Q3 earnings call
Sales cycle is blowing out, deal scrutiny is up, contract length is down. “we did continue to see some of the macroeconomic headwinds reported by many of our software peers, including elongated deal cycles and increased scrutiny on software investments, particularly with new business.” Customers are signing fewer multiyear contracts. “One thing that we haven’t seen as robust in Q2 and Q3 as we have prior year periods are those people who signed a 12-month deal upfront, more of them are opting to continue on a 12-month deal just because of environment.” Upsells however were strong and the pipeline looks good.
Customers also want to see faster ROI. “Those are also aspects of the macro environment right now, where investments are being made and investment decisions are being made with a return expected on a shorter time horizon and with lower volatility in it.” To get around this, Braze offers smaller initial implementations, perhaps a single team or channel, and allows the account to grow.
It’s a great time to hire R&D talent. “we’ve experienced one of the most robust R&D hiring environments that we’ve ever seen in our history….we’re still looking to selectively take advantage of this great hiring market to bring in really good talent into the company”
Braze’s industry is new, which helps drive growth. “Many of the job titles and teams that rely on Braze today were not around when we were founded in 2011 and their continued rise in prominence is an important indicator”
Don’t sell by territory, sell by account. “we switched from the traditional hunter farmer model across all of our account territories. We actually shifted more of them over to the named account model because of the confidence that we have in our ability to land and expand. There were more cases prior to that, where the hunters were incentivized to land a bigger deal. Now we’ve made sure that our sales team is incentivized just get started because we know that we can grow customers more effectively over time.”
Another growth lever is selling new products and use cases into the same customers. “Often, we can consolidate out other vendors as they’re working to find spend efficiency. there’s an entire category of just taking a step back, looking at their entire marketing spend and helping them optimize that in order for them to be able to maintain or, in many cases, in those situations still increase their Braze investment.”
Long contracts, complex pricing. “The terms of our subscription agreements are primarily annual with a dollar weighted-average contract length of 24 months as of July 31, 2021. Our subscription fees are principally based on an upfront commitment by our customers for a specific number of monthly active users, on a cost-per-message basis for volume of email and/or SMS messages sent, platform access and/or support and certain add-on products.”
But no customer concentration. “As of July 31, 2021, January 31, 2021 and January 31, 2020, no single customer represented more than 5% of our ARR.”
Very nice net dollar retention. “We believe our successful land-and-expand strategy is evidenced by our dollar-based net retention rate, which for the trailing 12 months ended July 31, 2021, January 31, 2021 and January 31, 2020 was 125%, 123% and 126%, respectively, for all our customers, and 135%, 133% and 127%, respectively, for our customers with ARR of $500,000 or more.”
Customers drive the roadmap. “We believe our market-driven product development approach maximizes the return on new feature development and channel expansion. Our customers consistently volunteer to participate in the testing of new products, which indicates their appetite for new and innovative functionality.”