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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________
FORM 10-Q
______________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from     to     
Commission File Number: 001-41065
______________________________________________________________
Braze, Inc.
(Exact name of Registrant as specified in its charter)
______________________________________________________________
Delaware45-2505271
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
330 West 34th Street, Floor 18
New YorkNew York 10001
(Address of principal executive offices, including zip code) 
(609964-0585
(Registrant’s telephone number, including area code)
______________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareBRZEThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x   No  o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
At June 1, 2023, there were 63,842,793 shares of the registrant’s Class A and 33,744,159 shares of the registrant’s Class B common stock, each with a par value of $0.0001 per share, outstanding.


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Braze, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended April 30, 2023
TABLE OF CONTENTS
Page No.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

the anticipated effects of unstable market and economic conditions that may have serious adverse consequences on our business, financial condition and share price;
our expectations regarding our revenue and the timing of revenue recognition under our customer contracts, expenses and other operating results;
our ability to acquire new customers and successfully retain existing customers;
our ability to increase usage of our platform and upsell and cross-sell additional products;
our ability to achieve or sustain our profitability;
future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
the costs and success of our marketing efforts, and our ability to promote our brand;
our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;
our growth strategies for our platform and our ability to effectively manage our growth, including any international expansion;
the estimated addressable market opportunity for our platform;
our ability to protect and enforce our intellectual property rights and any costs associated therewith;
the anticipated impact of domestic and global socioeconomic events on our business;
our ability to compete effectively with existing competitors and new market entrants; and
the size and growth rates of the markets in which we compete.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and are inherently uncertain. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-
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looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Braze,” “the Company,” “we,” “our” and “us” refer to Braze, Inc. and its subsidiaries.

“Braze,” “Braze Currents” and other trade names and trademarks of ours appearing in this Quarterly Report on Form 10-Q are our property. This Quarterly Report on Form 10-Q contains trade names and trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

We may announce material business and financial information to our investors using our investor relations website (www.investors.braze.com). We therefore encourage investors and others interested in Braze to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, or the SEC, webcasts, press releases and conference calls. Information contained on, or that can be accessed through, our website is not incorporated by reference into this Quarterly Report on Form 10-Q, and you should not consider information on our website to be part of this Quarterly Report on Form 10-Q.
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Part 1 – Financial Information
Item 1.    Financial Statements
BRAZE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)
April 30,
2023
January 31,
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$116,932 $68,587 
Restricted cash, current3,373  
Accounts receivable, net of allowance of $1,881 and $1,613 at April 30, 2023 and January 31, 2023, respectively
66,649 78,338 
Marketable securities385,869 410,083 
Prepaid expenses and other current assets25,285 26,163 
Total current assets598,108 583,171 
Restricted cash, noncurrent1,193 4,036 
Property and equipment, net20,433 20,339 
Operating lease right-of-use assets    46,623 46,261 
Deferred contract costs51,229 48,451 
Other assets3,707 3,148 
TOTAL ASSETS$721,293 $705,406 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable$3,571 $3,101 
Accrued expenses and other current liabilities47,018 37,415 
Deferred revenue181,216 166,092 
Operating lease liabilities, current13,231 10,695 
Total current liabilities245,036 217,303 
Operating lease liabilities, noncurrent39,211 40,590 
Other long-term liabilities814 755 
TOTAL LIABILITIES285,061 258,648 
COMMITMENTS AND CONTINGENCIES (Note 13)
Redeemable non-controlling interest (Note 4)1,083 1,455 
STOCKHOLDERS’ EQUITY
Class A common stock, $0.0001 par value; 2,000,000,000 and 2,000,000,000 shares authorized as of April 30, 2023 and January 31, 2023, respectively; 63,118,499 and 61,585,973 shares issued and outstanding as of April 30, 2023 and January 31, 2023, respectively
6 6 
Class B common stock, $0.0001 par value; 110,000,000 and 110,000,000 shares authorized as of April 30, 2023 and January 31, 2023, respectively; 33,745,938 and 34,389,453 shares issued and outstanding as of April 30, 2023 and January 31, 2023, respectively
4 4 
Additional paid-in capital832,831 806,044 
Accumulated other comprehensive loss(5,311)(6,824)
Accumulated deficit(392,381)(353,927)
TOTAL STOCKHOLDERS’ EQUITY435,149 445,303 
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY$721,293 $705,406 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended
April 30,
20232022
Revenue$101,780 $77,495 
Cost of revenue32,687 25,906 
Gross profit69,093 51,589 
Operating expenses:
Sales and marketing57,262 46,044 
Research and development29,745 21,620 
General and administrative23,983 23,574 
Total operating expenses110,990 91,238 
Loss from operations(41,897)(39,649)
Other income, net3,459 30 
Loss before provision for income taxes(38,438)(39,619)
Provision for income taxes388 14 
Net loss(38,826)(39,633)
Net loss attributable to redeemable non-controlling interest(372)(364)
Net loss attributable to Braze, Inc.$(38,454)$(39,269)
Net loss per share attributable to Braze, Inc. common stockholders, basic and diluted$(0.40)$(0.42)
Weighted-average shares used to compute net loss per share attributable to Braze, Inc. common stockholders, basic and diluted96,353 93,250 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands)
Three Months Ended
April 30,
20232022
Net loss$(38,826)$(39,633)
Other comprehensive loss:
Change in foreign currency translation adjustments66 (562)
Unrealized gains (losses) on marketable securities1,447 (1,195)
Other comprehensive income (loss), net1,513 (1,757)
Comprehensive loss, net(37,313)(41,390)
Less: comprehensive loss, net, attributable to redeemable non-controlling interest(372)(364)
Comprehensive loss attributable to Braze, Inc.$(36,941)$(41,026)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
Redeemable Non-controlling InterestClass A and Class B Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total Stockholders' Equity
SharesAmount
Balance at January 31, 2023
$1,455 95,975 $10 $806,044 $(353,927)$(6,824)$445,303 
Issuance of common stock for options exercised— 676 — 2,211 — — 2,211 
Vesting of restricted stock units— 213 — — — — — 
Stock-based compensation— — — 24,576 — — 24,576 
Other comprehensive loss— — — — — 1,513 1,513 
Net loss attributable to redeemable non-controlling interests(372)— — — — — — 
Net loss attributable to Braze, Inc.— — — — (38,454)— (38,454)
Balance at April 30, 2023
$1,083 96,864 $10 $832,831 $(392,381)$(5,311)$435,149 

Redeemable Non-controlling InterestClass A and Class B Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total Stockholders' Equity
SharesAmount
Balance at January 31, 2022
$3,235 92,968 $9 $717,175 $(214,961)$(640)$501,583 
Issuance of common stock for options exercised— 667 — 2,630 — — 2,630 
Vesting of early exercised options— — — 54 — — 54 
Vesting of restricted stock units— 77 — — — — — 
Repurchase of unvested shares related to early exercised options— (1)— — — — — 
Stock-based compensation— — — 17,172 — — 17,172 
Other comprehensive loss— — — — — (1,757)(1,757)
Net loss attributable to redeemable non-controlling interests(364)— — — — — — 
Charitable donation of stock— 96 — 4,260 — — 4,260 
Net loss attributable to Braze, Inc.— — — — (39,269)— (39,269)
Balance at April 30, 2022
$2,871 93,807 $9 $741,291 $(254,230)$(2,397)$484,673 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
April 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (including amounts attributable to redeemable non-controlling interests)$(38,826)$(39,633)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation24,179 16,971 
Amortization of deferred contract costs6,660 5,407 
Depreciation and amortization1,526 965 
Provision for credit losses594 (143)
Value of common stock donated to charity 4,260 
Amortization of discount/premium on marketable securities471 13 
Non-cash foreign exchange loss 310 505 
Other20 4 
Changes in operating assets and liabilities:
Accounts receivable11,046 21,984 
Prepaid expenses and other current assets745 3,615 
Deferred contract costs(9,479)(8,205)
ROU assets and liabilities705 879 
Other assets(380)614 
Accounts payable405 28 
Accrued expenses and other current liabilities9,364 (2,530)
Deferred revenue15,228 13,177 
Other long-term liabilities(19)10 
Net cash provided by operating activities22,549 17,921 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(40)(1,960)
Capitalized internal-use software costs(852)(306)
Purchases of marketable securities(46,297)(421,537)
Maturities of marketable securities71,486 16,000 
Net cash provided by/(used in) investing activities24,297 (407,803)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options2,211 2,630 
Net cash provided by financing activities2,211 2,630 
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash(180)(1,075)
Net change in cash, cash equivalents, and restricted cash48,877 (388,327)
Cash, cash equivalents, and restricted cash, beginning of period72,623 482,973 
Cash, cash equivalents, and restricted cash, end of period$121,500 $94,646 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SUPPLEMENTAL CASH FLOWS DISCLOSURE
(in thousands)
Three Months Ended
April 30,
20232022
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for income tax payments (refunds), net$(465)$172 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock-based compensation capitalized to internal-use software$480 $232 
Net change in capitalized internal-use software development costs in accrued expenses$ $21 
Unrealized net loss on marketable investment securities$(1,447)$(1,195)
Net change to property and equipment (included in accounts payable / accrued liabilities)$66 $623 
Vesting of early exercised options$ $54 
Asset retirement obligation$6 $365 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BRAZE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Company Overview
Description of Business

Braze, Inc., together with its subsidiaries (collectively, the “Company”, “we”, “us”, “our” or “Braze”), is a cloud-based customer engagement platform that delivers customer-centric experiences across push notifications, email, in-product messaging, SMS and MMS messages, and more. Customers use the Braze platform to facilitate real-time experiences between brands and customers in a more authentic and human way.

We began operations in 2011 and are incorporated in the state of Delaware. Our headquarters are located in New York, New York. As of April 30, 2023, we also lease additional office space in Austin, Berlin, Chicago, Jakarta, London, Paris, San Francisco, Singapore, and Tokyo.
2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and variable interest entities (“VIE”) for which we are the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain reclassifications and immaterial changes have been made to prior-period financial statements to conform to the current-period presentation.
Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reported period. We evaluate estimates based on historical and anticipated results, trends, and various other assumptions. Significant items subject to such estimates and assumptions include, but are not limited to, the standalone selling price for separate performance obligations in our revenue arrangements, expected period of benefit for deferred contract costs, the valuation of common stock and stock-based compensation, the allocation of overhead costs between cost of revenue and operating expenses, the estimated useful lives of intangible and depreciable assets, the incremental borrowing rate, the valuation of deferred tax assets and liabilities and other tax estimates including our ability to utilize net operating losses.

Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments as facts and circumstances dictate. As future events and their effects, including the uncertainty surrounding rapidly changing market and economic conditions from global or domestic macroeconomic and socioeconomic events such as, among others, instability in the banking and financial services sector, international and domestic supply chain risks, inflationary pressure, interest rate increases, declines in consumer confidence, international conflicts and domestic and foreign political unrest, that impact us and our customers, cannot be determined with precision, actual results could differ from those estimates and many of our estimates and assumptions have required increased judgement and carry a higher degree of variability and volatility.
Significant Accounting Policies
Our significant accounting policies are detailed in “Note 2. Summary of Significant Accounting Policies" of the audited annual consolidated financial statements for the fiscal year ended January 31, 2023 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 31, 2023 (the “Annual Report”). There have been no material changes to our significant accounting policies with the exception of the below:
Concentration of Credit Risk

Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities, and accounts receivable. Restricted cash consists of letters of credit related to
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our leased properties. For cash, cash equivalents, restricted cash, and marketable securities, we are exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the consolidated balance sheets in excess of the Federal Deposit Insurance Corporation (“FDIC”) limits. Cash, cash equivalents, restricted cash, and marketable securities balances are maintained at financial institutions that management believes are of high-credit, quality financial institutions, where deposits, at times, exceed the FDIC limits.

Significant customers are those which represent 10% or more of our total revenue for the period, or accounts receivable at the balance sheets dates. For the three months ended April 30, 2023 and 2022, no customer accounted for 10% or more of our total revenue.

For accounts receivable, we are exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the consolidated balance sheets. As of April 30, 2023 and January 31, 2023, no customers accounted for 10% or more of our total accounts receivable balance.
3. Revenue from Contracts with Customers

Disaggregated Revenue Streams

The following disaggregation depicts the nature, amount, timing and uncertainty of cash flows related to the primary types of revenue from contracts with customers.

The following table presents total revenue by type (in thousands):

Three Months Ended
April 30,
20232022
Subscription$97,146 $72,836 
Professional services and other4,634 4,659 
Total$101,780 $77,495 

The following table presents total revenue by geography (in thousands):

Three Months Ended
April 30,
20232022
United States$58,503 $45,352 
International43,277 32,143 
Total$101,780 $77,495 

Revenue by geography is determined based on the location of our users. Other than the United States, no other individual country accounted for 10% or more of total revenue for any of the periods presented.

Unbilled Accounts Receivable

Unbilled accounts receivable included in trade accounts receivable, net, which generally arise from our contractual right to bill our customers in advance of services on the contract effective date, were $4.8 million and $1.0 million as of April 30, 2023 and January 31, 2023, respectively.

Contract Balances

Contract Assets

Contract assets as of April 30, 2023 and January 31, 2023 were $0.2 million and $0.8 million, respectively. The change in contract assets for all periods presented primarily reflects revenue recognized in excess of billings partially offset by contract assets earned during the period.

Deferred Revenue

The change in deferred revenue for all periods presented primarily reflects cash payments received during the period for which the performance obligation was not satisfied prior to the end of the period, partially offset by revenues recognized during
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the period. Revenue recognized during the three months ended April 30, 2023 from amounts included in deferred revenue at January 31, 2023, was $77.1 million. Revenue recognized during the three months ended April 30, 2022 from amounts included in deferred revenue at January 31, 2022, was $59.5 million.

Credit Losses

The following table presents a reconciliation of the allowance for credit losses on accounts receivable (in thousands):

Allowance for Credit Losses
Balance at January 31, 2023
$1,613 
Reserve:
Credit losses625 
Deferred revenue689 
Write-offs(1,063)
Recoveries17 
Balance at April 30, 2023
$1,881 

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, the timing of service delivery and contract terms. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes and other market factors.

The following table presents remaining performance obligations as of the dates indicated below (in millions):

TotalLess than 1 Year1-5 Years
April 30, 2022$390.9 $255.1 $135.8 
July 31, 2022410.5 274.2 136.3 
October 31, 2022408.7 283.3 125.4 
January 31, 2023455.7 312.6 143.1 
April 30, 2023477.5 325.4 152.1 
4. Variable Interest Entity and Redeemable Non-Controlling Interest

On September 14, 2020, we, along with Japan Cloud Computing Co., Ltd., and M30 LLC, (the “Investors”), entered into an agreement, whereby each Investor agreed to purchase shares of common stock of Braze KK (“Braze KK Shares”) for a total purchase price of $10.0 million in two tranches of $5.0 million per tranche in September 2020 and September 2021, to engage in the investment, organization, management and operation of Braze KK focused on the distribution of our products in Japan. The purpose of this arrangement was to further expand our business in the Japanese market.

In March 2022, we consented to the issuance of stock options to purchase Braze KK Shares by certain employees of Braze KK. These options will vest in full in March 2027 and, other than the options held by one officer of Braze KK, cannot be exercised by the holders thereof prior to the exercise of the call or put options described in more detail below. The Company considers the stock options to be a substantive class of equity, classified as a liability within other long-term liabilities on the consolidated balance sheets. As of April 30, 2023, the liability balance was $0.4 million. The issuance of stock options does not impact our majority stake in Braze KK, as none of the vesting criteria of the options were met as of the balance sheet date. The issuance of stock options did not result in a reconsideration event and therefore Braze KK still met the criteria of a VIE as Braze KK did not have sufficient equity at risk to finance their activities. As a result, we continue to operate Braze KK as a subsidiary, exposing us to business and foreign exchange risk. We consolidate Braze KK and present the results within our consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows.

The common stock held by the Investors is callable by us or puttable by the Investors upon certain contingent events. Should the call or put option be exercised, the redemption value would be determined based on a prescribed formula derived from the discrete revenues of Braze KK and the Company and may be settled, at our discretion, with our stock or cash. The non-controlling interest in Braze KK is classified in mezzanine equity as redeemable non-controlling interest as a result of the
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put right available to the Investors in the future, an event that is not solely in our control. The non-controlling interest is not accreted to redemption value because it is currently not probable that the non-controlling interest will become redeemable.

The following table summarizes the activity in the redeemable non-controlling interests for the periods indicated below (in thousands):

Balance as of January 31, 2023
$1,455
Net loss attributable to redeemable non-controlling interest(372)
Balance as of April 30, 2023
$1,083
5. Fair Value Measurements

The following table sets forth our financial instruments that were measured at fair value on a recurring basis at the periods indicated below, by level within the fair value hierarchy (in thousands):
April 30, 2023
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$59,008 $ $ $59,008 
59,008   59,008 
Marketable securities
U.S. government securities$293,749 $ $ $293,749 
Foreign bonds 2,978  2,978 
Corporate debt securities 89,142  89,142 
Total marketable securities293,749 92,120  385,869 
Total$352,757 $92,120 $ $444,877 
January 31, 2023
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$30,873 $ $ $30,873 
30,873   30,873 
Marketable securities
U.S. government securities$307,744 $ $ $307,744 
Foreign bonds 2,967  2,967 
Corporate debt securities 99,372  99,372 
Total marketable securities307,744 102,339  410,083 
Total$338,617 $102,339 $ $440,956 

Our money market funds are classified as Level 1 within the fair value hierarchy, because they are valued using quoted prices in active markets as of April 30, 2023 and January 31, 2023. Financial instruments classified as Level 2 within our fair value hierarchy are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. Prices of these securities are obtained through independent, third-party pricing services and include market quotations that may include both observable and unobservable inputs. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments. There were no transfers of financial instruments among Level 1, Level 2 and Level 3 during the periods presented.
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6. Marketable Securities

Marketable securities consist of the following for the periods presented (in thousands):
April 30, 2023
Cost or Amortized CostGross Unrealized GainsGross Unrealized LossesTotal Estimated Fair Value
U.S. government securities$296,729 $212 $(3,192)$293,749 
Foreign bonds3,021  (43)2,978 
Corporate debt securities90,250 15 (1,123)89,142 
Total$390,000 $227 $(4,358)$385,869 
January 31, 2023
Cost or Amortized CostGross Unrealized GainsGross Unrealized LossesTotal Estimated Fair Value
U.S. government securities$312,044 $31 $(4,331)$307,744 
Foreign bonds3,028  (61)2,967 
Corporate debt securities100,589 27 (1,244)99,372 
Total$415,661 $58 $(5,636)$410,083 

Accrued interest receivables related to our available-for-sale securities of $2.9 million as of April 30, 2023, and $2.0 million as of January 31, 2023, were included within prepaid expenses and other assets on our consolidated balance sheets.

The Company’s short-term investments consist of available-for-sale debt securities and term deposits. The term deposits are at cost, which approximates fair value. The weighted-average remaining maturity of the Company’s investment portfolio was less than one year as of the periods presented. No individual security incurred continuous unrealized losses for greater than 12 months.

The Company purchases investment grade marketable debt securities which are rated by nationally recognized statistical credit rating organizations in accordance with its investment policy. This policy is designed to minimize the Company's exposure to credit losses. As of April 30, 2023, the credit-quality of the Company’s marketable available-for-sale debt securities had remained stable. The unrealized losses recognized on marketable available-for-sale debt securities as of April 30, 2023 was primarily related to the continued market volatility associated with market expectations of an aggressive pace of interest rate increases by the Federal Reserve. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments and it is not expected that the investments would be settled at a price less than their amortized cost basis. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. The Company is not aware of any specific event or circumstance that would require the Company to change its assessment of credit losses for any marketable available-for-sale debt security as of April 30, 2023. These estimates may change, as new events occur and additional information is obtained, and will be recognized on the consolidated financial statements as soon as they become known. No credit losses were recognized as of April 30, 2023 for the Company’s marketable debt securities.

The contractual maturities of the investments classified as available-for-sale marketable securities are as follows (in thousands):
April 30, 2023
Amortized CostEstimated Fair Value
Due within 1 year$233,654 $230,753 
Due in 1 year through 5 years156,346 155,116 
Total$390,000 $385,869 
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January 31, 2023
Amortized CostEstimated Fair Value
Due within 1 year$247,214 $244,280 
Due in 1 year through 5 years168,447 165,803 
Total$415,661 $410,083 
Investment Income

Investment income consists of interest income and accretion income/amortization expense on our cash, cash equivalents, and marketable securities. Investment income is included within other income, net on the consolidated statements of operations. The components of investment income were as follows (in thousands):
Three Months Ended
April 30,
20232022
Interest income$2,928 $443 
Amortization of discount/premium, net471 13 
Investment income$3,399 $456 
7. Property and Equipment, Net

Property and equipment, net, consist of the following (in thousands):
April 30,
2023
January 31,
2023
Capitalized internal-use software$8,677 $7,344 
Computer equipment, office equipment, and software7,801 8,111 
Leasehold improvements9,604 9,410 
Furniture and fixtures4,187 4,085 
Total property and equipment30,269 28,950 
Less: accumulated depreciation and amortization(9,836)(8,611)
Total property and equipment, net$20,433 $20,339 

The total depreciation expense and amortization expense for property and equipment was $1.2 million and $1.0 million during the three months ended April 30, 2023 and 2022, respectively. During the three months ended April 30, 2023, the Company removed $0.3 million of fixed assets consisting of computer equipment, office equipment, and software, that was largely depreciated from property and equipment, gross and accumulated depreciation, which had minimal net impact on the Company’s consolidated financial results.

We capitalized internal-use software of $1.3 million and $0.5 million during the three months ended April 30, 2023 and 2022, respectively. Amortization for capitalized internal-use software costs recognized within cost of revenue, on the consolidated statements of operations, was $0.5 million and $0.5 million for the three months ended April 30, 2023 and 2022, respectively.

8. Prepaid Expenses and Other Current Assets
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Prepaid expenses and other current assets consist of the following (in thousands):
April 30,
2023
January 31,
2023
Prepaid software subscriptions$13,164 $12,574 
Prepaid advertising1,515 1,322 
Prepaid insurance2,688 2,795 
Investment interest receivable2,917 2,013 
Consumption tax receivable1,050 1,045 
Prepaid employee bonuses242 538 
Prepaid employee benefits755 811 
Other2,954 5,065 
Total prepaid expenses and other current assets$25,285 $26,163 
9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consists of the following (in thousands):
April 30,
2023
January 31,
2023
Accrued compensation costs$20,288 $12,644 
Accrued software subscriptions7,809 8,454 
Accrued commissions5,557 6,205 
Accrued professional service fees2,126 1,779 
Accrued advertising755 922 
Accrued tax liability5,471 4,188 
ESPP payable2,508 322 
Other2,504 2,901 
Total accrued expenses and other current liabilities$47,018 $37,415 
10. Employee Benefit Plans

We sponsor a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. Matching contributions under the plan were $2.4 million and $1.8 million for the three months ended April 30, 2023 and 2022, respectively.

11. Stockholder’s Equity

Class A and Class B Common Stock

We have two classes of common stock, Class A and Class B. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting, conversion and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes and may be converted at the option of the holder into one share of Class A common stock. In addition, all shares of Class B common stock will automatically convert into shares of Class A common stock in certain circumstances, including on the earlier of (i) the last trading day of the fiscal quarter during which the number of shares of Class B common stock then outstanding represents less than 10% of the aggregate number of shares of Class A common stock and Class B common stock then outstanding, or (ii) the last trading day of the fiscal quarter immediately following the fifth anniversary of our initial public offering. All shares of the Company’s capital stock outstanding immediately prior to our initial public offering, including all shares held by our executive officers, directors and their respective affiliates, and all shares issuable upon the conversion of our then outstanding convertible preferred stock, were reclassified into shares of Class B common stock immediately prior to the completion of the initial public offering.

Charitable Contributions

In connection with our Pledge 1% commitment, we donated 96,465 shares of our Class A common stock to a charitable donor-advised fund that resulted in the recognition of a $4.3 million expense within general and administrative in our consolidated statements of operations during the three months ended April 30, 2022. There were no stock donations in the three months ended April 30, 2023.
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12. Employee Stock Plans

We have historically issued equity awards under our Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) and our 2021 Equity Incentive Plan (the “2021 Plan”).

Amended and Restated 2011 Equity Incentive Plan

Our 2011 Plan provides for the award of stock options and restricted stock units (“RSUs”) to employees, officers, directors, advisors and other service providers of Braze. The terms of each award and the exercise price of awards under the 2011 Plan are determined by our board of directors. Following effectiveness of the 2021 Plan in connection with our initial public offering, no further awards were made under the 2011 Plan.

2021 Equity Incentive Plan

In November 2021, our board of directors and our stockholders approved the 2021 Plan, which became effective on November 16, 2021. No grants were made under the 2021 Plan prior to its effectiveness. No further grants will be made under the 2011 Plan. At effectiveness, we reserved 25,660,249 shares of our Class A common stock to be issued under the 2021 Plan. In addition, the number of shares of our Class A common stock reserved for issuance under the 2021 Plan will automatically increase on February 1 of each year for a period of ten years, beginning on February 1, 2022 and continuing through February 1, 2031, in an amount equal to (1) 5% of the total number of shares of our common stock (both Class A and Class B) outstanding on the preceding January 31, or (2) a lesser number of shares determined by the Board no later than the February 1 increase. On February 1, 2023, the number of shares of our Class A common stock reserved for issuance under our 2021 Plan increased by an additional 4,798,771 shares.
Restricted Stock Units

The following table summarized unvested and outstanding RSU award activity and related information:
SharesWeighted-Average Grant Date Fair Value
Balance as of January 31, 2023
4,625,518
Granted3,094,197$33.46 
Vested(212,766)$46.00 
Forfeited(173,544)$38.34 
Balance as of April 30, 2023
7,333,405

RSUs granted during the three months ended April 30, 2023 contained a service-based vesting condition of up to approximately a four year period. RSUs typically vest on a quarterly basis or have a one year cliff vesting period with quarterly vesting thereafter.

Stock-based Compensation Expense

The following table summarizes stock-based compensation expense, which was included in the consolidated statements of operations as follows (in thousands):

Three Months Ended,
April 30,
20232022
Cost of revenue$889 $920 
Sales and marketing7,848 5,667 
Research and development9,843 6,173 
General and administrative5,566 4,211 
Stock-based compensation, net of amounts capitalized$24,146 $16,971 
Capitalized stock-based compensation expense480 232 
Total stock-based compensation expense$24,626 $17,203 

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As of April 30, 2023, total compensation cost not yet recognized related to unvested equity awards and the weighted-average remaining period over which these costs are expected to be realized were as follows:

Stock OptionsRSUs
Unrecognized compensation costs (in thousands)$41,005$189,496
Weighted-average remaining recognition period (years)2.283.07

Employee Stock Purchase Plan

In November 2021, our board of directors and our stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective on November 16, 2021. Following completion of our initial public offering, the ESPP authorized the issuance of 1,825,000 shares of our Class A common stock under purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our Class A common stock reserved for issuance will automatically increase on February 1 of each year for a period of ten years, beginning on February 1, 2022 and continuing through February 1, 2031, by the lesser of (i) 1% of the total number of shares of our common stock (both Class A and Class B) outstanding on the preceding January 31; and (ii) 2,737,000 shares, except before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii) above. On February 1, 2023, the number of shares of our Class A common stock reserved for issuance under our ESPP increased by an additional 959,754 shares.

The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of the Company’s Class A common stock on specified dates during such offerings. Under the ESPP, our board of directors will be permitted to specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our Class A common stock will be purchased for employees participating in the offering. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period or (2) the fair market value of the Company’s Class A common stock on the last day of the offering period, as defined by the ESPP.

The Company recognized $0.8 million of stock-based compensation expense related to the ESPP in the three months ended April 30, 2023. There was no stock-based compensation expense related to the ESPP in three months ended April 30, 2022. As of April 30, 2023, $2.5 million has been withheld on behalf of our employees for a future purchase and is classified as accrued expenses and other current liabilities on the consolidated balance sheets. There were no purchases related to the ESPP in the three months ended April 30, 2023. As of April 30, 2023, 2,629,404 shares of Class A common stock remain available for issuance under the ESPP.
13. Commitments and Contingencies

Indirect Taxes

We are subject to indirect taxation in some, but not all, of the various U.S. states and foreign jurisdictions in which we conduct business. Therefore, we have an obligation to charge, collect and remit Value Added Tax (“VAT”) or Goods and Services Tax (“GST”) in connection with certain of our foreign sales transactions and sales and use tax in connection with eligible sales to subscribers in certain U.S. states. On June 21, 2018, the U.S. Supreme Court issued an opinion in South Dakota v. Wayfair. The State of South Dakota alleged that U.S. constitutional law should be revised to permit South Dakota to require remote sellers to collect and remit sales tax in South Dakota in accordance with South Dakota’s sales tax statute. Under the U.S. Supreme Court’s ruling, the longstanding Quill Corp v. North Dakota sales tax case was overruled, and states may now require remote sellers to collect sales tax under certain circumstances. We began collecting sales tax in relevant jurisdictions for the fiscal year ended January 31, 2019. As a result of this ruling and given the scope of our operations, taxing authorities continue to provide regulations that increase the complexity and risks to comply with such laws and could result in substantial liabilities, prospectively as well as retrospectively. Based on the information available, we continue to evaluate and assess the jurisdictions in which indirect tax nexus exists and believe that the indirect tax liabilities are adequate and reasonable. Due to the complexity and uncertainty around the application of these rules by taxing authorities, results may vary materially from expectations, and we have recognized liabilities for contingencies related to state sales and use tax, VAT, and GST deemed probable and estimable totaling $0.5 million and $0.5 million as of April 30, 2023 and January 31, 2023, respectively, which is included in accrued expenses and other current liabilities on the consolidated balance sheets. As of January 31, 2023, we have filed prior period returns in several jurisdictions in order to remediate this potential exposure, and the Company continues to evaluate the potential exposure on an ongoing basis.

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Legal Contingencies

From time to time, in the ordinary course of business, we are or may be involved in various legal or regulatory proceedings, claims or purported class actions related to, among other things, alleged infringement of third-party patents and other intellectual property rights, commercial, labor and employment, wage and hour and other claims. We have been, and may in the future be, put on notice or sued by third-parties for alleged infringement of their proprietary rights, including patent infringement. We accrue a liability when we believe that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. We believe we have recorded adequate provisions for any such matters and, as of April 30, 2023, we believe that no material loss will be incurred in excess of the amounts recognized in our financial statements.
14. Leases

The Company’s lease portfolio consists solely of office space with lease terms ranging from two to ten years. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments.

The following table presents information on our operating leases for three months ended April 30, 2023 and 2022 (in thousands):
Three Months Ended
April 30,
20232022
Operating lease cost$3,651$3,496 
Variable lease cost672585 
Short-term lease cost288552 
Total net lease cost$4,611$4,633

The future maturities of the Company’s operating lease liabilities by fiscal year were as follows (in thousands):

2024$9,079 
202512,358 
20268,420 
20277,444 
20286,011 
Thereafter19,137 
Total future undiscounted lease payments$62,449 
Less: imputed interest(10,009)
Less: tenant improvement allowance not yet received 
Total reported lease liability$52,440 

The Company's lease terms and discount rates are as follows:
April 30, 2023
Weighted-average remaining lease term (years)6.3
Weighted-average discount rate5.5 %

Other information for the Company's leases is as follows (in thousands):
Three Months Ended
April 30,
20232022
Cash paid for amounts included in the measurement of lease liabilities$2,933 $2,499 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities$2,767 $ 

New York City Headquarters Agreement

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In November 2022, the Company entered into a Sublease Agreement (the “Sublease”) pursuant to which the Company agreed to lease approximately 92,300 square feet of general office space in New York, New York. The term of the Sublease commences on October 1, 2023 and will terminate on January 30, 2034. Under the Sublease, the Company's fixed rent obligation is $0.6 million per month, provided, that the Company shall be entitled to a rent abatement in the aggregate amount of $6.6 million to be applied in equal monthly installments until the abatement amount is fully exhausted. The Sublease contains customary provisions for real property subleases of this type, including specified termination rights, and is subject to and contingent upon receipt of a standard third-party consent.
15. Income Taxes

The Company computes its provision for interim periods by applying an estimated annual effective tax rate to anticipated annual pretax income or loss as directed by ASC 740. The estimated annual effective tax rate is applied to the Company’s year to date income or loss, and is adjusted for discrete items recorded in the period. The Company recorded an income tax expense of $0.4 million and $0.0 million for the three months ended April 30, 2023 and 2022, respectively. The effective tax rate for the three months ended April 30, 2023 and 2022 was (1.0)% and 0.0%, respectively.

The provision for income taxes recorded for the three months ended April 30, 2023 consists of income taxes in state jurisdictions and foreign jurisdictions in which the Company conducts business. The primary difference between the effective tax rate and the statutory rate is the change in the valuation allowance recorded. The Company continues to maintain a full valuation allowance against its net deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized. When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made.
16. Net Loss per Share
We compute net loss per share of Class A common stock and Class B common stock under the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock share in the Company’s net loss. The following table sets forth the computation of basic and diluted net loss per share attributable to Braze, Inc. common shareholders during the periods presented (in thousands, except per share amounts):
Three Months Ended
April 30,
20232022
Numerator:
Net loss attributable to Braze, Inc.$(38,454)$(39,269)
Denominator:
Weighted-average shares of Braze, Inc. common stock outstanding96,360 93,295 
Less: weighted-average unvested shares of Braze, Inc. subject to repurchase(7)(45)
Weighted-average shares used to calculate net loss per share attributable to Braze, Inc. common stockholders, basic and diluted96,353 93,250 
Net loss per share attributable to Braze, Inc. common stockholders, basic and diluted$(0.40)$(0.42)
The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per share attributable to Braze, Inc. common shareholders for the periods presented, because their inclusion would be anti-dilutive (in thousands):
Three Months Ended
April 30,
20232022
Options to purchase common stock7,440 10,314 
Restricted stock units7,333 2,805 
ESPP shares estimated to be purchased138  
Total14,911 13,119 

17. Related Party Transactions

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In May 2021, the Chief Financial Officer of Datadog, Inc., one of our vendors, joined our board of directors. We have purchased services from Datadog, Inc. in the aggregate amount of approximately $0.8 million and $0.6 million during the three months ended April 30, 2023 and 2022, respectively.


18. Subsequent Events

In May 2023, the Company implemented a workforce reduction designed to rebalance talent to better meet customer needs and achieve business priorities. The Company estimates severance and other termination costs of approximately $1.0 million related to these measures. The foregoing estimates of the charges the Company expects to incur are subject to assumptions and the execution of employee separation agreements. Actual charges may differ from such estimates.

In May 2023, in connection with our Pledge 1% commitment, we donated 32,155 shares of our Class A common stock to a charitable donor-advised fund that resulted in the recognition of approximately $1.0 million of operating expense.

In May 2023, the Company granted RSUs for a total of 81,175 shares of Class A common stock to employees pursuant to the 2021 Plan. The RSUs vest over a service period of approximately four years. The grant date fair value of these awards was $2.4 million.

In May 2023, the Company entered into a lease agreement for a new office space in Austin, Texas. The lease commencement date, which is when the premises will become available to the Company for use, is expected to be in the second quarter of fiscal year 2024. The Company is obligated to pay approximately $0.1 million per month beginning in the second quarter of fiscal 2024 through the fourth quarter of fiscal 2025, the expiration date.

In June 2023, the Company closed the acquisition of North Star Y, Pty Ltd (“North Star”) and acquired all of North Star’s outstanding stock for aggregate closing consideration of up to $28.0 million in cash and stock, resulting in the issuance of 190,283 shares of the Company’s Class A common stock, and subject to ordinary course working capital adjustments. The sellers in the transaction may also be entitled to certain earn-out payments based on specified commercial targets over two years, in each case subject to customary payment caps.
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our audited annual consolidated financial statements and related notes for the fiscal year ended January 31, 2023 that are included in our Annual Report on Form 10-K, or the Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC, on March 31, 2023. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those set forth under the section entitled “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. See “Special Note Regarding Forward Looking Statements” in this Quarterly Report on Form 10-Q.
Overview
Braze is a leading comprehensive customer engagement platform that powers customer-centric interactions between consumers and brands. Our platform empowers brands to listen to their customers better, understand them more deeply, and act on that understanding in a way that is human and personal. Using our platform, brands ingest and process customer data in real time, orchestrate and optimize contextually relevant, marketing campaigns across multiple channels. Our platform is designed so that interactions between brands and consumers have the same relevance and cross-channel continuity as human interactions.

Our customers include many established global enterprises and leading technology innovators, and span a wide variety of sizes and industries, including retail, eCommerce, media, entertainment and on-demand services.

We primarily generate revenue from the sale of subscriptions to customers for the use of our platform. Our subscription fees are principally based on an upfront commitment by our customers for a specific number of monthly active users, messaging volumes, platform access and/or support and certain add-on products. Additionally, we provide professional services, which better enable customers to successfully onboard and use our platform, including certain premium professional services such as email deliverability support and dedicated technical support staff.

We employ a land-and-expand business model centered around offering products that are easy to adopt and have a rapid time to value. We expand our reach within existing customers when our customers add new channels, purchase additional subscription products such as Braze Currents, implement new engagement strategies, or onboard new business units and geographies. We also grow as our customers grow because our pricing is based in large part on the number of consumers that our customers reach and the volume of messages our customers send. Accordingly, as our customers increase the use of our platform and increase the number of end users reached via our platform, the value of our contracts with such customers also increases.

We have grown significantly in recent periods. We generated revenue of $101.8 million in the three months ended April 30, 2023, representing year-over-year growth of 31.3% from the three months ended April 30, 2022. We had net losses of $38.8 million and $39.6 million in the three months ended April 30, 2023 and 2022, respectively. We had net cash provided by operating activities of $22.5 million in the three months ended April 30, 2023 and net cash provided by operating activities of $17.9 million in the three months ended April 30, 2022, respectively. Our Non-GAAP free cash flow was $21.7 million and $15.7 million in the three months ended April 30, 2023 and 2022, respectively. See the section titled “— Non-GAAP Free Cash Flow” for additional information about how we calculate free cash flow, a non-GAAP financial metric, and a reconciliation to net cash provided by operating activities, the most directly comparable measure calculated in accordance with accounting principles generally accepted in the United States, or GAAP.
Factors Affecting Our Performance

Acquiring New Customers

We believe there is substantial opportunity to continue to grow our customer base. We intend to continue to expand our customer base in verticals where we already have a strong presence, such as retail, eCommerce, media, entertainment and on-demand services, and to increase our presence in verticals where we are not yet strongly represented. Through our sales and marketing efforts, we plan to capitalize on the ongoing digital transformation in regulated industries like healthcare and financial services to further propel adoption of our technology. As of April 30, 2023, we had 1,866 customers across a broad range of sizes and industries. Our ability to attract new customers will depend on a number of factors, including the quality and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts.

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We define a customer as the separate and distinct, ultimate parent-level entity that has an active subscription with us to use our products. A single organization could have multiple distinct contracting divisions or subsidiaries, all of which together would be considered a single customer.

Expanding Within Our Existing Customer Base

We believe we can achieve significant growth by expanding sales within our existing customer base. We expand the use of our platform by existing customers by, among others, adding new channels and increasing the messaging volume we sell to our customers as their businesses and needs continue to grow. We intend to continue to invest in developing and enhancing our products and functionality. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our solutions, the ability of our customers to attract new end users, competition, pricing and overall changes in our customers’ spending levels.

Historically, we have experienced significant expansion within a customer’s business once our platform is deployed, with customers typically increasing the number of monthly active users, channels and use cases as well as purchasing additional products. A monthly active user is an end user of a customer who has engaged with the customer’s applications and websites in the previous calendar month. We include each distinguishable end user in our calculation of monthly active users, even though some users may access our customers’ applications and websites using more than one device, and multiple users may gain access using the same device. As of April 30, 2023, we had 5.1 billion monthly active users, up from 4.8 billion monthly active users as of January 31, 2023.

Braze supports interactions across a broad range of both in-product and out-of-product messaging channels. The flexibility of our platform also allows us to add new channels quickly and efficiently as they become relevant to our customers. The breadth of channels we offer, and our ability to efficiently expand our offering of channels, allows us to expand our reach within existing customers as they purchase additional channels from us.

In addition to monthly active users, we have a history of increasing annual recurring revenue, or ARR, from our customers. We define ARR as the annualized value of customer subscription contracts, including certain premium professional services that are subject to contractual subscription terms, as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms (including contracts for which we are negotiating a renewal). Our calculation of ARR is not adjusted for the impact of any known or projected future events (such as customer cancellations, expansion or contraction of existing customers relationships or price increases or decreases) that may cause any such contract not to be renewed on its existing terms. Our ARR may decline or fluctuate as a result of a number of factors, including customers’ satisfaction or dissatisfaction with our products and professional services, pricing, competitive offerings, economic conditions or overall changes in our customers’ spending levels. ARR should be viewed independently of revenue and does not represent our GAAP revenue on an annualized basis or a forecast of revenue, as it is an operating metric that can be impacted by contract start and end dates and renewal rates.

For clarity, we use annualized invoiced amounts per customer subscription contract, including certain premium professional services that are subject to contractual subscription terms, as compared to revenue calculated in accordance with GAAP, to calculate our ARR. Our invoiced amounts are not matched to the performance obligations associated with the underlying subscription contract and premium professional service obligations as they are with respect to our GAAP revenue. This can result in timing differences between our GAAP revenue and ARR calculations. For our revenue calculated in accordance with GAAP, we recognize revenue related to contracts with customers in an amount that reflects the consideration to which we expect to be entitled in exchange for subscription and professional services. See the section titled “— Critical Accounting Policies and Estimates” for additional information regarding how we recognize revenue on a GAAP basis. Investors should not place undue reliance on ARR as an indicator of our future or expected results. Moreover, ARR may differ from similarly titled metrics presented by other companies and may not be comparable to such other metrics.

A further indication of the propensity of our customer relationships to expand over time is our dollar-based net retention rate. We calculate our dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. We then calculate the weighted average point-in-time dollar-based net retention rates as of the last day of each month in the current trailing 12-month period to arrive at the dollar-based net retention rate. Our dollar-based net retention rate for the trailing 12 months ended April 30, 2023 and April 30, 2022 was 122% and 127%, respectively, for all our customers, and 124% and 133%, respectively, for our customers with ARR of $500,000 or more. In addition, 164 and 129 of our customers had ARR of $500,000 or more as of April 30, 2023 and April 30, 2022, respectively.

Expanding Geographically
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We believe there is a significant opportunity to continue to expand our presence in international markets we have already penetrated and by entering markets we have not yet penetrated. For the three months ended April 30, 2023 and 2022, approximately 43% and 41% of our revenue was generated outside of the United States, respectively. We expect to increase market penetration in regions including Europe and Asia-Pacific and to further capitalize on the greenfield opportunity in regions such as Latin America. Although these investments in geographic regions may negatively affect our operating results in the near term, we believe that they will contribute to our long-term growth.

Sustaining Innovation and Technology Leadership

Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We are focused on investing in research and development to continue to enhance our platform. For example, we continue to develop our artificial intelligence capabilities, to enable brands to better analyze and act on customer data, and expand our channel offerings. 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. We believe our continued innovation will provide new avenues for growth through which we will continue to deliver differentiated outcomes for our customers. We intend to continue to invest in building additional products that expand our capabilities and facilitate the extension of our platform to new channels and use cases.

Macroeconomic Conditions on Our Business

Unfavorable conditions in the economy, both in the United States and abroad, may negatively affect the growth of our business and our results of operations. General macroeconomic and socioeconomic conditions such as, among others, instability in the banking and financial services sector, international and domestic supply chain risks, inflationary pressure, interest rate increases, declines in consumer confidence, international conflicts and domestic and foreign political unrest have recently led to increased economic uncertainty. We cannot predict if these trends will continue, and, accordingly, we are not able to estimate the ongoing effects on our results of operations, financial condition or liquidity as a result of these macroeconomic factors. For additional details, see the section titled “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q.

Components of Results of Operations

Revenue

Revenue is derived from two primary sources: (1) subscription services and (2) professional services and other.

Subscription services primarily consist of access to our customer engagement platform and related customer support. Our customers enter into a subscription for committed contractual entitlements. To the extent that our customers’ usage exceeds the committed contractual entitlements under their subscription plans, they are charged for excess usage, or they may exercise an option to purchase an incremental volume tier of committed contractual entitlements. Revenue associated with platform subscriptions is recognized ratably over the contract term, which is consistent with the period over which services are provided to the customer. Fees associated with excess usage and incremental volume are also treated as subscription revenue. To date, fees associated with excess usage have not been material.

Professional services and other revenue consists of fees for distinct services rendered in training and assisting our customers to configure our platform for their use at the onset of their initial contract or when a new product is purchased. Such revenue is generally recognized over a period of up to six months from providing access to the platform. We also provide additional platform and feature enhancement and optimization services which are generally recognized ratably over the contract term.

Deferred revenue consists of customer billings in advance of revenue being recognized. We generally invoice our customers for subscription services arrangements annually in advance and for professional services upfront.

Cost of Revenue

Cost of revenue consists of direct costs related to providing platform access to our customers and to performing onboarding and professional services including consulting services. These costs primarily include payments to third-party cloud infrastructure providers for hosting software solutions, costs associated with application service providers utilized to deliver the platform, personnel-related costs, including salaries, cash-based performance compensation, benefits and stock-based compensation, and overhead cost allocations, including rent, utilities, depreciation, information technology costs, amortization of internal use software and certain administrative personnel costs.

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We intend to continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the capabilities of our platform. The level, timing and relative investment in our infrastructure could affect our cost of revenue in the future. We expect our cost of revenue to increase for the foreseeable future as we continue to grow our business.

Gross Profit and Gross Margin

Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as our revenue and cost of revenue fluctuates, including as a result of the timing and amount of resources we dedicate to improving our platform and expanding our products.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development and general and administrative expenses. Personnel costs, including salaries, cash-based performance compensation, benefits and stock-based compensation, are the most significant component of operating expenses. Operating expenses also include allocated overhead costs, which include rent, utilities, depreciation, information technology costs and certain administrative personnel costs. As we continue to expand our operations, we expect an increase in personnel headcount and expansion of our global footprint.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel costs for our sales and marketing organization, sales commissions, costs related to brand awareness, sponsorships, customer marketing events and advertising, agency costs, travel-related expenses and allocated overhead costs.

We intend to continue to invest in sales and marketing to help drive the growth of our business. We expect our sales and marketing expenses will increase in absolute dollars as we continue to invest in sales and marketing activities to acquire new customers and increase sales to existing customers.

Research and Development

Research and development expenses consist primarily of personnel costs for our engineering, service, design and information technology teams. Additionally, research and development expenses include allocated overhead costs and contractor fees. Research and development costs are expensed as incurred. Capitalized internal-use software development costs are excluded from research and development expenses as they are capitalized as a component of property and equipment, net and amortized to cost of revenue over the software’s expected useful life, which is generally three years.

We expect to continue our investment in research and development to enhance the user experience of our current customers and attract new customers. We expect research and development expenses to increase in absolute dollars as we continue to invest in enhancing our platform.

General and Administrative

General and administrative expenses consist primarily of personnel costs for finance, legal, human resources and other administrative functions, as well as non-personnel costs such as legal, accounting and other professional service fees, software costs, certain tax, license and insurance-related expenses and allocated overhead costs. Additionally, from time to time general and administrative expenses may include expenses associated with our donation of shares of Class A common stock to a charitable donor-advised fund in connection with our Pledge 1% commitment.

We expect that general and administrative expenses will increase in absolute dollars and vary from period to period as a percentage of revenue for the foreseeable future but decrease as a percentage of revenue over the long term, as we focus on processes, systems, and controls to enable our internal support functions to scale with the growth of our business. We expect to incur additional expenses as a result of operating as a public company, including expenses to comply with the rules and regulations applicable to companies listed on The Nasdaq Stock Market LLC, expenses related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and higher expenses for directors’ and officers’ insurance, investor relations and professional services.

Other Income (Expense), Net

Other income (expense), net, primarily consists of net exchange gains or losses on foreign currency transactions and investment income consists primarily of income earned on our investments, cash and cash equivalents, and restricted cash.

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Provision for Income Taxes

Provision for income taxes consists of state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We maintain a full valuation allowance in jurisdictions where we had net deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
Results of Operations
The following table sets forth our unaudited condensed consolidated statements of operations data for each of the periods indicated:
Three Months Ended
April 30,
20232022
(in thousands)
Revenue$101,780 $77,495 
Cost of revenue (1)
32,687 25,906 
Gross profit69,093 51,589 
Operating expenses:
Sales and marketing (1)
57,262 46,044 
Research and development (1)
29,745 21,620 
General and administrative (1)
23,983 23,574 
Total operating expenses110,990 91,238 
Loss from operations(41,897)(39,649)
Other income, net3,459 30 
Loss before provision for income taxes(38,438)(39,619)
Provision for income taxes388 14 
Net loss$(38,826)$(39,633)
(1) Includes stock-based compensation expense as follows:
Three Months Ended
April 30,
20232022
(in thousands)
Cost of revenue$