What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-31 · 366 added, 334 removed, 772 unchanged (48% of the section changed)

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Consolidated Statements of Convertible Preferred Stock, Redeemable Non-Controlling Interest and Stockholders’ Equity (Deficit) for the years ended January 31, 202 3 , 202 2 , and 202 1

Consolidated Statements of Cash Flows for the years ended Jan u a ry 31, 202 2 , 20 21 , and 20 20

Consolidated Statements of Cash Flows for the years ended January 31, 202 3 , 202 2 , and 20 21

Notes to Consolidated Financial Statements

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 30, 2023 expressed an adverse opinion thereon.

Adoption of ASU No.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2023 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases and associated amendments (Topic 842) using the modified retrospective method.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Timing and measurement of Revenue Recognition

Description of the Matter As of January 31, 2023, the Company recorded revenue and unearned revenue of $355.4 million and $166.1 million, respectively.

As discussed in Note 2 to the consolidated financial statements, the Company derives revenue primarily from subscriptions to their platform, including associated support, and professional services.

The Company’s revenue contracts include contractual terms and conditions that can impact the amount allocated to each of its performance obligations and the timing of revenue recognition.

Auditing the timing and measurement of the Company's revenue recognition was especially challenging due to the assessment of any potential unique terms and contract modifications.

This involved assessing the contractual terms and conditions of both new and modified contracts to determine the contract period and identifying all performance obligations.

In addition, as described in Management’s Report on Internal Control Over Financial Reporting, the Company identified a material weakness in their internal control over financial reporting associated with the revenue process including the ITGC’s of the related systems, which required significant changes to the extent of effort in the performance of our procedures.

How We Addressed the Matter in Our Audit We performed audit procedures that included, among others, reading a sample of revenue contracts, including modifications, to evaluate the contractual terms and conditions.

Our procedures included assessing the performance obligations and the related allocation of transaction price.

In addition, for the selected new contracts and modifications we tested the timing of revenue recognized and unearned revenue recorded as of year-end.

In response to the material weakness, we performed incremental audit procedures, for instance we increased the extent of testing on reports derived from the Company's systems and applications.

We tested the revenue recognized and unearned revenue as of year-end through analytical procedures, including revenue recognized on a disaggregated basis.

Finally, we assessed the appropriateness of the related disclosures in the consolidated financial statements.

/s/ Ernst & Young LLP

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March 30, 2023

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Braze, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Braze Inc.’s internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria).

In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Braze Inc.

(the Company) has not maintained effective internal control over financial reporting as of January 31, 2023, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

Management has identified a material weakness related to the Company’s revenue recognition processes.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2023 consolidated financial statements of the Company as of January 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, convertible preferred stock, redeemable non-controlling interest and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended January 31, 2023, and the related notes.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated March 30, 2023, which expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

March 30, 2023

CONSOLIDATED BALANCE SHEETS

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Cash and cash equivalents $ 68,587 $ 478,937

Restricted cash, current — 472

Accounts receivable, net of allowance for doubtful accounts of $ 743 and $ 934 at January 31, 2022 and January 31, 2021, respectively

Accounts receivable, net of allowance of $ 1,613 and $ 743 at January 31, 2023 and January 31, 2022, respectively

78,338 64,504

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Property and equipment, net 20,339 7,393

Operating lease right-of-use assets 46,261 —

Deferred contract costs 48,451 41,689

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TOTAL ASSETS $ 705,406 $ 666,262

LIABILITIES, CONVERTIBLE PREFERRED STOCK, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

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Deferred revenue 166,092 126,260

Operating lease liabilities, current 10,695 —

Total current liabilities 217,303 159,966

Deferred tax liabilities — 80

Operating lease liabilities, noncurrent 40,590 —

Other long-term liabilities 755 1,478

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COMMITMENTS AND CONTINGENCIES (Note 13)

Convertible preferred stock, $ 0.0001 par value;

no shares and 65,318,250 shares authorized as of January 31, 2022 and January 31, 2021, respectively;

no shares and 62,830,697 shares issued and outstanding, January 31, 2022 and January 31, 2021, respectively

Redeemable non-controlling interest (Note 4) 1,455 3,235

STOCKHOLDERS’ DEFICIT

Preferred stock, $ 0.0001 par value;

10,000,000 authorized as of January 31, 2022;

no shares of preferred stock issued and outstanding as of January 31, 2022;

no preferred stock authorized, issued, or outstanding as of January 31, 2021

Common stock, $ 0.0001 par value;

no shares and 98,500,000 shares authorized as of January 31, 2022 and January 31, 2021, respectively;

no shares and 19,498,295 shares issued and outstanding as of January 31, 2022 and January 31, 2021, respectively

STOCKHOLDERS’ EQUITY

Class A common stock, $ 0.0001 par value;

2,000,000,000 and no shares authorized as of January 31, 2022 and January 31, 2021, respectively;

18,549,183 and no shares issued and outstanding as of January 31, 2022 and January 31, 2021, respectively

2,000,000,000 and 2,000,000,000 shares authorized as of January 31, 2023 and January 31, 2022, respectively;

61,585,973 and 18,549,183 shares issued and outstanding as of January 31, 2023 and January 31, 2022, respectively

Class B common stock, $ 0.0001 par value;

110,000,000 and no shares authorized as of January 31, 2022 and January 31, 2021, respectively;

74,418,847 and no shares issued and outstanding as of January 31, 2022 and January 31, 2021, respectively

110,000,000 and 110,000,000 shares authorized as of January 31, 2023 and January 31, 2022, respectively;

34,389,453 and 74,418,847 shares issued and outstanding as of January 31, 2023 and January 31, 2022, respectively

Additional paid-in capital 806,044 717,175

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Accumulated deficit ( 353,927 ) ( 214,961 )

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 501,583 ( 108,507 )

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 666,262 $ 171,394

TOTAL STOCKHOLDERS’ EQUITY 445,303 501,583

TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY $ 705,406 $ 666,262

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

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Loss from operations ( 148,140 ) ( 78,211 ) ( 32,152 )

Other income (expense):

Investment income 137 840 2,127

Other (expense) income, net ( 258 ) ( 120 ) 48

Other income (expense), net 7,977 ( 121 ) 720

Loss before provision for income taxes ( 140,163 ) ( 78,332 ) ( 31,432 )

(Benefit from) provision for income taxes ( 165 ) 537 452

Provision for (benefit from) income taxes 583 ( 165 ) 537

Net loss ( 140,746 ) ( 78,167 ) ( 31,969 )

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Change in foreign currency translation adjustments ( 633 ) ( 534 ) ( 26 )

Unrealized gains (losses) on marketable securities ( 64 ) ( 50 ) 87

Other comprehensive gain (loss), net ( 598 ) ( 76 ) 2

Unrealized losses on marketable securities ( 5,551 ) ( 64 ) ( 50 )

Other comprehensive loss, net ( 6,184 ) ( 598 ) ( 76 )

Comprehensive loss, net ( 146,930 ) ( 78,765 ) ( 32,045 )

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62,831 $ 174,229 $ — — $ — 17,180 $ — $ 19,580 $ ( 106,490 ) $ 34 $ ( 86,876 )

Cumulative effect of adoption of Topic 606 — — — — — — — — 10,003 — 10,003

Issuance of common stock for options exercised — — — — — 2,334 — 2,482 — — 2,482

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Repurchase of shares related to early exercised options — — — — — ( 5 ) — ( 10 ) — — ( 10 )

Repurchase of common shares — — — — — ( 11 ) — ( 204 ) — — ( 204 )

Stock-based compensation — — — — — — — 7,666 — — 7,666

Other comprehensive income — — — — — — — — — 2 2

Investment in redeemable non-controlling interests — — 2,450 — — — — — — — —

Other comprehensive loss — — — — — — — — — ( 76 ) ( 76 )

Net loss attributable to redeemable non-controlling interests — — ( 217 ) — — — — — — — —

Net loss attributable to Braze, Inc.

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Issuance of common stock for options exercised — — — 2,856 2 — — 8,164 — — 8,166

Issuance of common stock for warrants exercised — — — 216 — — — — — — —

Vesting of early exercised options — — — — — — — 524 — — 524

Repurchase of shares related to early exercised options — — — — — ( 5 ) — ( 10 ) — — ( 10 )

Repurchase of common shares — — ( 11 ) ( 204 ) ( 204 )

Vesting of restricted stock units — — — 70 — — — — — — —

Repurchase of unvested shares related to early exercised options — — — ( 3 ) — — — — — — —

Stock-based compensation — — — — — — — 47,567 — — 47,567

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Net loss attributable to redeemable non-controlling interests — — ( 1,448 ) — — — — — — — —

Initial public offering, net of issuance costs — — — 7,500 1 — — 456,920 — — 456,921

Reclassification of common stock to class A and class B common stock — — — 19,498 — ( 19,498 ) — — — — —

Conversion of convertible preferred stock to common stock ( 62,831 ) ( 174,229 ) — 62,831 6 — — 174,223 — — 174,229

Net loss attributable to Braze, Inc.

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

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

(in thousands, except share amounts)

Convertible Preferred Stock Redeemable Non-controlling Interest Class A and Class B Common Stock Common Stock Additional

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY (DEFICIT) (cont.)

(in thousands)

Redeemable Non-controlling Interest Class A and Class B Common Stock Additional

Capital Accumulated

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Comprehensive

Income (Loss) Total Stockholders' Equity (Deficit)

Shares Amount Shares Amount Shares Amount

Loss Total Stockholders' Equity

Shares Amount

Balance at January 31, 2022

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Issuance of common stock for options exercised — 2,156 1 8,455 — — 8,456

Issuance of common stock for warrants exercised 216

Issuance of common stock under employee stock purchase plan — 125 — 2,876 — — 2,876

Vesting of early exercised options — — — 145 — — 145

Vesting of restricted stock units — 631 — — — — —

Repurchase of unvested shares related to early exercised options — — — ( 3 ) — — — — — — —

Repurchase of shares related to early exercised options — ( 1 ) — — — — —

Stock-based compensation — — — 73,133 — — 73,133

Investment in redeemable non-controlling interests — — 2,450 — — — — — — — —

Other comprehensive loss — — — — — ( 6,184 ) ( 6,184 )

Net loss attributable to redeemable non-controlling interests ( 1,780 ) — — — — — —

Initial public offering, net of issuance costs — — — 7,500 1 — — 456,920 — — 456,921

Reclassification of common stock to class A and class B common stock — — — 19,498 ( 19,498 ) — — — — —

Conversion of convertible preferred stock to common stock ( 62,831 ) ( 174,229 ) — 62,831 6 — 174,223 — — 174,229

Charitable donation of stock — 96 — 4,260 — — 4,260

Net loss attributable to Braze, Inc.

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Depreciation and amortization 4,618 2,773 1,589

Provision for bad debt 88 853 580

Provision for credit losses 807 88 853

Value of common stock donated to charity 4,260 — —

Amortization of discount/premium on marketable securities 1,336 369 345

Non-cash foreign exchange loss (gain) 1,612 387 222

Deferred income taxes ( 80 ) 60 57

Other 495 ( 80 ) 60

Changes in operating assets and liabilities:

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Deferred contract costs ( 30,469 ) ( 31,967 ) ( 19,969 )

ROU assets and liabilities 3,355 — —

Other assets 1,711 ( 4,723 ) 643

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Maturities of marketable securities 256,407 59,309 86,242

Net cash provided by (used in) investing activities 18,040 22,472 ( 87,234 )

Net cash (used in)/provided by investing activities ( 398,519 ) 18,040 22,472

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts 462,260 — —

Proceeds from issuance of common stock upon initial public offering, net of offering costs — 462,260 —

Investment from redeemable non-controlling interest — 2,450 2,450

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Unrealized net loss on marketable investment securities $ ( 5,551 ) $ ( 64 ) $ ( 50 )

Net change to property and equipment (included in accounts payable) $ ( 23 ) $ ( 15 ) $ 57

Net change to property and equipment (included in accounts payable / accrued liabilities) $ 75 $ ( 23 ) $ ( 15 )

Vesting of early exercised options $ 145 $ 524 $ 263

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Deferred offering costs reclassed to Stockholders’ Equity (Deficit) $ — $ 183 $ —

Asset retirement obligation $ 374 $ — $ —

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

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Our headquarters are located in New York, New York.

We also lease additional office space in Austin, Berlin, Chicago, London, San Francisco, Singapore, and Tokyo.

Initial Public Offering

On November 19, 2021, the Company completed an initial public offering (“IPO”) of its Class A common stock.

As part of the IPO, the Company issued and sold 7,500,000 shares of its Class A common stock at a public offering price of $ 65.00 per share, including 800,000 shares pursuant to the underwriters’ overallotment option to purchase additional shares of its Class A common stock.

The Company received net proceeds of approximately $ 456.8 million from the IPO, after deducting the underwriting discounts, commissions, and related offering expenses.

In addition, the selling stockholders, named in the Company’s final prospectus that forms a part of the Registration Statement on Form S-1 (File No.

333-260428) for the IPO filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(4) on November 18, 2021 (the “Final Prospectus”), sold an additional 1,300,000 shares of Class A common stock, for which the Company did not receive any proceeds.

In connection with the IPO, all then outstanding shares of convertible preferred stock automatically converted into an aggregate of 62,830,697 shares of Class B common stock.

We also lease additional office space in Austin, Berlin, Chicago, Jakarta, London, Paris, San Francisco, Singapore, and Tokyo.

Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and, for so long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies.

If we cease to be an emerging growth company, we will no longer be able to take advantage of these exemptions or the extended transition period for complying with new or revised accounting standards.

Impact of COVID-19

Beginning in January 2020, the outbreak of the novel Coronavirus Disease 2019 (“COVID-19”) pandemic caused general business disruption worldwide.

COVID-19 is considered to be highly contagious and poses a serious public health threat.

Although certain restrictions are being lifted, state mandated lockdowns have adversely impacted many companies in the past, as many public health regulations transformed or even halted daily operations, and similar adverse effects may re-occur if any state mandated lockdowns are reinstated in the future.

We have not experienced a materially negative impact from COVID-19 and continue to monitor the global situation and the potential impact on our financial condition, liquidity, operations, suppliers, industry, and workforce.

Given the continued evolution of the COVID-19 outbreak, including the emergence of new variant strains of COVID-19, and the global responses to curb its spread, we are not able to estimate the ongoing effects on our results of operations, financial condition, or liquidity.

Based on the market value of the Company’s common equity held by non-affiliates as of July 29, 2022 (the last business day of the Company’s most recently completed second fiscal quarter), the Company ceased to qualify as an emerging growth company (as described in Section 107(b) of the Jumpstart Our Business Startups Act of 2012) as of the end of the fiscal year ended January 31, 2023.

As a result, the Company will no longer be able to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

In addition, the Company will no longer be able to use the extended transition period for complying with new or revised accounting standards available to emerging growth companies and will be required to adopt new or revised accounting standards as of the effective dates for public companies.

Summary of Significant Accounting Policies

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The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

The accompanying 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.

The accompanying 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.

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

Deferred Offering Costs

Deferred offering costs consisting primarily of accounting, legal, and other fees related to the IPO, were capitalized and recorded in other assets on the consolidated balance sheets.

Upon completion of the IPO, $ 5.3 million of deferred offering costs were reclassified to stockholders’ equity and recorded against the proceeds from the IPO.

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 the outbreak of COVID-19 or other significant macroeconomic events, 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.

Basic and Diluted Net Loss attributable to Braze, Inc.

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common stockholders since the effects of potentially dilutive securities are antidilutive.

Use of Estimates

The preparation of financial statements in conformity with U.S.

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 valuation of deferred tax assets and liabilities and other tax estimates including our ability to utilize net operating losses.

As future events and their effects, including the uncertainty surrounding rapidly changing market and economic conditions from the outbreak of COVID-19, 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.

Segment Reporting

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Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured at period-end using the period-end exchange rate.

Gains and losses resulting from remeasurement are recorded in other income, net, on the consolidated statements of operations.

Gains and losses resulting from remeasurement are recorded in other income (expense), net, on the consolidated statements of operations.

All assets and liabilities of foreign subsidiaries are translated at the current exchange rate as of the end of the period, retained earnings and other equity items are translated at historical rates, and revenue and expenses are translated at average exchange rates in effect during the period.

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dollars is reflected as foreign currency cumulative translation adjustments reported on the consolidated statements of comprehensive loss.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income (loss), net in the accompanying consolidated statements of operations when realized.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income (expense), net in the accompanying consolidated statements of operations when realized.

Cash and cash equivalents represent cash and highly liquid investments with original contractual maturities of three months or less at the date of purchase.

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Cash and cash equivalents $ 68,587 $ 478,937

Restricted cash — 472

Restricted cash, noncurrent 4,036 4,036

Total cash, cash equivalents, and restricted cash $ 72,623 $ 482,973

Accounts Receivable, Net

Accounts receivable are recorded at amounts billed and unbilled to customers, net of an allowance for doubtful accounts.

Accounts Receivable, Net and Credit Losses

Accounts receivable consists of customer obligations due under normal trade terms and are recorded at amounts billed and unbilled to customers, net of allowance for any potential uncollectible accounts.

Unbilled amounts are 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.

Trade accounts receivable are recorded at invoiced amounts and do not bear interest.

On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off based on historical write-offs, collections, and current credit conditions.

We maintain an allowance for credit losses for accounts receivable, net which is recorded as an offset to accounts receivable, net and changes in this allowance are recorded as general and administrative expenses in the consolidated statements of operations.

We assess collectability by reviewing accounts receivable on a collective basis when similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues.

In determining the amount of the allowance for credit losses, we consider historical collectability based on past due status and make judgements about the creditworthiness of customers based on ongoing credit evaluations.

A receivable is considered past due if we have not received payment based on agreed-upon terms.

We generally do not require any security or collateral to support our receivables.

Unbilled amounts 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 $ 2.2 million and $ 3.6 million as of January 31, 2022 and 2021, respectively.

We also consider customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data.

No material write-offs of accounts receivable have been recognized in any of the periods presented.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities and accounts receivable.

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 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 accompanying consolidated balance sheets in excess of federal insurance limits.

Significant customers are those which represent 10% or more of our total revenue for the period or accounts receivable at the balance sheet dates.

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 fiscal years ended January 31, 2023 or 2022, no customer accounted for 10% or more of 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 accompanying consolidated balance sheets.

Our accounts receivable are derived from revenue contracts with customers.

We maintain reserves for potential credit losses on customer accounts when deemed necessary.

As of January 31, 2022, no customer accounted for 10% or more of our total accounts receivable balance, and as of January 31, 2021, one customer accounted for 11 % of our total accounts receivable balance.

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 January 31, 2023 or 2022, no customer accounted for 10% or more of our total accounts receivable balance.

Marketable Securities

We classify our investments in marketable securities within current assets on the consolidated balance sheets as the investments are available for use, if needed, in current operations.

Securities are classified as available-for-sale and are carried at fair value, with the change in unrealized gains and losses, net of tax, reported as a separate component on the consolidated statements of comprehensive loss, until realized.

Fair value is determined based on quoted market rates when observable or utilizing data points that are observable, such as quoted prices, interest rates and yield curves.

Declines in fair value judged to be other-than-temporary on securities available for sale are included as a reduction to investment income.

To determine whether a decline in value is other-than-temporary, we evaluate, among other factors:

the duration and extent to which the fair value has been less than the carrying value and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

No impairment losses related to marketable securities have been recognized in any of the periods presented.

For the purposes of computing realized and unrealized gains and losses, the cost of securities sold is based on the specific-identification method.

Interest on securities classified as available for sale is included as a component of investment income.

Subsequent gains or losses realized upon redemption or sale of these securities in excess or below their adjusted cost basis are also recorded as investment income.

We classify our investments in marketable securities within current assets on the consolidated balance sheets as the investments are available for use, if needed, in current operations as we may sell our marketable securities at any time, without

significant penalty, even if they have not yet reached maturity.

These investments are carried at fair value, based on quoted market rates when observable or utilizing data points that are observable, such as quoted prices, interest rates and yield curves.

Gains and losses are determined based on the specific identification method and are recognized when realized as a component of Other income, net in our consolidated statements of operations.

We review our securities on a regular basis to evaluate if any security has experienced an other-than temporary decline in fair value.

We consider an available-for-sale security to be impaired if the fair value of the investment is less than its amortized cost basis, our intent to sell, or whether it is more likely than not that we are required to sell the security before recovery of its amortized cost basis.

If we believe that an other-than-temporary decline exists in one of the securities, we will write down these investments to fair value.

To the extent that the decline in fair value is related to credit losses, such as changes to the rating of the security by third-party rating agencies, and adverse conditions specific to the security, among other factors, the write-down related to credit loss would be recorded in Other income, net in our consolidated statements of operations.

Impairments related to factors other than credit losses are recognized in accumulated other comprehensive income (loss), net of tax.

As of January 31, 2023, the Company had not recorded any credit impairments.

Property and Equipment, Net

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Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred.

Upon asset retirement or sale, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheet, and the resulting gain or loss is reflected in general and administrative expenses in the consolidated statements of operations.

Upon asset retirement or sale, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheets, and the resulting gain or loss is reflected in general and administrative expenses in the consolidated statements of operations.

The estimated useful lives for significant property and equipment categories are as follows:

Computer equipment and software 3 years

Computer equipment, office equipment, and software 3 years

Furniture and fixtures 7 years

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If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the new shorter useful life.

There were no material impairment losses of long-lived assets recognized for the fiscal years ended January 31, 2022 and 2021.

There w ere no material impair ment losses of long-lived assets recognized for the fiscal years ended January 31, 2023, 2022 and 2021.

Capitalized Internal-use Software Costs

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A VIE is an entity that either has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or has equity investors who lack the characteristics of a controlling financial interest.

The primary beneficiary of a VIE is the party with both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE.

The primary beneficiary of a VIE is the party with both the power to direct the activities of the VIE that most significantly impact

the VIE’s economic performance and the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE.

To assess whether we have the power to direct the activities of a VIE that most significantly impact its economic performance, we consider all the facts and circumstances including our role in establishing the VIE and our ongoing rights and responsibilities.

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To assess whether we have the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE, we consider all of our economic interests, including debt and equity interests, servicing rights and fee arrangements, and any other variable interests in the VIE.

If we determine that we are the party with the power to make the most significant decisions affecting the VIE, and we have an obligation to absorb the losses or the right to receive benefits that could potentially be

significant to the VIE, then we consolidate the VIE.

We perform ongoing reassessments of whether we are the primary beneficiary of a VIE.

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Revenue Recognition

Effective February 1, 2019, we adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”), and applied the guidance on a modified retrospective basis.

We applied the standard to all contracts as of February 1, 2019, to aggregate the effect of all contract modifications that occurred prior to the adoption date.

The cumulative impact of applying the new guidance was that $ 10.0 million was recorded as an adjustment to accumulated deficit as of February 1, 2019.

We derive our revenue primarily from subscriptions to our platform, including associated support, and professional services.

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Variable consideration, including as a result of service level guarantees, product usage and overage fees or other potential claims such as breach of warranty, was not material during the fiscal years ended January 31, 2023 and 2022.

We allocate the variable consideration related to the product usages and overages to the distinct month during which the related services were performed as those fees relate specifically to providing usage of the platform in the period and represents the consideration we are entitled

to for the access to the platform.

As a result, the usage and overage fees are included in the transaction price and recognized as revenue in the period in which the fee was generated.

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These performance obligations are satisfied over time as the customer simultaneously receives and consumes the benefits.

Contracts are typically 1 year in length, but may be up to 5 years.

Contracts are typically one year in length, but may be up to five years .

At the beginning of each subscription term we invoice our customers, typically in annual installments but also quarterly and semi-annually.

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A contract asset is the right to consideration for transferred goods or services when the amount is conditioned on something other than the passage of time.

These balances are included in prepaid and other current assets on our consolidated balance sheets.

These balances are included in prepaid expenses and other current assets on our consolidated balance sheets.

Deferred Revenue

We record deferred revenue when we have an unconditional right to payments in advance of satisfying the performance obligations on our contracts.

The balance consists primarily of annual plan subscription services and professional services not yet provided as of the balance sheet date.

The balance consists primarily of annual plan subscription services and professional services not

yet provided as of the balance sheet date.

Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as a current liability in our consolidated balance sheets.

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Capitalized amounts are recoverable through future revenue streams under all customer contracts.

Contract costs are amortized on a straight-line basis up to 4 years, which reflects the expected period of benefit of the performance obligation and may be longer than the initial contract period.

Contract costs are amortized on a straight-line basis up to four years , which reflects the expected period of benefit of the performance obligation and may be longer than the initial contract period.

We determined the estimated benefit period having considered both qualitative and quantitative factors, including the length of the subscription terms in our customer contracts and the anticipated life of our technology, among other such factors.

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We recognize stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period, and use the straight-line method to recognize stock-based compensation.

We use the Black-Scholes-Merton (“Black-Scholes”) option pricing model to determine the fair value of stock

based awards.

We use the Black-Scholes-Merton (“Black-Scholes”) option pricing model to determine the fair value of stock based awards.

We estimate expected forfeitures of stock-based awards at the grant date and recognize compensation cost only for those awards expected to vest.

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Expected Volatility

We estimate volatility for option grants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the options’ expected term since we do not have a trading history of our common stock.

Expected Term

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We have elected to use the simplified method to compute the expected term, which we believe is representative of future behavior.

Our stock plans provide a contractual term of 10 years before the option is forfeited.

Our stock plans provide a contractual term of ten years before the option is forfeited.

Risk-Free Interest Rate

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and (vi) the likelihood of achieving a liquidity event, such as an IPO or sale of the Company, given prevailing market conditions.

To evaluate the fair value of the underlying shares for grants between two independent valuations and after the last independent valuation, a linear interpolation framework was used to evaluate the fair value of the underlying shares.

To evaluate the fair value of the underlying shares for grants between two independent valuations and after the last independent valuation, a linear interpolation framework was used to evaluate.

Subsequent to our IPO, the fair value of each share of underlying common stock is based on the closing price of our Class A common stock as reported on the Nasdaq Stock Market on the date of grant.

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Other income (expense), net, is primarily comprised of realized and unrealized foreign currency gains and losses.

We categorize leases at their inception as either operating or capital.

In the ordinary course of business, we enter into non-cancelable operating leases, principally for office space.

We recognize lease costs on a straight-line basis and treat lease incentives as a reduction of rent expense over the term of the agreement.

The difference between cash payments and rent expense is recorded as a deferred rent liability in accrued expenses and other current liabilities and other long-term liabilities on the consolidated balance sheets.

We determine if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether we have the right to control the identified asset.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term.

ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.

As the implicit rate in our leases is generally unknown, we use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

The lease terms may include options to extend or terminate the lease when it is reasonably certain we will exercise any such options.

Lease costs for our operating leases are recognized on a straight-line basis over the lease term.

Finance lease assets are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term.

The interest component of finance leases is included in interest expense and recognized using the effective interest method over the lease term.

We did not have any finance leases in the periods presented.

We have elected to not separate lease and non-lease components for any leases within our existing classes of assets and, as a result, we account for any lease and non-lease components as a single lease component.

We have also elected to not apply the recognition requirement to any leases within our existing classes of assets with a term of 12 months or less (short-term leases).

Variable lease costs are comprised primarily of our proportionate share of operating expenses, property taxes, and insurance and is classified as lease cost due to our election to not separate lease and non-lease components.

Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and non-current in our consolidated balance sheets.

Refer to Note 14.

Leases, for further information.

We account for income taxes using the asset and liability method.

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Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, we would charge an adjustment to the valuation allowance to earnings in the period when such determination is made.

As of January 31, 2022, we recorded a full valuation allowance on our net deferred tax assets, which consist of net operating loss carryforwards and other basis differences, as we have concluded that it is more likely than not that our deferred tax assets will not be realized.

As of January 31, 2023, we recorded a full valuation allowance in jurisdictions where we had net deferred tax assets, which consist of net operating loss carryforwards and other basis differences, as we have concluded that it is more likely than not that our deferred tax assets will not be realized.

We recognize tax expense associated with Global Intangible Low-Taxed Income as it is incurred as part of the current income taxes to be paid or refunded for the current period.

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Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).

This ASU is designed to reduce complexity for accounting for costs of implementing a cloud computing service arrangement.

This standard aligns the accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software.

The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2020, and early adoption is permitted.

We adopted ASU 2018-15 prospectively on February 1, 2021, and the adoption of this update did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”).

ASU 2018-13 adds, modifies, and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with ASC 820, Fair Value Measurement.

ASU 2018-13 is effective for fiscal years beginning after December 15, 2019.

We adopted ASU 2018-13 on February 1, 2020, and the adoption of this update did not have a material impact on our consolidated financial statements.

In November 2019, the FASB issued ASU 2019-08, Codification Improvements — Share-Based Consideration Payable to a Customer (“ASU 2019-08”).

ASU 2019-08 clarifies the accounting for share-based payments issued as consideration

payable to a customer in accordance with ASC 606.

Under ASU 2019-08, entities apply the guidance in ASC 718 to measure and classify share-based payments issued to a customer that are not in exchange for a distinct good or service (i.e., share-based sales incentives).

Accordingly, entities use a fair-value-based measure to calculate such incentives on the grant date, which is the date on which the grantor (the entity) and the grantee (the customer) reach a mutual understanding of the key terms and conditions of the share-based consideration.

The result is reflected as a reduction of revenue in accordance with the guidance in ASC 606 on consideration payable to a customer.

After initial recognition, the measurement and classification of the share-based sales incentives continue to be subject to ASC 718 unless (1) the award is subsequently modified when vested and (2) the grantee is no longer a customer.

The guidance is effective for public and private companies’ fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

We adopted ASU 2019-08 as of February 1, 2020.

The amendments in ASU 2019-08 did not have a material impact on our consolidated financial statements.

In November 2019, the FASB issued ASU 2019-08, Codification Improvements — Share-Based Consideration Payable to a Customer (“ASU 2019-08”).

ASU 2019-08 clarifies the accounting for share-based payments issued as consideration payable to a customer in accordance with ASC 606.

The result is reflected as a reduction of revenue in accordance with the guidance in ASC 606 on consideration payable to a customer.

The guidance is effective for public and private companies’ fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

We adopted ASU 2019-08 as of February 1, 2020.

The amendments in ASU 2019-08 did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842), (“ASC 842”) and issued certain transitional guidance and subsequent amendments between January 2018 and February 2020 within ASU No.

2017-13, ASU No.

2018-01, ASU No.

2018-10, ASU No.

2018-11, ASU No.

2018-20, ASU No.

2019-01, ASU No.

2019-10, ASU No.

2020-02, and ASU No.

2020-05 (collectively, “Topic 842”).

The guidance in Topic 842 supersedes the leasing guidance in Topic 840, Leases.

Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than twelve months.

Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations.

2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842):

Effective Dates for Certain Entities, issued June 2020, Topic 842, as amended, is effective for fiscal years beginning after

December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Topic 842 is effective for our fiscal year ending January 31, 2022 and interim periods beginning February 1, 2023 with early adoption permitted.

While we previously elected to take advantage of the extended transition period available to emerging growth companies for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, we decided to early adopt Topic 842.

We adopted this standard under the modified-retrospective approach, using the practical expedients allowing us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired leases, and (iii) indirect costs for any existing leases.

Additionally, any lease arrangements with a term of 12 months or less will be recognized on the consolidated statements of operations on a straight-line basis over the lease term and any non-lease components shall not be separated from the lease components, but instead accounted for as a single lease component.

Upon adoption of ASC 842, we recognized a right-of-use asset of $ 59.6 million and a lease liability of $ 61.3 million at February 1, 2022 on our consolidated balance sheets.

Prior period amounts were not restated and are reported in accordance with ASC 840.

Refer to Note 14.

Leases, for further information.

In June 2016, the FASB issued ASU No.

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2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), Topic 326, as amended, is effective for (1) public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and (2) all other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Topic 326 is effective for our fiscal year beginning February 1, 2023.

Early adoption is permitted.

We expect to early adopt Topic 326 beginning February 1, 2022.

We are currently evaluating the impact of the new guidance on our consolidated financial statements and do not expect the adoption to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) and issued certain transitional guidance and subsequent amendments between January 2018 and February 2020 within ASU No.

2017-13, ASU No.

2018-01, ASU No.

2018-10, ASU No.

2018-11, ASU No.

2018-20, ASU No.

2019-01, ASU No.

2019-10, ASU No.

2020-02, and ASU No.

2020-05 (collectively, “Topic 842”).

The guidance in Topic 842 supersedes the leasing guidance in Topic 840, Leases.

Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than twelve months.

Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations.

2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842):

Effective Dates for Certain Entities, issued June 2020, Topic 842, as amended, is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Topic 842 is effective for our fiscal year beginning February 1, 2022.

We plan to adopt this standard under the modified-retrospective approach, using the practical expedients allowing us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired leases, and (iii) indirect costs for any existing leases.

Additionally, any lease arrangements with a term of 12 months or less will be recognized on the statement of operations on a straight-line basis over the lease term and any non-lease components shall not be separated from the lease components, but

instead accounted for as a single lease component.

We do not expect the adoption of this amended guidance to have a significant impact on our consolidated statements of operations, but will result in a right-of-use asset and lease liability estimated between $ 55.0 million to $ 65.0 million on our consolidated balance sheets.

Topic 326 is effective for our fiscal year beginning February 1, 2023 and early adoption is permitted.

We determined that the adoption of this ASU did not have a material impact on our consolidated financial statements.

As such, we adopted this ASU prospectively on February 1, 2022.

In December 2019, the FASB issued ASU No.

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Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance.

We expect to adopt ASU 2019-12 beginning February 1, 2022 as the Company has elected to use the extended transition period under the JOBS Act.

We are currently evaluating the impact of the new guidance and do not expect the adoption to have a material impact on our consolidated financial statements.

We adopted ASU 2019-12 on February 1, 2022 and determined that the adoption of this ASU had no material impact on our consolidated financial statements.

In October 2020, FASB issued ASU No.

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We expect to adopt ASU 2020-10 beginning February 1, 2022, and do not expect the adoption to have a material impact on our consolidated financial statements.

We adopted ASU 2020-10 prospectively on February 1, 2022 and determined that this ASU does not have a material impact on our consolidated financial statements.

Revenue from Contracts with Customers

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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 $ 1.0 million and $ 2.2 million as of January 31, 2023 and January 31, 2022, respectively.

Contract Balances

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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 the period.

Revenue recognized during the fiscal year ended January 31, 2022, 2021, 2020 from amounts included in deferred revenue at the beginning of each respective period was $ 74.6 million, $ 51.2 million, and $ 22.8 million, respectively.

Revenue recognized during the fiscal year ended January 31, 2023, 2022, and 2021 from amounts included in deferred revenue at the beginning of each respective period was $ 126.1 million, $ 74.6 million, and $ 51.2 million, respectively.

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, 2022

Credit losses 808

Deferred revenue 1,667

Write-offs ( 1,746 )

Recoveries 141

Balance at January 31, 2023

Remaining Performance Obligations

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January 31, 2023 455.7 312.6 143.1

These amounts only include contracts subject to a guaranteed fixed amount or the guaranteed minimum under variable contracts.

Unrecognized revenue under contracts disclosed above do not include (i) contracts with an original expected term of one year or less and (ii) agreements for which the right to invoice corresponds with the value provided to the customer.

Variable Interest Entity and Redeemable Non-Controlling Interest

On September 14, 2020, we, along with Japan Cloud Computing Co., Ltd.

(“JCC”), and M30 LLC (“M30”), (the “Investors”), entered into an agreement (the “Share Purchase 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, to engage in the investment, organization, management and operation of Braze KK focused on the distribution of our products in Japan.

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.

The Investors contributed their first tranche of the purchase price on September 14, 2020.

On September 23, 2020, the Investors executed a shareholders’ agreement (the “Shareholders Agreement”) in connection with the closing of the first tranche.

The Shareholders’ Agreement, along with the Articles of Incorporation, outlines the Investors’ rights, including certain protective provisions of JCC and M30, (together referred to the “Non-controlling Interest Holders”).

All of the common stock held by the Investors is callable by us or puttable by the Non-controlling Interest Holders upon certain contingent events but no later than the eighth anniversary of the Share Purchase Agreement .

The price of the put and call option is based on our fair value as of the date of sale.

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 January 31, 2023, the liability balance was $ 0.3 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.

We determined that Braze KK was a VIE and we are the primary beneficiary, because Braze KK was dependent on us for ongoing financial support and we have both the power to direct the significant activities that impact the economic performance of Braze KK and the obligation to absorb losses and the right to receive expected benefits that could be significant to Braze KK.

In September 2021 , following the first anniversary of the execution of the Share Purchase Agreement and pursuant to the terms and conditions of the Shareholders Agreement, the Investors purchased Braze KK Shares in the second tranche for a total purchase price of $ 5.0 million .

The investment did not change the ownership interest between the Investors.

The investment resulted in a reconsideration event and we determined that 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, w e 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, condensed consolidated statements of operations, and condensed consolidated statements of cash flows.

As of January 31, 2022 and January 31, 2021, the non-controlling interest in Braze KK is classified in mezzanine equity as redeemable non-controlling interest as a result of the put right available to the Non-controlling Interest Holders in the future, an event that is not solely in our control.

The non-controlling interest in Braze KK is classified in mezzanine equity as redeemable non-controlling interest as a result of the 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.

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Balance as of January 31, 2021

Investment from redeemable non-controlling interest 2,450

Investment in redeemable non-controlling interest 2,450

Net loss attributable to redeemable non-controlling interest ( 1,448 )

Balance as of January 31, 2022

Investment from redeemable non-controlling interest 2,450

Net loss attributable to redeemable non-controlling interest ( 1,780 )

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Cash and cash equivalents $ 4,849 $ 6,705

Accounts receivable, net of allowance for doubtful accounts 143 —

Accounts receivable, net of allowance 535 143

Prepaid expenses and other current assets 331 196

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Total liabilities 4,778 1,660

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

Prepaid software subscriptions $ 19,396 $ 8,426

Prepaid advertising 1,132 1,008

Prepaid insurance 4,372 187

Other 4,688 2,581

Total prepaid expenses and other current assets $ 29,588 $ 12,202

Other long-term liabilities 322 —

Total liabilities $ 5,100 $ 1,660

Fair Value Measurements

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government securities $ 307,744 $ — $ — $ 307,744

Foreign government bonds — 3,203 — 3,203

Commercial paper — 18,993 — 18,993

Foreign bonds — 2,967 — 2,967

Corporate debt securities — 99,372 — 99,372

Asset-backed securities — 5,934 — 5,934

Total marketable securities 307,744 102,339 — 410,083

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government bonds $ 4,006 $ — $ — $ 4,006

Foreign bonds — 3,203 — 3,203

Commercial paper — 18,993 — 18,993

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Foreign bonds 3,028 — ( 61 ) 2,967

Commercial paper 18,993 — — 18,993

Corporate debt securities 100,589 27 ( 1,244 ) 99,372

Asset-backed securities 5,941 — ( 7 ) 5,934

Total $ 415,661 $ 58 $ ( 5,636 ) $ 410,083

2 unchanged sentences

government bonds $ 4,021 $ — $ ( 15 ) $ 4,006

Foreign bonds 3,203 — — 3,203

Commercial paper 18,993 — — 18,993

2 unchanged sentences

Total $ 35,183 $ — $ ( 27 ) $ 35,156

There were no material reclassifications of gains or losses from accumulated other comprehensive loss on the consolidated balance sheets to other income, net, on the consolidated statements of operations.

As of January 31, 2022 and January 31, 2021, we did not consider any of our marketable debt securities to be other-than-temporarily impaired and we did not purchase or hold a material amount of non-marketable debt securities.

As of January 31, 2022 and January 31, 2021, there were no debt securities in a continuous unrealized loss position for greater than 12 months for the periods presented.

We believe that the losses incurred on the ten investment positions in an unrealized loss position as of January 31, 2022 were temporary because we had no intention of selling the investment and we had the ability to retain the investment for a period of time sufficient to allow for recovery of its amortized cost basis.

The contractual maturities of the investments classified as marketable securities are as follows (in thousands):

Accrued interest receivables related to our available-for-sale securities of $ 2.0 million as of January 31, 2023 and $ 0.3 million as of January 31, 2022 were included within prepaid expenses and other current assets on our consolidated balance sheets.

The Company’s short-term investments consist of available-for-sale debt securities.

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 January 31, 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 January 31, 2023 was primarily related to the continued market volatility associated with market expectations 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 January 31, 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 January 31, 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):

January 31, 2023

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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 (expense), net on the consolidated statements of operations.

The components of investment income were as follows (in thousands):

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Capitalized internal-use software $ 7,344 $ 5,353

Computer equipment and software 3,833 2,077

Computer equipment, office equipment, and software 8,111 3,833

Leasehold improvements 9,410 2,470

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The total depreciation expense and amortization expense for property and equipment was $ 3.4 million, $ 2.8 million and $ 1.6 million, during the fiscal years ended January 31, 2023, 2022 and 2021, respectively.

During the fiscal year ended January 31, 2023, the Company removed $ 1.2 million of fixed assets substantially consisting of leasehold improvements and computer equipment, office equipment, and software, that was fully depreciated from property and equipment, gross and accumulated depreciation, which had no net impact on the Company’s financial results.

We capitalized internal-use software of $ 2.0 million, $ 2.4 million and $ 2.1 million during the fiscal years ended January 31, 2023, 2022, and 2021 respectively.

Amortization for capitalized internal-use software costs recognized within cost of revenue on the consolidated statements of operations was $ 1.7 million, $ 1.2 million and $ 0.5 million for the fiscal years ended January 31, 2023, 2022, and 2021, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

Prepaid software subscriptions $ 12,574 $ 19,396

Prepaid advertising 1,322 704

Prepaid insurance 2,795 4,372

Investment interest receivable 2,013 259

Consumption tax receivable 1,045 667

Prepaid employee bonuses 538 332

Prepaid employee benefits 811 233

Other 5,065 3,625

Total prepaid expenses and other current assets $ 26,163 $ 29,588

Accrued Expenses and Other Current Liabilities

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Accrued professional service fees 1,779 2,218

Accrued advertising 922 660

Accrued tax liability 2,152 1,951

Other 5,259 3,541

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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 will be entitled to one vote.

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 the IPO.

All shares of the Company’s capital stock outstanding immediately prior to the IPO, including all shares held by its executive officers, directors and their respective affiliates, and all shares issuable upon the conversion of its then outstanding convertible preferred stock, were reclassified into shares of Class B common stock immediately prior to the completion of the IPO.

Convertible Preferred Stock Conversion

According to the terms of our amended and restated certificate of incorporation in effect immediately prior to our IPO, all outstanding shares of convertible preferred stock would automatically be converted into shares of common stock upon either a (i) the closing of the sale of shares of common stock to the public (x) at a price at least equal to the original issue price of the Series E convertible preferred stock and (y) resulting in at least $ 50.0 million of gross proceeds to Braze, or (ii) the occurrence of an event specified by vote or written consent of the holders of (i) at least a majority of the outstanding shares of convertible preferred stock voting as a single class on an as-converted basis, (ii) at least a majority of the outstanding shares of Series C convertible preferred stock, voting separately on an as-converted basis, (iii) at least a majority of the outstanding shares of Series D convertible preferred stock, voting separately on an as-converted basis, and (iv) at least a majority of the outstanding shares of Series E convertible preferred stock, voting separately on an as-converted basis.

In connection with the completion of the IPO on November 19, 2021, all shares of convertible preferred stock then outstanding were automatically converted into 62.8 million shares of Class B common stock.

All outstanding common stock warrants were net exercised pursuant to their terms for an aggregate of 216,354 shares of Class B common stock in connection with the IPO.

All shares of the Company’s capital stock outstanding immediately prior to our initial public offering, including all shares held by its 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 $ 4.3 million expense within general and administrative in our consolidated statements of operations during the fiscal year ended January 31, 2023.

No stock donations were made during the fiscal years ended January 31, 2022 and 2021.

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

The Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) provided 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 are determined by the Board.

Following effectiveness of the 2021 Equity Incentive Plan in connection with the IPO, no further awards were made under the 2011 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, the Board and our stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”), which became effective on the date of the underwriting agreement related to the IPO.

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 Equity Incentive Plan.

We have reserved 25,660,249 shares of our Class A common stock to be issued under the 2021 Plan.

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, 2022, the number of shares of our Class A common stock reserved for issuance under our 2021 Plan increased by an additional 4,648,401 shares.

Stock Options

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Forfeited ( 415,690 ) 5.48

Expired ( 23,299 ) 2.95

Balance as of January 31, 2022

11,035,704 $ 12.56 7.69 $ 413,384

Granted 3,120,516 35.02

Granted — n/a

Exercised ( 2,155,929 ) 3.94

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Vested and expected to vest as of January 31, 2023

7,861,331 $ 13.66 6.52 $ 151,740

Exercisable - January 31, 2023

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2023 2022 2021

Weighted-average grant date fair value per share of options granted during each respective period $ 24.53 $ 7.41 $ 2.24

Weighted-average grant date fair value per share of options granted during each respective period n/a $ 24.53 $ 7.41

Aggregate intrinsic value of options exercised during each respective period (in thousands) $ 71.16 $ 121.90 $ 78.90

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2023 2022 2021

Dividend yield (in percentage) — % — % — %

Expected volatility (in percentage) 61.8 - 66.1 %

55.7 - 62.5 %

Dividend yield (in percentage) n/a — % — %

Expected volatility (in percentage) n/a 61.8 - 66.1 %

55.7 - 62.5 %

Expected term (in years) 5.9 - 6.7

Risk-free interest rate (in percentage) 1.0 - 1.2 %

Fair value of common stock $ 65.00 $ 5.28 - $ 28.35

Expected term (in years) n/a 5.9 - 6.7

Risk-free interest rate (in percentage) n/a 1.0 - 1.2 %

Fair value of common stock n/a $ 65.00

$ 5.28 - $ 28.35

Early Exercise of Stock Options

Prior to July 2019, stock options granted contained a provision whereby the holders of the stock options were able to exercise the options prior to vesting.

We recorded a share repurchase liability related to stock options with four-year vesting schedules that were exercised early.

The liability is included within accrued expenses and other current liabilities on the consolidated balance sheets.

Upon termination of service of an employee, we have the right to repurchase any non-vested but issued common shares at the original purchase price.

Such an exercise is not substantive for accounting purposes.

The liability is being amortized into additional paid-in capital over the course of the vesting schedule.

During the fiscal years ended January 31, 2022, 2021, and 2020, $ 0.5 million, $ 0.3 million, and $ 0.3 million was recorded to additional paid in capital related to the vesting of early exercised awards, respectively.

During the fiscal years ended January 31, 2022, 2021, and 2020, 88,099 , 287,963 , and 129,225 options were early exercised for cash in an amount of $ 0.2 million, $ 0.4 million, and $ 0.2 million, respectively.

As of January 31, 2022 and 2021, $ 0.2 million and $ 0.5 million is recorded as a liability on the consolidated balance sheets in account payables and other accrued expenses, respectively.

A summary for activities for early exercised options is as follows:

Unvested Options

Balance as of January 31, 2020

Exercises 287,963

Vested ( 210,764 )

Repurchased ( 4,524 )

Balance as of January 31, 2021

Exercises 88,099

Vested ( 296,400 )

Repurchased ( 3,251 )

Balance as of January 31, 2022

Restricted Stock Units

Prior to the IPO, all granted restricted stock units (“RSUs”) contained both a service-based vesting condition and a performance-based vesting condition.

The service-based vesting condition is satisfied over either a four year or three year period.

Some RSUs vest on a quarterly basis and other RSUs have a one year cliff vesting period with quarterly vesting thereafter.

The performance-based vesting condition in relation to the then outstanding RSUs was deemed satisfied as a result of the closing of the IPO in November 2021.

As such, the Company recorded stock-based compensation vesting of RSUs in connection with the IPO using the accelerated attribution method during the fourth quarter of the fiscal year ended January 31, 2022 .

Upon completion of the IPO, the Company recognized compensation expense of $ 16.1 million related to RSUs granted to employees and directors that were subject to performance-based vesting conditions that were satisfied upon completion of the IPO.

The following table summarized unvested RSU award activity and related information:

The following table summarizes unvested RSU award activity and related information:

Shares Weighted-Average Grant Date Fair Value

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Balance as of January 31, 2023

RSUs granted during the fiscal year ended January 31, 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.

Employee Stock Purchase Plan

In November 2021, our board of directors and our stockholders approved our 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, 2022, the number of shares of our Class A common stock reserved for issuance under our ESPP increased by an additional 929,680 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 $ 1.8 million of stock-based compensation expense related to the ESPP during the fiscal year ended January 31, 2023.

As of January 31, 2023, $ 0.3 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.

During the fiscal year ended January 31, 2023, the Company issued 125,276 shares of Class A common stock under the ESPP.

As of January 31, 2023, 2,629,404 shares of Class A common stock remain available for issuance under the ESPP.

Stock-based Compensation Expense

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No secondary transactions involving employees occurred during the fiscal year ended January 31, 2023 .

During the fiscal year ended January 31, 2020, we facilitated a transaction whereby a related-party investor purchased 893,500 shares of our common stock from our current and former employees (the “2020 Secondary Transaction”).

The purchase price paid was in excess of the fair value of the common stock on the purchase date.

In connection with the 2020 Secondary Transaction, we recognized $ 8.7 million stock-based compensation expense which represented the amounts paid above fair value of common stock and the charge associated with employees selling shares which were held for less than six months.

The expense is included in the same category of operating expense as the employees’ other compensation.

Employee Stock Purchase Plan

In November 2021, the Board and our stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective on the date of the underwriting agreement related to the IPO.

Following completion of the IPO, 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.

and (ii) 2,737,000 shares, except before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

Commitments and Contingencies

We have noncancellable operating leases for office space that expire at various dates through 2031 .

R ental expense for operating leases for the fiscal years ended January 31, 2022, 2021, and 2020 was $ 10.2 million, $ 8.8 million, and $ 5.9 million respectively.

This rental expense includes sublease income of $ 0.4 million, $ 1.1 million, and $ 0.9 million, respectively, for the fiscal years ended January 31, 2022, 2021, and 2020.

Our operating leases generally provide for annual rent increases and may include rent holidays, typically at the outset of a lease agreement.

The following represents the Company’s future minimum payments under non-cancelable operating leases as of January 31, 2022 for each of the next five years and thereafter (in thousands):

Fiscal Years Ended January 31,

Thereafter 34,697

Total future lease payments $ 76,070

The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding.

Obligations under contracts that we can cancel without a significant penalty are not included in the table above.

Indirect Taxes

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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 $ 1.3 million and $ 0.6 million as of January 31, 2022 and 2021, respectively, which is included in other current liabilities on the consolidated balance sheets.

As of fiscal year ended January 31, 2022, we have entered into several voluntary disclosure agreements with jurisdictions where we identified a potential exposure due to not filing prior returns.

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 $ 1.3 million as of January 31, 2023 and 2022, respectively, which is included in other

current liabilities on the consolidated balance sheets.

As of fiscal year ended January 31, 2023, we have remediated potential exposure in several jurisdictions due to not filing prior returns, and the Company continues to evaluate the potential exposure on an ongoing basis.

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 alleged infringement of third-party patents and other intellectual property rights, commercial, labor and employment, wage and hour and other claims.

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.

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We believe we have recorded adequate provisions for any such matters and, as of January 31, 2023, we believe that no material loss will be incurred in excess of the amounts recognized in our financial statements.

The components of the (benefit from) provision for income taxes are as follows (in thousands):

The Company’s lease portfolio consists solely of office space with lease terms ranging from less than one 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 the fiscal year ended January 31, 2023 (in thousands):

Fiscal Year Ended January 31, 2023

Operating lease cost $ 13,638

Variable lease cost 2,521

Short-term lease cost 1,795

Total net lease cost $ 17,954

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

2024 $ 10,705

Thereafter 18,755

Total future undiscounted lease payments 61,682

imputed interest ( 10,397 )

tenant improvement allowance not yet received —

Total reported lease liability $ 51,285

The Company's lease terms and discount rates are as follows:

January 31, 2023

Weighted-average remaining lease term (years) 6.6

Weighted-average discount rate 5.5 %

Other information for the Company's leases is as follows (in thousands):

Fiscal Year Ended January 31, 2023

Cash paid for amounts included in the measurement of lease liabilities $ 10,292

Operating lease right-of-use assets obtained in exchange for new operating lease liabilities $ —

New York City Headquarters Agreement

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.

Berlin Lease Agreement

In October 2022, the Company entered into a lease agreement for a new office space in Berlin, Germany.

The lease commencement date, which is when the premises will become available to the Company for use, is expected to be in the first quarter of fiscal year 2024.

The Company is obligated to pay € 0.1 million per month beginning in the second quarter of fiscal year 2024 through the fourth quarter of fiscal 2025, the expiration date.

The components of the provision for (benefit from) income taxes are as follows (in thousands):

Fiscal Year Ended January 31,

2023 2022 2021

Federal $ — $ — $ —

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Total deferred 35 ( 80 ) 60

(Benefit from) provision for income taxes $ ( 165 ) $ 537 $ 452

Provision for (benefit from) income taxes $ 583 $ ( 165 ) $ 537

The components of loss before income taxes are as follows (in thousands):

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Change in valuation allowance ( 24.2 ) % ( 26.5 ) % ( 21.6 ) %

Section 382 NOL — % — % ( 9.0 ) %

Stock-based compensation 1.5 % 5.8 % ( 1.4 ) %

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Deferred tax assets:

Net operating losses $ 46,886 $ 30,743

Bad debt reserve 186 237

Other reserves 1,016 1,105

Stock-based compensation 8,402 106

Property, equipment, and software 272 185

Accrued taxes 113 37

Accrued bonus 1,552 902

R&D credit 3,541 1,927

Deferred payroll taxes 250 594

Loss carryforwards $ 72,878 $ 46,886

Compensation and benefits 16,834 10,772

Operating lease liabilities 12,679 —

Tax credits 5,689 3,541

Capitalized costs 5,568 —

Other 3,999 1,429

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Deferred tax liabilities:

Capitalized costs $ ( 10,286 ) $ ( 6,952 )

Deferred contract costs ( 11,826 ) ( 10,286 )

Property, equipment and software ( 1,264 ) ( 133 )

Operating lease right-of-use assets ( 11,447 ) —

Deferred tax liabilities ( 24,537 ) ( 10,419 )

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Accordingly, $ 242.2 million of our NOLs may be carried forward indefinitely for federal tax purposes and $ 39.4 million, if not utilized, will expire at various times between 2035 and 2037.

state NOLs if not utilized, will expire at various times between 2026 and 2042.

The majority of state NOLs if not utilized, will expire at various times between 2026 and 2043.

We also had foreign NOL carryforwards as of January 31, 2023 of $ 8.3 million, the majority of which may be carried forward indefinitely.

As of January 31, 2022, we had NOL carryforwards for federal and state income tax purposes of approximately $ 179.4 million and $ 119.1 million, respectively.

At January 31, 2022, the Company had tax credit carryforwards of $ 3.5 million related to credits for research activities.

The credit carryforwards will expire between 2037 and 2042.

At January 31, 2023, the Company had tax credit carryforwards of $ 5.7 million, the majority of which are related to credits for research activities, and if not utilized, will expire between 2037 and 2043.

IRC Sections 382 and 383 place a limitation on the amount of taxable income that can be offset by carryforward tax attributes, such as net operating losses or tax credits, after a change in control.

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These ownership shifts resulted in a reduction of NOLs in the fiscal year ended January 31, 2021 of $ 13.8 million and credits of $ 0.7 million.

Our utilization of our NOLs and credits is limited by these ownership shifts but those limitations do not have a significant impact to the financial statements since there is no utilization of the NOLs and credits and a full valuation allowance exists against the net operating losses and credits.

Our utilization of our NOLs and credits is limited by these ownership shifts but those limitations do not have a significant impact to

the financial statements since there is no utilization of the NOLs and credits and a full valuation allowance exists against the net operating losses and credits.

Subsequent ownership changes may subject us to additional annual limitations of its net operating losses.

Such annual limitation could result in the expiration of the NOLs and credits.

As of January 31, 2022, there were no additional limitations to the net operating losses or credits.

We determine our valuation allowance on deferred tax assets by considering both positive and negative evidence to ascertain whether it is more likely than not that deferred tax assets will be realized.

Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing, and amount of which are uncertain.

Due to our history of losses, we believe that it is not more likely than not that all the deferred tax assets can be realized as of January 31, 2022.

Accordingly, we have recorded a full valuation allowance against our deferred tax assets.

Due to our history of losses, we believe that it is not more likely than not that jurisdictions where we have net deferred tax assets can be realized as of January 31, 2023.

Accordingly, we have recorded a full valuation allowance against these respective net deferred tax assets.

The valuation allowance increased by $ 40.9 million, and $ 22.9 million, during the fiscal years ended January 31, 2023, and 2022, respectively.

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As of January 31, 2023, 2022 and 2021, accrued unrecognized tax benefits were $ 0.0 million , $ 0.6 million, and $ 0.9 million, respectively, and if recognized would reduce the provision for income taxes, and our effective tax rate.

We expect the majority of the unrecognized tax benefits to be released during the next twelve months.

We are subject to income tax examinations in the United States and various state and foreign jurisdictions.

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However, amounts reported as NOLs from these prior tax periods also remain subject to review by most tax authorities.

Net Loss per Share Attributable to Braze, Inc.

Common Shareholders

Net Loss per Share

We compute net loss per share of our 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):

common stockholders during the periods presented (in thousands, except per share amounts):

Fiscal Year Ended January 31,

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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):

common stockholders for the periods presented, because their inclusion would be anti-dilutive (in thousands):

Fiscal Year Ended January 31,

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Restricted stock units 4,626 1,355 —

ESPP shares estimated to be purchased 121 — —

Warrants to purchase common stock — — 218

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We have purchased services from Datadog, Inc.

in the aggregate amount of approxi mately $ 0.7 million during the fiscal year ended fiscal year ended January 31, 2021 and $ 1.2 million during the fiscal year ended January 31, 2022 .

in the aggregate amount of approxi mately $ 1.4 million during the fiscal year ended January 31, 2023, of which $ 0.4 million was included within accrued expenses and other current liabilities on the consolidated balance sheets.

We have purchased $ 1.2 million during the fiscal year ended 2022.

During the fiscal year ended January 31, 2021, we had no related party transactions.

S ubsequent Events

In March 2022, the Company granted a total of 1.6 million Class A common stock RSUs to employees pursuant to the 2021 Plan.

The fair value of the RSU grants was determined based upon the market closing price of the Company’s common stock on the date of grant.

The RSUs vest over the requisite service period, subject to the continued service of the individual.

The Company expects to recognize aggregate stock-based compensation expense of $ 60.4 million related to the RSUs over a weighted-average requisite service period of approximately 3.5 years.

In March 2022, we entered into a memorandum of understanding with Tides Foundation to establish a donor advised fund in support of our philanthropic goals and our commitment to the Pledge 1% movement.

In February 2023, the Company granted RSUs for a total of 148,362 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 $ 4.9 million.

In March 2023, the Company granted RSUs for a total of 2,914,105 shares of Class A common stock to employees pursuant to the 2021 Plan.

The RSUs vest over a service period of approximately three years .

The grant date fair value of these awards was $ 97.5 million.

On March 27, 2023, the Company entered into a definitive stock purchase agreement to acquire all outstanding stock of North Star Y, Pty Ltd (“North Star”) for estimated aggregate closing consideration of $28.0 million in cash and stock.

In addition, 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.

The acquisition is expected to close during the second quarter of fiscal year 2024, subject to customary closing conditions.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data