Braze, Inc. Price & Performance (BRZE)

Thank you, operator. Good afternoon, and thank you for joining us today to review Braze's results for the fiscal fourth quarter twenty twenty five. I'm joined by our co founder and chief executive officer, Bill and our Chief Financial Officer, Isabelle Winkels. We announced our results in a press release issued after the market closed today. Please refer to the Investor Relations section of our website at investors.braze.com for more information and a supplemental presentation related to earnings announcement. During this call, we will make statements related to our business that are forward looking under federal securities laws and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding our financial outlook for the first quarter and fiscal year ended 01/31/2020 the anticipated closing of, benefits from, and product advancements due to our anticipated acquisition of OfferFit, expectations concerning new customer verticals, our anticipated anticipated customer behaviors including vendor consolidation and replacement trends and their impact on Braze, our potential market opportunity and our ability to effectively execute on such opportunity and our long term financial targets and goals. 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 material risks and uncertainties that could affect our actual results please refer to 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 fourth quarter twenty twenty five performance in addition to the impact these items have on the financial results. Please refer to the reconciliations of our non GAAP financial 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 For Or Superior To The Measures Of Financial Performance Prepared In Accordance With US GAAP. And now like to turn the call over to Bill.

Thank you, Chris, and good afternoon, everyone. Delivered strong fourth quarter results, generating $160,400,000 of revenue, up 22% year over year and 5% from the prior quarter, again demonstrating the high ROI and long term value of the Braze customer engagement platform along with the strong execution of our teams around the world. We drove continued efficiency across our business, recognizing nearly $8,000,000 of non GAAP operating income in the quarter and achieving a non GAAP operating margin of 5%, up from negative 5.7% in the fourth quarter of last year. We also achieved our third straight quarter of non GAAP net income profitability. Generating over $12,000,000 of net income and over $15,000,000 of free cash flow. Our financial results for the full year demonstrated impressive operating leverage, including $18,000,000 of non GAAP net income, nearly $20,000,000 of free cash flow, and an 850 basis point improvement in non GAAP operating income margin. Which combines with last year's efficiency efforts to represent a nearly 20 percentage point improvement over the last two fiscal years. As previously discussed, we expect to generate positive quarterly non GAAP operating income and free cash flow going forward. We are proud of these financial achievements as we continue on our journey to become the leading customer engagement platform globally, and we look forward to sustaining profitable growth in the coming quarters and years while also thoughtfully reinvesting to grow our business.

We previously highlighted the legacy vendor replacement cycle and point solution consolidation trends. Continue to capitalize on those in the fourth quarter. Securing a diverse set of new business wins where Braze is replacing legacy clouds, including a US fintech, a large US retailer, energy company in EMEA, and a ticket broker in APAC, just to name a few. We also continue to win against both channel specific point solutions and home grown tools across a diverse set of industries, geographies, and use cases. Some notable takeaways in the quarter included a leading U. S. Consumer rating service, a U. Gaming business, a Saudi Arabian delivery application, a careers website in EMEA, and a telecommunications company in APAC. Among others. We are confident that both the legacy replacement cycle and vendor consolidation trends, which have been a tailwind for some time, will create more opportunities for Braze to gain market share as brands increasingly strive to upgrade their customer engagement strategies and leverage new AI driven advancements to achieve productivity gains build strong relationships with their customers. Q4 also included our highest net new customer result of FY 2025. Rising by 85 to 2,296, up 252 year over year. New business wins and upsells included America's Test Kitchen, Dis Chem, Dunkin' UAE, Kueski, Legal and General, Movie Cinemas, Qdoba, Mexican Eats, Springer Nature, and Tony's along with many others.

The quarter also illustrated the diversification of our customer base as we secured new business across a wide range of industries, and geographies, including US based specialty retailers and restaurants a consumer software firm in APAC, automobile companies in The US and Europe, a security business in EMEA, a digital media company in APAC. Just to name a few. Large customer additions were also strong with our $500,000 plus ARR customers increasing to two forty seven, up 22% year over year. Demonstrating the desire of enterprises to leverage first party data and advanced artificial intelligence to drive sophisticated cross channel customer engagement at scale. Our continued diversification across verticals is driven by a trend that we've been discussing for years. Increasing importance of first party data as businesses of all kinds strive to better understand their customer customers and unlock the ability to efficiently communicate with them through digital product experiences and first party messaging channels. We believe that this super cycle of investment across verticals continues to increase Braze's long term opportunity as modern businesses prioritize first party data collection and customer engagement, thereby building new company assets in the form of actionable first party relationships with their customers.

Looking ahead, we expect these same businesses to capitalize on the growing strength and attachment of those customer relationships to diversify their own business offerings forging more durable bonds with their customers and finding opportunities incremental profit along the way. While we're very excited about the diversity of the opportunity ahead of us, we're also now starting to systematically lean into our largest verticals to ensure that Braze's flexibility and power can be easily wielded for common use cases in each major industry. The first such vertical to see this focused R and D treatment is also our largest. Retail and consumer goods, which accounts for roughly one fifth of Braze's business. To further strengthen our leadership in this vertical, we recently announced enhanced ecommerce features and an upgraded Shopify integration. These updates include prebuilt ecommerce templates, predefined event tracking for abandoned carts, customizable landing pages, and expanded WhatsApp commerce capabilities. Such as product catalogs and in thread shopping experiences. By simplifying implementation and accelerating time to value, these enhancements empower ecommerce marketers to drive higher engagement and conversions. Moreover, the Shopify integration enables seamless bidirectional data flow, allowing enterprise brands like e. F. Beauty, Hugo Boss, Gymshark, Gap, and Overstock to create more personalized customer journeys and improve conversion rates and lifetime value.

This strategic partnership with Shopify also fosters deeper collaboration between both companies' go to market teams, unlocking mutual value in the enterprise segment in particular. As Shopify continues expanding upmarket, it can leverage Braze's expertise in enterprise engagement to accelerate digital transformation for legacy commerce and marketing systems. As we look ahead, we continue to believe that there's never been a better time to be a better marketer. The increasing agility of data, the growth of channels, the explosion of AI, and the rising sophistication of marketers means brands have a unique opportunity to connect with their customers like never before, building long lasting relationships with their customers. It's not just about the tired trope of finding the right message, for the right channel at the right time. It's about understanding customers in greater depth. Engaging with them more completely, and strengthening customer relationships through the delivery of connected messages and product experiences. AgenTic AI in particular is crucial for optimizing relevance achieving higher levels of personalization at scale as decisioning agents autonomously experiment, learn, and deliver highly relevant personalized experiences. At Forge, our annual customer conference last September we shared our vision for Project Catalyst, a proprietary agent designed to help brands personalize and optimize experiences with highly relevant journeys, content, and incentives.

And we're on track for the first private beta release of Project Catalyst in late q one. Building on this vision, we are excited to announce that Braze has entered into a definitive agreement to acquire OfferFit, a leading AI decisioning company that leverages proprietary reinforcement learning technology to enable brands to deliver highly relevant, personalized customer engagement at scale in a cash in stock deal valued $325,000,000 For nearly five years, OfferFit has been perfecting a multi agent solution that autonomously explore solution spaces across the many dimensions of life cycle marketing campaigns. Producing individualized recommendations for cross channel delivery and content strategies in partnership with customer engagement platforms and marketing cloud services like Braze, Salesforce Marketing Cloud, and Klaviyo. The technology approach is based on ensembles of contextual bandits and a highly flexible, replacing the manual work of AB testing reinforcement learning agents that autonomously experiment, and learn optimal actions. OfferFit's sophisticated AI decisioning can be deployed in a wide array of experimentation optimization use cases, and their approach has been highly successful. Successful, enabling the company to land and expand with large enterprises across numerous industry verticals over a short period of time. OfferFit's customer base, vertical focus, and user sophistication complements Braze's enterprise motion in particular.

Like Braze, an ideal large offer fit customer is a high scale b to c brand invested in sophisticated marketing technology. Their average starting contract is typically in excess of $250,000 per year top industry verticals, including financial services, retail, restaurants, media and streaming, energy, telco, and travel. In fact, as OfferFit's most prominent partner, nearly one third of current OfferFit customers use Braze as their primary customer engagement And while their go to market motion is still focused in The United States, they've shown an ability to sell globally that we expect will be amplified by Braze's robust existing presence across EMEA, LATAM, and APAC. In the near term, we believe OfferFit solution will help us grow deal sizes their unique reinforcement learning products and services and also help us differentiate versus competitors by providing a wide spectrum of AI driven optimization capabilities at various price points and service levels. Over the medium term, much as we've done with other core aspects of Braze AI, AI, we will infuse OfferFit's agents and machine learning models throughout the Braze platform. Allowing us to jointly solve new use cases and enhance existing features to help brands deliver more relevant customer engagement.

Finally, we believe their engine and expertise will enable Braze to more quickly advance multiple Braze AI priorities, further positioning Braze as a leader in AI and customer engagement to capitalize on a massive market opportunity globally. We're incredibly excited to have OfferFit's team and technology joining Braze combining our collective years of research and development into machine learning and artificial intelligence to advance our product ecosystem and drive brilliant experiences for our customers and their consumers. I'll conclude my remarks by reiterating our excitement in the future of Braze and the confidence in our long growth story. Thank you for your interest and support in Braze, and now I'll turn the call over to Isabelle.

Thank you, Bill. And thank you, everyone, for joining us today. As Bill stated, reported a strong fourth quarter with revenue increasing 20% year over year to a hundred and $60,400,000. Driven by a combination of existing customer contract expansions, renewals and new business. Subscription revenue remains the primary component of our total top line contributing 96% of our fourth quarter revenue, while the remaining 4% represents a combination of recurring professional services and one time configuration and onboarding fees. Total customer count increased 12% year over year to 2,296 customers as of January 31, up 252 from the same period last year and up 85 from the prior quarter. Our total number of large customers, which we define as those spending at least $500,000 annually, grew 22% year over year to 247. And as of January 31, contributed 62% to our total ARR, This compares to a 60% contribution as of the same quarter last year. Measured across all customers, dollar based net retention was 111%, while dollar based net retention for our large customers was 114%. Expansion was again broadly distributed across industries and geographic regions. Revenue outside The US contributed 45% to our total revenue in the fourth quarter, consistent with the prior quarter of this year and up a hundred basis points from 44% in the prior year quarter.

In the fourth quarter, our total remaining performance obligation was $793,000,000 up 24% year over year and up 11% sequentially. Current RPO was $5.00 $5,000,000 up 23% year over year and up 10% 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. Non GAAP gross profit in the quarter was $112,000,000 representing a non GAAP gross margin of 69.9%. This compares to a non GAAP gross profit of $89,000,000 and non GAAP margin of 67.9% in the fourth quarter of last year. The increase in year over year margin was driven by continued cost optimization of our technology stack with additional benefits from personnel efficiencies, partially offset by higher premium messaging volumes. Non GAAP sales and marketing expenses were $60,000,000 or 37% of revenue compared to $55,000,000 or 42% revenue in the prior year quarter. While the dollar increase reflects our year over year investments in headcount cost to support our ongoing growth and global expansion. The improved efficiency reflects our disciplined investment approach to resource deployment across our go to market organization. Non GAAP r and d expense was $23,000,000 or 14% of revenue.

Compared to $21,000,000 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. Our R and D expenditures reflect our intentional yet disciplined technology investment strategy and are in line with our long term non GAAP R and D percent of revenue target of 13% to 15%. Non GAAP G and A expense was $21,000,000 or 13% of revenue compared to $20,000,000 or 15% of revenue in the prior year quarter. The dollar increase was driven by investments to support overall company growth, and global expansion. Non GAAP operating income was $8,000,000 or 5% of revenue, compared to a non GAAP operating loss of $7,000,000 or negative 6% of revenue in the prior year quarter. Non GAAP net income attributable to Braze shareholders in the quarter was $12,000,000 or 12¢ per share compared to a loss of $3,000,000 or a loss of 4¢ per share in the prior year quarter. Now turning to the balance sheet and cash flow statement. We ended the quarter with approximately $514,000,000 in cash, cash equivalents, restricted cash, and marketable securities.

Cash provided by operations during the quarter was $17,000,000 compared to cash provided by operations of $4,000,000 in the prior year quarter. Including the cash impact of capitalized costs, free cash flow in the quarter was $15,000,000 compared to a negative free cash flow of $4,000,000 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. Now turning to guidance. Please note that our formal guidance excludes the impact of the planned OfferFit acquisition, which we expect to close in the second quarter. The transaction is expected to add approximately two percentage points to year over year revenue growth and be modestly dilutive to non GAAP operating income margins in the fiscal year. We plan to update our guidance to account for the transaction after it closes. For the first quarter of fiscal twenty twenty six, we expect revenue to be in the range of a hundred and fifty eight million to a hundred and $59,000,000, which represents a year over year growth rate of approximately 17% at the midpoint. As a reminder, our first quarter contains three fewer days compared to the other three quarters of the year, which each contain ninety two days.

First quarter non GAAP operating income is expected to be in the range of $0 to $1,000,000 First quarter non GAAP net income is expected to be $4,500,000 to $5,500,000 and first quarter non GAAP net income per share in the range of 4 to 5¢ per share based on approximately a hundred and 8,000,000 weighted average diluted shares outstanding during the period. For the full fiscal year 2026, we expect total revenue to be in the range of $606,000,000 to $691,000,000 which represents a year over year growth rate of approximately 16% at the midpoint. Fiscal year twenty twenty six non GAAP operating income is expected to be in the range of 25.5 to $29,500,000. At the midpoint, this implies a non GAAP operating income margin of four percentage points, roughly a 400 basis point improvement versus fiscal year twenty twenty five in line with the annual margin expansion framework we outlined at our Investor Day last September. While we expect to remain operating income positive for the year, inclusive of the proposed acquisition of OfferFit, the dilutive impact in fiscal year twenty twenty six is likely to result in a temporary departure from the framework. With a return to a more meaningful year over year operating income expansion next year.

Non GAAP net income for fiscal year twenty twenty six is expected to be in the range of $30,000,000 to $38,000,000 and net income per share is expected to be $0.31 to $0.35 per share based on a full year weighted average diluted share count of approximately a 10,000,000 shares. I'll close by reiterating our excitement about Braze's future, We remain committed to becoming the global leader in customer engagement solutions and driving product innovation while executing against our long term financial goals. And with that, now open the call for questions. Operator, please begin the Q and A. We will now begin the Q and A session. If you would like to ask a question, please use the raise hand feature at the bottom of your Zoom window. Please limit yourself to one question. I will wait one moment while the queue assembles. Our first question comes from Ryan McWilliams with Barclays. Please unmute your audio and ask your question.

Hey. Congrats on the quarter and congrats to Miles on a great run.

Bill, glad to see the Braze technical brand refresh earlier this week. Along with today's announcement of the offer fit acquisition. Love to hear more about what OfferFit could add to your platform. And how do you envision AI agents, improving marketing campaign for your customers in the near future? I have one follow-up. Thanks.

Yeah. Of course. So I think I'll just start at the top and break down the two major components that I think are necessary to understand the synergies behind this deal and, you know, the logic behind it and why we're so excited about it. So first, when you look at OfferFit's existing full product offering, which they've been scaling and improving upon for the last four and a half years, It excels specifically at generating maximum uplift in scenarios where even small differences in performance can translate into massive ROI for their customers. Now like Palantir, the openness and the configurability of the OfferFit system does lead to a requirement for expert assistance from their forward deployed machine learning implementation engineers. And that is heavier upfront, of course, through initial implementation And then as the agents need monitoring or maintenance over time, as the customer base, changes or as performance starts to drift, etcetera, those expert teams are there to ensure that that maximum performance continues be delivered. And it achieves that uplift to a degree that, you know, is previously only possible with massive proprietary in house data science investments or or into machine learning teams or other bespoke services engagements that come at much higher price tags.

And so, you know, we're really excited about what that means for the end of the market, you know, looking at our enterprise and our, global strategic accounts categories in particular, as well as other high scale b to c companies as they're scaling. We also, though, believe that even as Frontier AI technology continues to advance, that there's there's always gonna be use cases where achieving that maximum performance is worth that meaningful incremental investment, and they've built a capability to provide that the top end of the market in a highly scalable fashion with an attractive gross margin. We also believe that the underlying technology, the offer fit engine, can be tuned and constrained to particular use cases to remove that need for the expert services attachment while still achieving meaningful performance uplift across a wide array of life cycle marketing goals. And so we're really excited in addition to continuing to build and scale the existing OfferFit you know, full product to work alongside their expert r and d teams to find new places to deploy their engine that's gonna be able to solve new use cases for customers as well as enhance existing aspects of both Braze AI and the testing and personalization space and to extend the future capabilities of Project Catalyst.

Excellent. And then for Isabelle, really really tough time for CFOs at this point due to the shifting macro. Any adjustments to your normal guidance philosophy, given the macro? And any color on what in quarter net retention look like for the fourth quarter? Thanks.

Yeah. Thanks. So, I would say, look, we've been living in this macro disruption, and evolving environment for the last years. So we're we've sort of become used to the the changes that's is a bit of the new normal. I would say that, you know, when we went into last year's guide, I talked about being a little closer to the pin. I think that philosophy will be maintained in this context. So look for for that to continue as a as a as a as as a mantra that that we espouse. And then on the in quarter DBNR, look, I think the way to think about dollar based retention, it's very sensitive, obviously, to, the evolution of new business versus upsell. And actually, as you heard Bill and I say in some of our prepared remarks, we're very satisfied and very pleased with the evolution of the new business. Strength in in q four and some of the momentum there. We're really focused actually on the total impact on revenue growth. And I made some comments last quarter about revenue growth inflecting ahead of dollar based net retention. And we stand by those comments going into this year.

And so we're really excited about the overall momentum on the business.

Appreciate the color. Thanks so much.

Our next question will come from the line of Arjun Bhatia with William Blair. Please go ahead.

Yep. Perfect. Thank you, and congrats on a nice supposed to be here.

Maybe first for you. I You mentioned something in your prepared remarks.

That kinda stuck out. I I think you've raised it as the next level of personalization beyond right message, right channel, right time. I don't know if that was specifically addressed to opposite or that's something Braze is trying to do in general. But what what is that next frontier personalization and how does it you know, maybe change the nature of the messages, if at all, that you're sending to your customers beyond kind of traditional marketing oriented messages? And then I have a there. I think it's Yeah. So I think that there's it's important to think about all this on a spectrum. And, you know, there's a there's a few different ways to organize that spectrum. There's manual AB testing and, you know, testing and instrumentation, which is obviously been possible in a lot of platforms for a long time. And that does drive optimal it drives higher results and more relevance and personalization for customers. Then you start to get to, you know, more automated experimentation like we've included in personalized path and Canvas, and we've spoken about in the past, and that's advanced machine learning tactics in order to, you know, do more than just trying to optimize little bits of content, but actually look at a lot of the decisions that are made across a cross channel journey that's, you know, communicating across, different outgoing channels as well as modifying product experiences and and experimenting with different things like cadence and tone and what have you.

And and then, you know, as we continue down that we get to project catalyst, which is obviously working to encapsulate not just that, experimentation and the automation around it, but also automate more of the generation around the different experiment variants and expand the scope of what the automated experimentation is able to make decisions on. And then as we get, you know, further down and and go back to some of the topics that I was just discussing in response to Ryan's question, you know, where you're looking at fully customizable models and applying them in places where, you know, small differences in performance can lead to outsized outcomes. And, you know, you see that in a lot of places where there's either really high value actions or there's really expensive downside scenarios to avoid. Or you're just operating at large enough scale that even, you know, basis points of improvement translate into really big dollars in ROI. And I think that there's there's some other really exciting parts of this because as I stated before, I think there's always gonna be room at the top end of the market to apply that hands on data science expertise in order to achieve maximum performance, whether that's coming from your own in house data scientists or it's coming from, you know, services offering like offer machine learning implementation engineers.

But not all teams have access to those kinds of resources. And similarly, it doesn't make sense to deploy that high of a cost both in terms of the setup time and the little literal dollars for the expert services in every little decision that gets made along the way through, you know, customer journeys. And Braze's vision is really to enable customers to be able to comprehensively across a really diverse customer, space with companies of all sizes be able to go in and use the tools of artificial intelligence and machine in order to optimize results and relevance for their customers. And and we wanna make sure that accessible and able to be deployed in all the little you know, detailed moments of the customer journey, and we've spoken about that at length in the past. I think that also another thing we've spoken about a lot is that the continued advance of Frontier AI will continue to translate into improved performance for those fully self serve and rapidly deployed you know, AI features like we have in the Braze AI suite today and like I've spoken about before, you know, as we ourselves evolve from, you know, simple multi armed bandit testing to or AB testing to automated multi arm bandit testing to, you know, personalized path, and these are all using subsequent generations of machine learning techniques in order to deliver better and better results.

But I think one of the really great things about bringing together the current offer fit approach with the more accessible approach that Braze has been working over the years is that is the feedback loop and the product feedback loop that comes with that much like Palantir has been able to build more quickly from the tight product feedback loop that they get from their four deployed engineers, OfferFit has historically been able to more quickly improve their engine because they have a direct and highly skilled feedback channel coming from their machine learning implementation And so we're looking forward to the future of Braze and OfferFit together being the best of all worlds as that same product feedback loop in Frontier r and d that's driving the high end offer fit offering is leveraged throughout the rest of Braze AI and in Project Catalyst.

Okay. Perfect. That's helpful. Thank you. And then one one quick one just on customer cohorts. I'm curious what you're seeing in terms of just expansion trends from some of the newer customer cohorts that you've won know, whether that's that's that's greenfield point solution replacements or legacy providers. It seems like new has been pretty strong, but those customers are coming up for renewal, are you seeing expansion levels still that are better than that SERP cohort and has that magnitude kinda changed it all from the nine points that we talked about at Analyst Day on the on our front? I do Yes. So in the since we announced that sort of nine percentage point differential between those two cohorts, that has continued trend in a positive direction. So, you know, we're not going to kind of continue to disclose that but it is it is continued to be that post ZERB cohorts are performing better than the ZERB cohorts. That trend continues.

Alright. That's a couple. Thank you.

Our next question comes from the line of DJ Hines with Canaccord.

Hey, thank you guys.

Bill, maybe we could go back to or or stick on the thread of OfferFit for a second. You explained the technology and the value prop very clearly. Maybe just speak to the business outcomes a little bit that you see for your customers that are already using OfferFit today? Like, do do they send more messages? Is it just that the are more effective? Can they create content faster? Just help me understand kinda how it translates from a revenue perspective to what Braze might actually see, as you push out for Fit more broadly across the customer base?

Yeah. So think that in terms of the performance that you see, what you should expect is enhanced relevance. And so, there are parts of the OfferFit offering that include automatic content generation. Those are very similar to the assistance and the helpers that are in the Braze composers today. And in fact, the the Braze composer suite and the GenAI assistants that accompany them are actually ahead of what OfferFit offers today, and we're excited to be able to, you know, focus their r and d where they've been specialized and have them be able to draft off of a lot of the other things that Braze has built around its dashboard, including of things like reporting and those composers and the Braze data platform and our enterprise permissioning and just a lot of the other things that we built along the way. They'll be able to benefit from and and accelerate with. We I think also when you look at the number of messages sent, you know, we don't expect that to materially change, although there are great examples where, when offer fit works with Braze customers in particular, they often will start out optimizing for a single channel, but because of Braze's cross channel capability and the ease with which you can move strategies from channel to channel on Braze, it it has promoted in our shared customers in the past them expanding those offer fit use cases across other Braze channels.

And so that's been, you know, really great to see, and we certainly hope to continue to see that trend continue as that makes our customers stickier and helps with them, upsell and cross sell across the board. We and I think also, the key differentiator when you think about the business impact in terms of what we sell and how we sell it I think is that OfferFit, because of the demonstrable performance of and really the focus on going into these extremely high value use cases has is in an extremely good position to value sell. They they show incredible levels of ROI for their customers when they deploy. They're able to maintain those high levels of performance through the attach of those machine learning implementation engineers. And they're doing it at a value and scalability level that maintains really attractive gross margin despite the attachment of those expert services to the software offering that they're deploying.

Yeah. Yeah. Okay. Very clear. And then, Isabelle, what is the mesh mix of cash and stock in that 325,000,000?

Yeah. So it's, 42% equity, and the balance is, cash.

Okay. Perfect. Thank you, guys.

Our next question will come from the line of Gabriela Borges with Goldman Sachs. Please go ahead.

Hi. Good afternoon. Thank you. Bill, there's a little bit of a debate in the market right now on the advantages of being a SaaS native company versus an AI native company. And you're a native company acquiring an AI native company. So help us understand why could you not build this in house and what were the limiting factors to offer fit being able to scale or being able to scale without agreeing to be a quieter by Braze. Thank you.

Yeah. So I I don't think in either of these cases, this was a can't. You know, both teams have high engineering and product groups with, you know, really great r and d, capable and are on great trajectories. But when we look at the synergies that we'll be able to achieve and the way that we'll be able to complement each other based off of where, both both kind of a combination of where focus areas and also where comprehensiveness, has been in the past. We think that it's gonna be you know, really fantastic coming together of the expertise and the experience that the OfferFit, you know, primarily data science focused, offering has had in the field, the work that they've done, you know, much much of which was with, roughly about I referenced this in the prepared remarks, but almost a third of their existing customer customers already work with Braze. And so it's something where, you know, we we knew them well as a partner. We could see the the synergies that we'll be able to achieve together. We can see the improved customer outcomes that come out of us working together. And we think that together, we can both move faster.

That makes sense. The follow-up is for Isabelle, specifically on demand trends that you've seen in the last several weeks. Has been so many mixed data points, whether it's on the consumer spending side or or more broadly with uncertainty types of the new administration. Have you seen any change in your leading indicators as it pertains to your customers willing to spend in the last several weeks?

So nothing specific in the last several weeks. We do recognize that the evolving global trends and specifically, as you mentioned, around some of the tactics of the new administration, are gonna create some challenges for some of our customers and our prospects. But, as we think about how pipeline has evolved how pipeline is behaving, the trends of it's linearity or just amounts of closed won through, through q one so far. There's nothing that we're seeing that gives us pause on the immediate trends.

Yeah. And also just add that on the technical side, we've obviously been anticipating data sovereignty concerns continuing to rise in importance for a whole bunch of reasons, which is why we've been expanding our data center footprint, which now includes options in The US, The EU, and Australia. We've got Indonesia launching relatively soon, and we'll have more regions to follow. And so we're preparing ourselves in a variety of ways. You know, I think that the the trend line of a lot of these things has certainly accelerated more recently, but it's pointed in a similar direction as it has been for years, and we've been preparing for Thank you both for the detail.

Yep.

Our next question comes from Brent Bracelin with Piper Sandler. Please go ahead.

Thank you for taking the question here. I wanna stick with the the macro.

Little surprise given retail and consumer goods are the largest verdict vertical for you. Yet you still have really strong CRPO backlog build in the quarter I think, bookings looks like it actually slightly accelerated. Bill, could you just talk about the feedback from from retail and consumer goods companies in in light of tariffs and uncertainty there. Is it cost that, that they're leaning into Braze? Is it rigidity of of old legacy platforms and they need to be more flexible. Walk us through what's resonating in a increasingly mixed environment. Then, Isabelle, if you could just touch on net new logo growth here. Ads were the highest in the year and a half. What drove that strength? Thanks.

Yeah. So a few things. You know, first, I I'll point you back to the high level diversification that we have in the business. You know, it is our large category, but it's also still roughly only about a fifth. And so in any given environment, I think we've had a ability to be able to leverage our diversification both around the globe as well as across categories in order to continue to push ahead in new business even as certain areas of the world or parts of the, you know, parts of the market have been impacted. I think also, you know, one of the things that we've learned over the last couple years in particular when we're looking at the enterprise segment, is that these enterprise replacement cycles are stickier and longer term and more considered than a lot of the short term noise that we, look at. And so I know know, it's we we can hear some of the short term responses to, to a a lot of the, you know, things that were happening recently with tariffs, and there's concerns about costs, and there's, you know, things like that. And there's been versions of that happening as inflation and currency strength has ebbed and flowed over the course of the last couple years.

But I think that some of the the things that underlie a lot of the legacy replacement cycles tend to be tied more to the long term contract lengths of those legacy, you know, marketing cloud deployments. The budget cycles, the teams coming into play. You know, there's RFPs being run all of these replacements. And so those aren't things that just kinda waver and get interrupted, you know, week by week. They tend to be more long standing. And and, you know, definitely, a lot of the the story of the last year and and what we saw culminating q four you know, in the enterprise in particular was that, these deal cycles do continue to be long. They continue to involve more stakeholders. A much higher percentage of them go to RFP than used to in the past. There's less appetite for customers to pay for overlapping contracts in order to kinda go through, migration periods and things like that. And so those are all things that make that legacy replacement cycle cycle, you know, harder and makes it take longer and take more effort. Now on the flip side, we feel better about the competitive position that we're in against the legacy marketing clouds than we ever have.

You know, there's obviously a lot going on, a lot of announcements coming out of the likes of Salesforce and Adobe, but, you know, it's very clear as well that, the the marketing cloud, the, you know, the aspects of the experience cloud that we compete with are simply not the focus area of those businesses right now. I think that more and more customers and their technology partners their agency partners are starting to wake up to that. And so that's starting to, I think, build more momentum. Around how people are thinking about the risks that you know, are are associated with sticking with the with the incumbents, you know, even even though they might be in a risk reverse posture. And so, you know, that that's all against a backdrop that includes all those other factors that I just mentioned that are that is still making it difficult to execute in. But I think we, you know, we feel really good about the investments that we've made over the last couple years to put us in the position that we're in, you know, in the enterprise in particular. And we're eager to continue to make progress and and take share in that enterprise space, especially against the legacy marketing clouds.

And then, Brent, on your question on logo count, so I'll make three three comments. So one, you know, q four is generally a strong quarter for kinda tapping into new budgets and securing new logos. So that just generally q four can be a a helpful kinda seasonal quarter there. We did do better in q this q four on logo churn so that we had a little bit less of a headwind working against us. So really happy with how that played out. But and what I will say is there was no nothing unnatural that happened in q four with regards to incentive structures or anything that would have driven, like, some of an odd one time pop in additional logos. So this is very much kind of core business performance.

Helpful color, and I'll echo congrats to Miles on a on a great run.

Our next question will come from Brian Peterson with Raymond James.

Hey, Thanks for taking the question. So appreciate all the commentary and congrats on the OfferFit acquisition. You mentioned that with the deal, fiscal year twenty six will be a year that will be a deviation from that growth margin framework you outlined at the analyst day. Is that dynamic solely due to offer or or is there any organic investments that you're seeing or making because there's a product or growth opportunity? Would you love to just get the perspective there? Thanks, guys.

Thanks for the question. If you go back to my organic outlook for for the year, so we did provide guidance both for the quarter and for the full year. And you look at the operate non GAAP operating income dollars, and that the implication of the margin relative to the revenue outlook, that is consistent with the framework. So I did wanna set that stage. The transaction has not closed yet. But we are indicating that once the transaction does close and we provide updated guidance, we do wanna set the stage and and, flag to the market that there will be a deviation once we we embed those costs.

And, Isabelle, just on the acquisition, you mentioned a couple points of revenue. Does that assume kind of the current run rate for OfferFit, or are there any incremental cross sell synergies embedded into that? Yeah. I mean, that's obviously a bit of a it's a risk adjusted, you know, number. So we're I think, you know, these these acquisitions, we wanna be judicious about kind of how how quickly we try to to sort of achieve that and we wanna certainly get as much out of this transaction as possible as quickly as possible and be very successful, but but we're obviously risk adjusting that that So for now, that is that is in fact just a a run rate number for them.

Understood. Thank you.

Our next question comes from Derrick Wood with TD Cowen.

Great, thanks.

Bill, can you just give us a sense as to what organizational changes have transpired since Miles announced his intention to step down and how we should be thinking about the the timeline of bringing on a CRO And and I guess since this is a q one, are there any notable go to market changes that you're making that you would flag Yeah. So first of all, the search was going well and I been really happy with our field team's execution during this transition period, you know, so far through Q1. As we updated you guys on throughout last year, the last six quarters, have brought in a lot of new field leaders around the world, and we've got great global leaders across our partnership sales and post sales groups who are, you know, long tenured, leaders who are in place, and they presently report, directly to me. But you know, other than some of the changes that we spoke about throughout the year last year, there were no other, you know, major changes other than that reporting those reporting lines switching from miles to meet as we began the year. Within that search, you know, we're looking for a world class executive to take on the CRO role who's gonna help bring us to the next level.

You know, we're really focused on reachieving rule of 40 efficiencies, scaling to, and then well beyond a billion in ARR, and continuing to grow Braze in the globally recognized leader in customer engagement. And, you know, we're just really focused on finding the leader across those field teams in that CRO seat help us do that. As for timing, we're in market right now. Candidate flow has been great It's definitely a highly sought after role and definitely a seat that, you know, Miles really shaped really well over the course of a decade and one that, you know, we've got a a lot of really robust candidate flow that's excited for the opportunity to step into that.

Great. If I could squeeze one in, a follow-up. Just on a few quarters ago, you talked about Meta potentially changing pricing strategy with WhatsApp. I don't know. Is there any update to to call out there? I know it could have some impact on kind of the the the p and l for you guys. Just wondering if you see anything down the pike.

Yeah. It's it's a good question. You know, we continue to partner closely with Meta and are committed to both robust and rapid support for everything that they been launching along the way as well as a number of their test programs that they run. However, that landscape also does continue to change rapidly. You may have heard about Meta's decision to discontinue marketing messages and WhatsApp for US customers recently. That doesn't impact us very commercially because the vast majority of our global demand for WhatsApp was already non US audiences. But it is another example of just how dynamic that offering pricing landscape has been for Meta as their quick leader iterating on their product. You know, that impacts both us and our road maps well as customers who need to plan out budget to be able to use for these different offerings. And so definitely, while that remains dynamic, it will be much harder both for customers to forecast and budget as well as for us to forecast. Now what's helping customers and us navigate this is that we are in a much better position to manage these changes with the flexible credits model that we launched last year.

And, obviously, Braze's product offering is highly flexible, you know, given the the cross channel offerings that we have across line in RCS and SMS push notifications and these others in particular. You know, as their product roadmap continues to to evolve, we're able to reuse a lot of the capabilities that we build out for other channels. And so, you know, I I don't think it's been really a drag on r and d velocity at all, but, you know, definitely while it continues to be a dynamic offering, it has been harder for customers to plan for that. And, you know, we've been working really closely with Meta in order to bring them you know, feedback and work closely with them as partners, and we've been really happy with how that partnership has been going as they've continued to iterate the product. But it's still hard to forecast out a long way into the future as we look at that channel.

Understood. Thanks for the color. Thanks. Yep.

As a reminder, please limit yourself to one question. Our next question comes from Nick Altman with Scotiabank. Please go ahead.

Awesome.

Thank you. It it it's clear there's still plenty of opportunity for consolidation and replacement activity. But, Bill, maybe know, how should we see this acquisition of OfferFit as well as know, additional product efforts, whether it's, Project Catalyst or or future new product features or launches, as we think about kind of the next growth act for Braze, know, just maybe give us an update and and kind of how you envision the platform evolving over the next couple of years how that can support continued growth durability? Thanks.

Yeah. Of course. You know, we're really excited about the potential for these because as I spoke about at the top of the call, you know, well, the well, the technology that we have at our fingertips for customer engagement today is certainly head and shoulders above where it was five years ago, ten years ago, even even just a couple of years ago, there's also still tremendous amount of room, a tremendous amount of room for continued improvement in terms of the relevance and the, you know, just the performance that we actually achieve in these channels. And it also continues to be the case that the ROI of engaging in first party channels of leveraging the first party data that a brand already has ownership of, which is a, you know, an asset that brands across every vertical continue to put more and more investment in. That that opportunity to create outsized value and return from continuing to optimize more of the first party world in much the same way that a lot of the performance marketing world has been really focused on for a long time. You know, we think there's still tremendous opportunity to continue to find more leverage and performance there.

And I think both Project Catalyst as well as OfferFit is a really great way for us to both help our customers achieve that know, continued those continued increases in performance driven by higher levels of relevance and, you know, stronger, more effective personalization, but also for us to capture more of the value of that that we generate through that optimization. And so, you know, we're definitely when we look out across our customer base, you know, I think that across that spectrum I spoke of earlier of the fully turnkey, you know, rapid rapidly deployed automated testing and other sorts of machine learning capabilities that can be put into any part of the customer journey all the way up to, you know, the bespoke full offer fit offering that has the, expert services attachment to it. You know, within that spectrum, we think that there's something additional for every single customer in the Braze universe. To, be able to go and, you know, drive a additional, you know, better outcomes for their customers and also be able to drive up growth for Braze.

Great.

Our next question will come from Scott Berg with Needham. Please go ahead.

Hi, everyone. Really nice quarter. I guess the one for me is is, you talked about the, you know, focus in in r and d and, of course, the new shop announcement with the integration there. But how do we think about the the benefit your customers are gonna get outside of maybe just streamlining you know, the technology side of that that that integration? Is there you know, I guess, how else does it affect, I don't know, product use, sales cycles, you know, all those types of things? How much more you know, efficient will that be billed comfortably?

Yeah. I think there's a few things. You know, first, a lot of these capabilities are they're they're focused on getting more rapid time to value for customers both as they get up and running in the first place as well as as they expand into new use cases. The data model expansions, that we have and a lot of the kinda vertical specific capabilities that we're putting in places like product catalogs within the segmentation options, within things like the purchase object, Those have a dual benefit where they both by virtue of getting those more, organized and standardized, customers can actually deploy more quickly, but they also make the machine learning efforts we have happening in Braze Eye Braze AI able to be more effective as well, because we're able to get the data into more standardized formats where we're then able to, deploy models that are, as I mentioned before, when a model is more constrained, it's easier to deploy. That mean it's less flexible. But, of course, the more that we can standardize the data models around specific verticals, the more use cases we can actually, we can actually accomplish and deliver additional value to through those more constrained models.

And so you should see these things as working hand in hand to both know, improve the offering, the visibility of the offering within those categories, the the time to value for, customers in those categories working with Braze, getting up and running with Braze. And then over the longer term, you know, those deployments being able to to because they're more bespoke to the vertical, us being able to then parlay that into additional features and enhancement that are both driven by, you know, stronger machine learning models but also, just improving productivity for marketers that work within those for all the common use cases that they have.

Very helpful. Congrats on the support Yeah. Thank you.

Our next question comes from Taylor McGinnis with UBS. Taylor, you can use star six to unmute.

Okay. Can you guys hear me now?

Yep.

Yeah. Okay. Awesome. Perfect. Thanks so much for taking the question. Isabel, when I hear, like, an inflection in growth, that sounds like a potential acceleration. So I guess, could you just talk about what you are seeing in terms of either, you know, renewal trends or expansion activity that's giving you comfort in that outlook. And now that, you know, we're a couple months into this one q, I guess, thoughts on terms of, you know, timelines and when we could get past some of these more challenged COVID contracts? Thanks.

Yeah. So rather than thinking about it as on an organic basis as any kind of of inflection and reacceleration, it's more of kind of a stabilization with then kind of a slow, steady path kind of back up from there. So it's not don't think about this as kind of a a hockey stick on on the upside. And I think what we're seeing is, you know, we we're we're seeing strength in our new business momentum, and then we are seeing, obviously, the new cohorts from an expansion perspective performing better than the ZERP cohorts. And I think those two things combined together are going to help us kind of achieve that stabilization inflection point and then, steady reacceleration of of, of the top on an organic basis. But I've I'm not trying to indicate that there's a a stick inflect inflection point happening, in the near term.

Thank you so much.

Our next question will come from Michael Berg with Wells Fargo.

Hey. Congrats on the quarter. Thanks for my question. I have another one for Isabelle, but this time in relation to Project Catalyst. You noted that it's likely to come out GA later this or latest quarter next quarter. So I'm curious how to think about what's embedded in the guidance for in terms of Project Catalyst contribution. And does that has that changed have you thought has the way you thought about the product contribution changed post acquisition here? Thank you.

Yeah. So, obviously, the the guide on an organic basis doesn't include doesn't include offer fit and just includes kind of, you know, our our own our own business. And I don't think, Catalyst is going GA quite as quickly as your as you're indicating.

Yeah. As I said in the prepared remarks, the first private beta release will be at end of q one, and we expect subsequent beta releases before GA, and there's been no nothing about when it goes to GA.

Yeah. So so I wouldn't expect anything material, you know, related to that embedded in the guide or, you know, coming coming anytime soon.

Got it. And then a quick follow-up for Bill here. You know that you are this is the best you felt in the competitive landscape here. Some of your key legacy competitors have talked about their core products, competitive products underperforming. Has that created more discussions or more in top of funnel [indiscernible] Or how can we think about the changing competitive landscape, you know, taking shape for you guys Yeah. So I've been talking about this for a little while now, and I think that the I'll call it the kind of distracted posture toward the competitive product. Within the the the parts of the legacy marketing clouds that Braze competes with has been picked up on by the broader community, and that has a few implications. You know, one is that we're seeing partners that have been long time, you know, services or technology partners to those marketing clouds, you know, starting to look around and figure out what their next act is gonna be. And, you know, as Braze emerges as the category in customer engagement, we're having a lot more of those conversations with prospective or current partners about, you know, doubling down on their commitment to Braze.

I think also, you know, there's been a lot of enterprises in particular that have have really been you know, they've they've been looking forward to a product road map from those capabilities. They maybe have been noticing the gap between what they'd like to have and what legacy marketing clouds are delivering to them for a while, but the product marketing around it and, you know, their prospective future road maps have felt really good, and they've been holding on hoping that those promises will come true. In the near future. And now I think it's becoming increasingly clear to people that you know, those products are more stagnant than they are, you know, really pushing ahead And in the meantime, Braze continues to push ahead into new frontier with highly focused and robust r and d, specifically in the customer engagement space. And so when we consider both the the absolute positioning as well as the relative investment posture, I I think that we feel really good about that. And I think the ecosystem is starting to notice that as well.

Awesome. Thank you.

Our next question comes from Brian Schwartz with Oppenheimer.

Hi. Thanks for taking my question.

I wanted to follow-up thinking about the problem the other with the architecture plans with, OperaFit. I I think you you mentioned that that they have a different data model than Braze. As you think about scaling Braze's architecture, in the future, is the plan to, get back to one tech stack or or or is it faster to scale by adding, other tech stacks? [indiscernible] Thanks.

Yeah. So I think that an enduring advantage that we've had against the, you prior generation of marketing clouds and marketing automation suites has actually derived from the tight integration that we have across our stack, as well as obviously the event driven stream processor that underlies all of it. And then, you know, the increasing flex data platform to be able to get more data more quickly, complete and cheaply, into that event driven stream processor. And so any acquisition that we make along the way is absolutely gonna be predicated on a strong integration plan where we bring those technology stacks together. I'm very committed to Braze not ending up being a fragmented set of acquisitions with a bunch of the the complexity that's inherent in that. You know, We're really looking forward to OfferFit coming into the Braze technical environment and the foundations and us being able to leverage their engine and them being able to leverage a lot of the things that we've built along way. You know, I think that when you specifically look at the data question, you know, a big part of extracting additional uplift through the way that they apply, their that they generate their features and apply their reinforcement learning to it.

Is actually activating bespoke company or industry specific data across both the customer feature space, which is to say, you know, kind of all the data that you have on your on first party users, across the user profiles as well as the action feature space, which is a which basically means, like, all the different optionality that you have to make offers, provide different incentives, different copy, different choices that you have, along the the along the customer journey. And so bringing in both of those flows in a bespoke way, also then requires transforming those incoming data flows to extract features that are usable for machine learning. Involves navigating regulatory and other requirements, especially in places where they work, like in finance, and they bring a lot of hands on experience in that area. So now the other side too, we're excited to speed up their road map because the Braze data platform is a more comprehensive data platform with more connectors already built than, you know, they've already created on their side. And that ends up being very complementary because they've really worked to make their data pipelines specifically for that transformation into features for, usage by machine learning and to, adhere to a lot of those regulatory requirements and particular in the high end of the enterprise and these highly regulated environments.

You know, the Braze data platform has built to be a comprehensive solution across across the b to c space to be able to get data into customer engagement stack, you know, quickly, completely, and cheaply And we think that there's just really good synergies there as we continue to build but we are very committed to making sure that the end state and and indeed one that we get to rapidly is one where the integration is tight, so that we can both benefit from continued R and D advancement that, you know, builds without incurring the flex or the without incurring the complexity, that arises from more fragmented technology. Thanks.

Our next question comes from Eun Kim with Loop Capital.

Okay. Great. Congrats on the solid quarter, Bill, and it's Isabelle. Strengthen the new customer adds. That you saw in the quarter. Any new bundles or packaging that's driving that drove that strength and if you can update us on how the initial LAN deal size has been trending.

Yeah. So, we only update our pricing and packaging meaningfully once a year, and the refresh for that will actually be coming up, as we begin q two. I'll also remind everyone that we launched the flexible credits model, around this time last year. And the adoption of that has been really good, but we had limited it to just a couple of channels in And so we've actually, in this upcoming in this upcoming version or refresh of, pricing and packaging, we're gonna be expanding the flexible credits model to also include email, content cards, banners, audience sync, and message archiving. And so, you know, that we're excited about that and and continuing to see good benefits from that. And, obviously, we did see, the benefits of the flexible credits model being there in q four. I think that, you know, similarly, we're we're continuing to see the kinds of buying trends that I've spoken about a lot of just you know, there's a lot of scrutiny in rigor behind all of these evaluations that are happening. And the upside to that are that people are scoping their purchases in ways that they're getting up and up and running, more quickly and more completely through their initial integration because they've got stakeholders all aligned before they're ready to go.

A lot of these RFPs, are drawn out, which has downside of it being a longer sales cycle, but has the upside of, you know, more often the company is ready to go for implementation right away. And so I think those are some of the differences that we're seeing not materially different in q four versus the rest of the year, but you know, obviously, we were happy with the new business performance in the quarter.

Okay. Great. Thank you so much.

Our next question comes from Patrick Walravens with JMP Securities. Patrick, your line is open. Feel free to unmute.

Sorry about that. Can you hear me now?

We can. Please go ahead.

Okay. Good. Thank you. Hey, Bill. I'm curious on OfferFit. Why now?

Like, was there a formal process that they were going through?

They considering doing an a a new financing? How long have you been thinking about this? What did this deal happen now?

Yeah. So I won't go into too many of the details, but, just quickly, you know, we we have an active corp dev, you know, active corp group here. This was identified as an area of interest for us. OfferFit has been a longtime partner, as I've mentioned a couple times. Braze is actually their most prominent partner, and we've been really happy with seeing the joint customer outcomes that we've been able to achieve with them along the way. And so we actually did approach them. We happened to approach them, right, as they were preparing for a fundraising round, and so that did put some constraints around the overall timeline. But, you know, a big part of this is just that we've seen them maturing as a business in our partnership ecosystem. And, you know, we we felt like there was a was a great time for complimentary building. We you know, I've mentioned a couple times the things that they've built, the things that we've built, you know, that the flip side of that is also the things that they haven't built yet. And things that, you know, where we haven't built yet as well. And I think those things match up in a way that's gonna create, not just an exciting combination, but also a really efficient one.

Alright. Great. Thank you.

We'll take our final question from Tyler Radke with Citi.

Hi. Thanks for the Isabel, you mentioned that you did a little bit better on Logiturn. I was wondering if you could expand on that and share an update on the health the SMB segment of the market?

Yeah. I mean, look. You the the one thing about churning an account is once you've churned it, you can't churn it again. And so we've had a quarters now where we've been talking about levels of churn that have been higher than what we would want on a sustained basis, and we're starting to kinda work our way through that. Now there are we're probably still not all the way through some level of right contract right sizing among some of our our customers who will stick around, but will have to kind of rightsize their entitlements as they come up for renewal. But that said, you know, we've we have indeed flushed out a a number of smaller accounts that that whose business health was was certainly at risk.

Thank you. There are no more questions in the queue, so I'll pass back to Bill for closing remarks.

Yes. Thank you everybody for joining us today. We We obviously, really exciting news today and really happy with the from the team around the world. We're looking ahead to a great fiscal year, and we'll see you next