.
Speaker Change #128: As you expand into more data capabilities and withdrew popcorn being.
Speaker Change #129: And the data we referred to me I guess.
Speaker Change #130: You're winning some deals within enterprises data boundaries or data initiatives is that something you're seeing a trend or there's more one off or how should we think about potentially winning deals we are.
Speaker Change #130: Data budget.
Speaker Change #131: Yeah, So when I talk about the total cost of ownership of the kind of data footprint. You know that is an important part of it and while these things are you know maybe bifurcated in certain organizations. You know when you look at that angle of I need to talk to my customers. They want to deliver great customer engagement to them that includes you know purchasing in order to get data into brands as well as.
Speaker Change #131: You know as well as being able to actually deliver those messages and so I think that those budgets are usually pretty co located but you're also seeing in in that AR and in that anecdote in in that evidence you're also seeing the importance of the technical stakeholders and a lot of these buying decisions and so not only are they involved in the mistake holder, sometimes the budgets are coming out.
Speaker Change #131: Product groups are coming out of engineering groups and that's why you know we've been talking about the free trials a lot, but there's a lot that we've done in order to make sure that we are kind of speaking to and delivering to those technical buyers whether their data engineering or product over the last several years. We think it's a really big advantage that Braves will have on the long term and it's one that's that's for.
Speaker Change #132: <unk> very hard to catch up on them you know as you're as everyone is aware, we've got a very noisy competitive landscape and I think that braced stands alone in terms of the the stability and the performance at scale that we can deliver the comprehensiveness of the a P is a the the different abstraction layers that we expose up and down our stack two technical groups to be able to build.
Speaker Change #132: With phrase and set a set of kind of staring down this build versus you know decision that a lot of companies grappled with we really have leaned into that build with braised message over the years and it's been highly effective in the organizations, where technical stakeholders are engaged and so I would take that as a really positive sign you know when youre seeing that that engineering stakeholders are opening their wall.
Speaker Change #132: In order to by Braze, you don't see that happened with marketing technology software very often and the fact that you're seeing that with Brazos just a strong testament to what we can deliver to those organizations.
Speaker Change #133: Okay. Thank you.
Speaker Change #134: Our next question comes from Yun Kim from loop capital.
Speaker Change #135: Okay, great any noticeable change in the channel mix that you're seeing out there or you were expecting in the second half on the international channels or international business continues to grow faster and also is still not good driving the channel mix.
Speaker Change #136: Back towards more lower priced channels like E mail.
Speaker Change #137: Yeah, I mean, obviously whatsapp is a channel that we introduced that in the last couple of quarters. So we're seeing you know healthy uptake there of that channel and overall across the channel mix, we're not seeing sort of meaningful shifts to among them you'll continue to see them more.
Speaker Change #138: <unk> across the marginally lower cost channels with then kind of proportionately lower volumes is that the cost structure increases I don't anticipate that that would change over time, but as we introduced new channels of course, you will see those start to mix and two to the totals yeah and I do think to your question about marginal cost of different channels, we have seen them.
Speaker Change #138: Across the board a lot of customers just rationalizing what channels are using and what places I think it's a little bit less of a concern around marketing use cases, because the marginal cost of email or S. M S compared to performance advertising as an example, they're both a lot lower than performance marketing them, but.
Speaker Change #138: And I think where you're seeing optimizations like that happened more often are on more utility volumes like a two factor op code definitely a brand would rather send that to you over email or in their app, rather than delivering it over SMS, which cost them a lot more but remember that we don't have a lot of those utility volume volumes in our customer base already because we've really tried to stay.
Speaker Change #138: Upmarket in the more premium use cases, we're really delivering value to the enhancement of the customer relationship.
Speaker Change #139: Okay, great. Thank you so much.
Speaker Change #139: And we have time for one more question Jessica Your line is open so first on mute.
Jessica: Our adjusted per share on a phone star sexual IH one yet.
Speaker Change #139: Yeah.
Okay.
Tara McKenna: Perfect. Thank you Hey, this is a tailored mckenna I'm.
Isabel: Isabel sensor enter our number you reported is on a trailing 12 month basis, it's tough to get insight into what might have happened in the quarter. So can you provide more color in terms of the in period and IRR that you might've seen in if there were any changes in gross churn and then as that relates to the renewal base in the quarter were there any larger optimization.
Speaker Change #142: Things are slower and that up sell to flag that might have weighed on that.
Speaker Change #143: Yeah, So and as I mentioned in some of the questions that I answered earlier some of what you're seeing is the roll off you you correctly identified the trailing 12 month basis. So some of it is the roll off of sort of that that prior quarter or that that we lost in in the four quarter trailing.
Speaker Change #143: I would say that from a gross churn perspective, there was not anything unexpected in Q2 churn does continue to remain at a level that is more elevated than we would like from a sustained basis and so I would say are the continued compounding of that is is mixing into the subsequent.
Speaker Change #143: Orders and then we're obviously, losing some of the historically stronger quarters. So I think that's what you're seeing in in Q2, nothing abnormal <unk> versus what we were expecting or had embedded in our own guide add that happened in Q2.
Speaker Change #144: Great. Thank you.
Speaker Change #144: There are no more questions in the queue. So I'll now pass the call back to Bill for closing remarks.
Bill: All right yeah. Thank you to everyone for joining the call today. We appreciate your continued interest and support and we're looking forward to seeing you at a conference or on the road soon or at our Forge Investor day in just a few weeks.
Bill: Yeah.