Q1 2025 Earnings Summary
- Braze's diversified customer base across industries, geographies, and company sizes provides resilience and allows them to find growth opportunities even in a challenging macro environment. This diversification enables Braze to consistently perform well despite macroeconomic headwinds.
- Successful execution and investments in go-to-market strategies, sales team enablement, and partnerships have led to improved sales productivity and a strong start to the year, setting Braze apart from competitors. This includes effective partnerships with firms like Accenture, Deloitte, and WPP, and increased brand awareness through rebranding efforts and events.
- Strategic investments in international expansion, including new data centers and regional teams, position Braze to capitalize on global opportunities and meet evolving customer demand as globalization trends continue. This prepares Braze for accelerated scaling when macro conditions improve.
- Persistent macroeconomic challenges: The macro environment remains difficult, with no meaningful improvement in demand. This is characterized by cautious buyer behaviors, prolonged decision-making cycles, and enhanced budget scrutiny, which could negatively impact Braze's growth prospects. William Magnuson stated, "We have not seen a meaningful improvement in the qualitative characteristics of our demand environment and continue to see cautious buyer behaviors, long decision-making cycles and enhanced scrutiny on both budget and personnel resources".
- Uncertainty due to changes in WhatsApp's pricing model: Meta's changes to WhatsApp's pricing and message delivery policies introduce uncertainty for Braze's monetization of this channel. William Magnuson mentioned that these changes "will likely shift the way that we monetize that channel," potentially resulting in "smaller dollar values for WhatsApp on any individual Braze order form" and requiring additional investments in R&D and adjustments to the go-to-market strategy.
- Potential profitability pressures from international expansion: Braze's increased investments in international expansion could pressure near-term profitability. William Magnuson acknowledged that "starting a new and building a new foundation is less efficient than putting an incremental dollar in a place that's already mature and already working really well," suggesting that these investments may not yield immediate returns and could impact margins.
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Net Retention Rate Dynamics
Q: Why is enterprise net retention rate declining?
A: Isabelle explained that while the consolidated net retention rate appears stable on a rounded basis, it is down on an unrounded basis and hasn't hit the floor yet. Enterprise net retention is impacted by macro pressures, making upsells as challenging as acquiring new business due to new budgets, stakeholders, and processes. Additionally, some contracts had previously purchased for higher growth expectations and are still working into those volumes, affecting upsell opportunities at renewal. -
Customer Reaction to Outage
Q: How did customers react to the recent outage?
A: William stated that customers have been understanding about the large outage at the end of April, the longest in their history. Throughout the outage, Braze communicated with urgency and transparency, leading to full recovery without data loss. They learned from the incident, made system improvements, and viewed it as a stress test for upcoming big events. -
Generative AI Impact on Usage
Q: Is generative AI increasing customer usage of Braze?
A: William noted that generative AI tools have significantly enhanced marketer productivity, allowing customers to move through their engagement roadmaps more quickly and experiment more often. This increased efficiency helps teams do more with the same or fewer resources, justifying Braze's premium price point. -
New Pricing and Channel Usage
Q: How is the new pricing affecting channel usage and margins?
A: William reported that the rollout of the credits program has been successful since its official launch on May 1. Customers can now experiment with new channels without new contracts, leading to increased usage. On SMS, competitive dynamics remain similar, allowing for vendor negotiation. With WhatsApp, Meta's changes to monetize the platform will shift how Braze monetizes that channel. While WhatsApp is currently a low single-digit percentage of revenue, Braze expects higher gross margins but smaller dollar values per order, with no material disruption anticipated. -
Snowflake Partnership
Q: Can you update us on the Snowflake partnership?
A: William highlighted that Snowflake is a crucial technical and go-to-market partner. Braze was an early adopter of Snowflake Data Sharing, embracing its role as both a consumer and producer of data. Deploying Braze and Snowflake together allows customers to do more with comprehensive data and reduces the technical burden of maintaining data pipelines. This partnership creates a win-win-win situation, enhancing customer capabilities and driving positive outcomes. -
MAU Growth Trends
Q: What are the trends in monthly active users growth?
A: Isabelle mentioned that revenue growth has outpaced MAU growth for some time. Premium messages are now the largest component of their topline, with MAUs moving to second. They focus on creating contract structures that enable customers to use the product effectively and maintain high ROI, rather than worrying about contract composition based on MAUs.