What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-31 · 58 added, 107 removed, 287 unchanged (37% of the section changed)

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See “Special Note Regarding Forward Looking Statements” in this Annual Report on Form 10-K.

Braze is a leading comprehensive customer engagement platform that powers customer-centric interactions between consumers and brands.

For a discussion regarding our financial condition and results of operations for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022, refer to “Management's Discussion and Analysis of Financial Condition

and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended January 31, 2023, filed with the SEC on March 31, 2023.

Braze is a leading customer engagement platform that empowers brands to Be Absolutely Engaging™.

Our platform empowers brands to listen to their customers better, understand them more deeply, and act on that understanding in a way that is human and personal.

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Our platform is designed so that interactions between brands and consumers have the same relevance and cross-channel continuity as human interactions.

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

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

We primarily generate revenue from the sale of subscriptions to customers for the use of our platform.

Our subscription fees are principally based on an upfront commitment by our customers for a specific number of monthly active users, on a cost-per-message basis for volume of email and/or SMS messages sent, platform access and/or support and certain add-on products.

Our subscription fees are principally based on an upfront commitment by our customers for messaging volumes, a specific number of monthly active users, platform access and/or support and certain add-on products.

Additionally, we provide professional services, which better enable customers to successfully onboard and use our platform, including certain premium professional services such as email deliverability support and dedicated technical support staff.

We employ a land-and-expand business model centered around offering products that are easy to adopt and have a rapid time to value.

We expand our reach within existing customers when our customers add new channels, purchase additional subscription products such as Braze Currents, implement new engagement strategies, or onboard new business units and geographies.

We expand our reach within existing customers when our customers add new channels, purchase additional subscription products, implement new engagement strategies, or onboard new business units and geographies.

We also grow as our customers grow because our pricing is based in large part on the number of consumers that our customers reach and the volume of messages our customers send.

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We had net losses of $130.4 million, $140.7 million and $78.2 million, in the fiscal years ended January 31, 2024, 2023, and 2022, respectively.

We had net cash used in operating activities of $22.3 million, $35.4 million, and $6.1 million in the fiscal years ended January 31, 2023, 2022, and 2021, respectively.

We had net cash provided by operating activities of $6.9 million in the fiscal year ended January 31, 2024 and net cash used in operating activities of $22.3 million and $35.4 million in the fiscal years ended January 31, 2023 and 2022, respectively.

Our Non-GAAP free cash flow was $(6.5) million, $(39.0) million and $(39.8) million in the fiscal years ended January 31, 2024, 2023, and 2022, respectively.

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We believe there is substantial opportunity to continue to grow our customer base.

We intend to continue to expand our customer base in verticals where we already have a strong presence, such as retail, eCommerce, media, entertainment and on-demand services, and to increase our presence in verticals where we are not yet strongly represented.

Through our sales and marketing efforts, we plan to capitalize on the ongoing digital transformation in regulated industries like healthcare and financial services to further propel adoption of our technology.

We intend to continue to expand our customer base in verticals where we already have a strong presence, such as retail, media and entertainment, on-demand services, gaming, health and lifestyle, and financial services — and to increase our presence in verticals where we are not yet strongly represented.

Through our sales and marketing efforts, we also plan to capitalize on industries subject to ongoing digital transformation and where direct-to-consumer relationships are accelerating, to further propel adoption of our technology.

As of January 31, 2024, we had 2,044 customers across a broad range of sizes and industries.

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We believe we can achieve significant growth by expanding sales within our existing customer base.

We expand the use of our platform by existing customers by, among others, adding new channels and increasing the messaging volume we sell to our customers as their businesses and needs continue to grow.

turn leads to a need for greater messaging capacity.

We intend to continue to invest in developing and enhancing our products and functionality.

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Historically, we have experienced significant expansion within a customer’s business once our platform is deployed, with customers typically increasing the number of monthly active users, channels and use cases, as well as purchasing additional products.

A monthly active user is an end user of a customer who has engaged with the customer’s applications and websites in the previous calendar month.

A monthly active user is an end user of a customer who has engaged with the customer’s applications and websites in the previous thirty-day period.

We include each distinguishable end user in our calculation of monthly active users, even though some users may access our customers’ applications and websites using more than one device, and multiple users may gain access using the same device.

As of January 31, 2024, we had approximately 6.2 billion monthly active users, up from approximately 4.8 billion monthly active users as of January 31, 2023.

Currently, our in-product messaging channels consist of Content Cards, which embed personalized content into a brand’s website or application, and in-app and in-browser messages.

Our out-of-product channels include, but are not limited to, mobile push notifications, web push notifications, email, SMS and MMS messages, webhooks, Facebook and Google advertisements and multiple over-the-top media services and connected TV channels.

We have also added early access to both WhatsApp and TikTok advertisements to certain customers on our platform.

Braze supports interactions across a broad range of both in-product and out-of-product messaging channels.

The flexibility of our platform also allows us to add new channels quickly and efficiently as they become relevant to our customers.

The breadth of channels we offer, and our ability to efficiently expand our offering of channels, allows us to expand our reach within existing customers as they purchase additional channels from us.

In addition to monthly active users, we have a history of increasing annual recurring revenue, or ARR, from our customers.

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We are focused on investing in research and development to continue to enhance our platform.

For example, we continue to enable brands to better analyze and act on customer data, to develop our artificial intelligence capabilities, and to expand on channel offerings.

For example, we continue to develop our artificial intelligence capabilities, to enable brands to better analyze and act on customer data, and to expand our channel offerings.

We believe our market-driven product development approach maximizes the return on new feature development and channel expansion.

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We intend to continue to invest in building additional products that expand our capabilities and facilitate the extension of our platform to new channels and use cases.

Impact of Global Events and Macroeconomic Conditions on Our Business

Macroeconomic Conditions on Our Business

Unfavorable conditions in the economy, both in the United States and abroad, may negatively affect the growth of our business and our results of operations.

For example, global, macroeconomic events such as (1) the COVID-19 pandemic or any other similar health pandemic, including the emergence of new variant strains of COVID-19, and any uncertainties related to the recovery therefrom, (2) international conflicts that may impact international trade and global economic performance, such as the ongoing conflict between Russia and Ukraine and the related economic sanctions imposed by the United States and its trading partners against Russia and Belarus and (3) other macroeconomic trends, such as international and domestic supply chain risks, inflationary pressure, interest rate increases and declines in consumer confidence, that impact us and our customers, have led to economic uncertainty.

Additionally, the rapid collapse of Silicon Valley Bank and Signature Bank has raised questions regarding the stability of other U.S.

While, to date, we have not been materially impacted by such events, if our primary banking partners, or the banking partners of our customers, were to experience a similar crisis, it may cause a material impact on our liquidity or the liquidity of our customers.

Further, we cannot predict what effect, if any, the collapse of Silicon Valley Bank and Signature Bank and the current stress on other financial institutions will have on our customers who relied on these institutions as their primary financial institution.

If these customers face liquidity challenges as a result of these recent collapses, it may cause such customers to delay, or fail to, make payments to us or otherwise reduce their demand for our products.

Historically, during periods of economic uncertainty and downturns, businesses slow spending on information technology, which may impact our business.

Additionally, these macroeconomic conditions have also negatively impacted the businesses of some of our customers and potential customers, which in turn may cause them to decrease spending on customer engagement tools, such as our platform.

In recent quarters, we have seen slower growth from new customers, which may be related to the uncertain macroeconomic environment.

General macroeconomic and socioeconomic conditions such as, among others, instability in the banking and financial services sector, international and domestic supply chain risks, inflationary pressure, interest rate increases, declines in consumer confidence, international conflicts, and domestic and foreign political unrest have recently led to increased economic uncertainty.

We cannot predict if these trends will continue, and, accordingly, we are not able to estimate the ongoing effects on our results of operations, financial condition or liquidity as a result of these macroeconomic factors.

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General and administrative expenses consist primarily of personnel costs for finance, legal, human resources and other administrative functions, as well as non-personnel costs such as legal, accounting and other professional service fees, software costs, certain tax, license and insurance-related expenses and allocated overhead costs.

Additionally, from time to time general and administrative expenses may include expenses associated with our donation of shares of our Class A common stock to a charitable donor-advised fund in connection with our Pledge 1% commitment.

Additionally, from time to time general and administrative expenses may include expenses associated with our donation of shares of Class A common stock to a charitable donor-advised fund in connection with our Pledge 1% commitment.

We expect that general and administrative expenses will increase in absolute dollars and vary from period to period as a percentage of revenue for the foreseeable future but decrease as a percentage of revenue over the long term, as we focus on processes, systems, and controls to enable our internal support functions to scale with the growth of our business.

We expect to incur additional expenses as a result of operating as a public company, including expenses to comply with the rules and regulations applicable to companies listed on The Nasdaq Stock Market LLC, expenses related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and higher expenses for directors’ and officers’ insurance, investor relations and professional services.

We have incurred, and expect to continue to incur, additional expenses as a result of operating as a public company, including expenses to comply with the rules and regulations applicable to companies listed on The Nasdaq Stock Market LLC, expenses related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and higher expenses for insurance, investor relations and professional services.

Other Income (Expense), Net

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The increase in revenue of $116.4 million, or 32.7%, for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023 was primarily driven by an $112.7 million, or 33%, increase in subscription revenue.

Approximately 72.5% of the increase in subscription revenue was attributable to the growth from existing customers due to customer expansion of committed contractual entitlements and features, and the remaining 27.5% was attributable to new customers.

Approximately 66.8% of the increase in subscription revenue was attributable to the growth from existing customers increase in monthly active users, expansion across channels and committed entitlements and features, and the remaining 33.2% was attributable to new customers.

Total customers grew to 2,044 as of January 31, 2024 from 1,770 as of January 31, 2023.

Professional services revenue increased $0.7 million, or 4%.

The slower acceleration rate in professional services revenue was expected as new customers increasingly engaged with third-party partner-led onboarding services.

The overall professional services revenue growth was driven by an increase in premium deliverability service fees, such as email deliverability support and dedicated technical support staff.

Additionally, in the fiscal year ended January 31, 2023, our international revenue increased by $55.1 million as we continue to expand market penetration in regions such as Europe and Asia-Pacific.

Professional services revenue increased $3.6 million, or 21%, due to an increase in deliverability services, technical account management, and support engagement services.

These increases were partially offset by the decline in onboarding revenue as a result of the continued engagement of new customers with third-party partner-led onboarding.

Additionally, in the fiscal year ended January 31, 2024, our international revenue increased by $54.1 million as we continued to expand market penetration in regions such as Europe and Asia-Pacific.

Cost of Revenue, Gross Profit and Gross Margin

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Gross margin 68.7 % 67.4 %

T he increase in cost of revenue of $37.3 million, or 47.5%, for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022 was primarily driven by an increase of $15.4 million in hosting, infrastructure, and other third-party fees associated with delivering our platform and an $11.2 million increase in third-party messaging fees associated with growth in our email and SMS channels.

T he increase in cost of revenue of $31.7 million, or 27.4%, for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023 was primarily driven by an increase of $15.8 million in hosting, infrastructure, and other third-party fees associated with delivering our platform and a $13.2 million increase in third-party messaging fees associated with growth in channel utilization.

In addition, we had an increase in personnel and overhead costs of $2.0 million.

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Our gross profit increased $84.7 million, or 35.3%, in the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023, and our gross margin increased by 1.3% to 68.7% in the fiscal year ended January 31, 2024 from 67.4% in the fiscal year ended January 31, 2023.

These increases were due primarily to economies of scale as our infrastructure costs to support our revenue growth did not increase at the same pace as our revenue, the increases were partially offset by a

one-time vendor charge.

In addition, we have undertaken initiatives to optimize the costs of our tech stack and drive personnel efficiencies related to customer support functions.

These increases were due primarily to improved personnel efficiencies,

economies of scale, a one-time vendor charge recorded in the fiscal year ended January 31, 2023, and the optimization of costs of our tech stack as our infrastructure costs to support our revenue growth did not increase at the same pace as our revenue.

Operating Expenses

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Sales and marketing $ 247,125 $ 201,684 $ 45,441 22.5 %

The increase in sales and marketing expense of $74.5 million, or 58.6%, for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022 was primarily driven by an increase in personnel and overhead costs of $47.2 million, which included $7.6 million of stock-based compensation costs, as a result of a year-over-year increase in headcount, coupled with an overall increase in grant date fair value of the equity awards.

Software costs to support our sales function and recruiting fees increased $2.6 million as we continue to expand our sales and marketing presences globally.

Additionally, the increase was driven in part by an increase in amortization of deferred contract costs of $8.4 million as a result of sales growth and an increase of $15.6 million in promotional, marketing, and travel and entertainment costs were primarily due to the loosening of COVID-19 travel and event restrictions which allowed for in-person, internal company trainings, in-person marketing events and in-person customer meetings.

The increase in sales and marketing expense of $45.4 million, or 22.5%, for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023, was primarily driven by an increase in personnel and overhead costs of $34.8 million, which included $7.3 million of stock-based compensation costs, as a result of the expansion of equity award grants for existing and new employees.

Additionally, the increase was driven in part by an increase of $4.0 million in promotional and product marketing, primarily related to the hosting of regional customer events.

Further, there was a $2.4 million increase in professional services substantially related to sales team training.

Research and Development Expense

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Research and development $ 119,863 $ 97,293 $ 22,570 23.2 %

Th e increase in research and development expense of $38.3 million , or 64.8%, for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022 was primarily driven by an increase of personnel and overhead costs of $35.8 million , which included $13.3 million of stock-based compensation costs , to support our continued investment in the features and functionality of our platform, coupled with an overall increase in grant date fair value of the equity awards.

Th e increase in research and development expense of $22.6 million, or 23.2%, for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023, was primarily driven by an increase of personnel and overhead costs of $22.9 million , which included $10.1 million of stock-based compensation costs , to support our continued investment in the features and functionality of our platform.

The increase in personnel costs was primarily due to a year-over-year increase in headcount.

In addition, software costs increased $1.5 million as we continue investing in our platform.

Increases in expenses were partially offset by a decrease of $1.2 million in professional services costs.

General and Administrative Expense

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General and administrative $ 101,977 $ 88,771 $ 13,206 14.9 %

The increase in general and administrative expenses of $37.2 million, or 72.2%, for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022 was primarily driven by an increase in personnel and overhead costs of $21.8 million , which included $2.7 million of stock-based compensation costs, a nd an increase in legal, regulatory, and professional services costs of $5.9 million.

The increases were primarily due to a period-over-period increase in headcount, coupled with an overall increase in grant date fair value of the equity awards, as well as continued investments in our finance and administrative functions to build processes, systems, and controls to enable our ongoing compliance with public company legal and regulatory requirements.

Software costs increased $2.6 million due to an increase in software subscriptions and the need for additional licenses related to existing subscriptions to support the continued optimization of our administrative support functions.

In addition, costs increased $1.2 million in travel and entertainment, marketing, and promotion costs due to the loosening of COVID-19 travel and event restrictions which allowed for in-person, internal company meetings and trainings.

Additionally, we donated shares of our Class A common stock to a charitable donor-advised fund in connection with our Pledge 1% commitment valued at $4.3 million.

Other Income (Expense)

The increase in general and administrative expenses of $13.2 million, or 14.9%, for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023 was primarily driven by an increase in personnel and overhead costs of $13.8 million , which included $7.6 million of stock-based compensation costs, and an increase in s oftware costs of $1.0 million .

The increases were primarily due to investments in our finance and administrative functions to continue to scale our processes, systems, and controls to enable our ongoing compliance with public company legal and regulatory requirements.

These increases were offset by a decrease in the fair value measurement of the contingent consideration related to the acquisition of North Star Y, Pty Ltd, or North Star, of $1.6 million as a result of developments in significant inputs, notably new and incremental actual and forecasted deal closings from the Australia-New Zealand region.

Additionally, increases were offset by a $0.5 million reduction in value of the shares of Class A common stock donated to a charitable donor-advised fund in connection with our Pledge 1% commitment.

The reduction in value is a result of fluctuations in our stock price on the date of grant.

Other Income (Expense), Net

Fiscal Year Ended January 31,

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($ in thousands)

Other income (expense), net $ 7,977 $ (121) $ 8,098 n/m

n/m - not meaningful

The increase in other income, net was primarily driven by investment income in marketable securities.

The increase in investment income was substantially related to the higher cash and investments balances maintained related to the proceeds received upon completion of our initial public offering in November 2021.

Other income (expense), net $ 16,220 $ 7,977 $ 8,243 103.3 %

The increase in other income (expense), net was primarily driven by investment income in marketable securities.

The investment income increase was driven primarily by the strengthening of interest rates related to the graded maturation of the portfolio positions and the reinvestment of proceeds in a rising interest rate environment.

Liquidity and Capital Resources

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Since our inception, we have financed our operations primarily through the net proceeds received from the sales of equity securities and cash generated from the sale of subscriptions to our platform.

We have generated losses from our operations as reflected in our accumulated deficit of $353.9 million as of January 31, 2023, and cash flows used in operating activities for the fiscal year ended January 31, 2023 of $22.3 million.

A substantial source of our cash used in operating activities is our deferred revenue, which is included on our consolidated balance sheets as a liability.

We have generated losses from our operations as reflected in our accumulated deficit of $483.1 million as of January 31, 2024, and cash flows provided by operating activities for the fiscal year ended January 31, 2024 of $6.9 million.

A substantial source of our cash provided by operating activities is our deferred revenue, which is included on our consolidated balance sheets as a liability.

Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recorded as revenue over the term of the subscription agreement.

As of January 31, 2023, we had total deferred revenue of $166.1 million of which substantially all was recorded as a current liability.

As of January 31, 2024, we had total deferred revenue of $204.7 million, of which $204.3 million was recorded as a current liability.

Deferred revenue will be recognized as revenue when all of the revenue recognition criteria are met.

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(in thousands)

Net cash used in operating activities $ (22,308) $ (35,398) $ (6,080)

Net cash provided by/(used in) operating activities $ 6,850 $ (22,308) $ (35,398)

Net cash (used in)/provided by investing activities $ (19,976) $ (398,519) $ 18,040

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Operating Activities

For the fiscal year ended January 31, 2023, net cash used in operating activities was $22.3 million, primarily due to a net loss of $140.7 million adjusted for non-cash charges of $109.0 million and net changes in our operating assets and liabilities of $9.4 million.

For the fiscal year ended January 31, 2024, net cash provided by operating activities was $6.9 million, primarily due to a net loss of $130.4 million adjusted for non-cash charges of $136.2 million and net changes in our operating assets and liabilities of $1.1 million.

The non-cash adjustments primarily relate to stock-based compensation of $97.2 million, amortization of deferred contract costs of $29.8 million, depreciation and amortization expense of $7.0 million, and expense associated with the donation of our Class A common stock to a charitable donor-advised fund of $3.8 million.

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The cash inflows were offset by cash outflows primarily from an increase in deferred contract costs of $45.1 million as a result of commissions on new bookings and renewals.

For the fiscal year ended January 31, 2022, net cash used in operating activities was $35.4 million, primarily due to a net loss of $78.2 million adjusted for non-cash charges of $68.4 million and net changes in our operating assets and liabilities of

$25.7 million.

The non-cash adjustments primarily relate to stock-based compensation of $47.2 million, amortization of deferred contract costs of $17.7 million and depreciation and amortization expense of $2.8 million.

The cash outflow from changes in our operating assets and liabilities were primarily due to an increase in deferred contract costs and accounts receivable of $32.0 million and $29.8 million, respectively, as a result of commissions and billings for new bookings and renewals and prepaid expense and other current assets of $17.5 million due to prepayments for third-party software fees, primarily consisting of hosting arrangements.

The cash outflow was offset by cash inflows primarily from an increase in deferred revenue of $51.5 million, as a result of increased billings driven by timing of subscriptions and renewals and an increase in total bookings, and an overall increase in accrued expenses and other current liabilities of $6.0 million related to employee compensation costs.

The non-cash adjustments primarily relate to stock-based compensation of $72.2 million, amortization of deferred contract costs of $23.6 million, depreciation and amortization expense of $4.6 million, and expense associated with the donation of our Class A common stock to a charitable donor-advised fund of $4.3 million as part of our Pledge 1%

The cash inflows from changes in our operating assets and liabilities were primarily due to an increase in deferred revenue of $39.9 million as a result of increased billings driven by timing of subscriptions and renewals.

The cash inflows were offset by cash outflows primarily from an increase in deferred contract costs of $30.5 million as a result of commissions on new bookings and renewals.

Investing Activities

Net cash used in investing activities was $20.0 million for the fiscal year ended January 31, 2024, primarily consisting of purchases of marketable securities of $248.1 million, cash paid for the acquisition of North Star of $16.3 million, purchases of property and equipment of $9.8 million, and capitalization of internal-use software costs of $3.6 million, partially offset by maturities of marketable securities of $257.7 million.

Net cash used in investing activities was $398.5 million for the fiscal year ended January 31, 2023, primarily consisting of purchases of marketable securities of $638.2 million, partially offset by maturities of marketable securities of $256.4 million.

Net cash provided by investing activities was $18.0 million for the fiscal year ended January 31, 2022, primarily consisting of maturities of marketable securities of $59.3 million, partially offset by purchases of marketable securities of $36.9 million, purchases of property and equipment of $2.3 million and capitalized internal-use software costs of $2.1 million.

Financing Activities

Net cash provided by financing activities was $13.1 million for the fiscal year ended January 31, 2024, primarily consisting of proceeds from the exercise of common stock options of $7.3 million and proceeds from stock purchases associated with our employee stock purchase plan of $6.0 million, offset by payments of deferred purchase considerations related to the acquisition of North Star of $0.2 million.

Net cash provided by financing activities was $11.3 million for the fiscal year ended January 31, 2023, consisting solely of proceeds from the exercise of common stock options.

Net cash provided by financing activities was $467.9 million for the fiscal year ended January 31, 2022, primarily consisting of the proceeds from the issuance of Class A common stock upon our initial public offering, net of underwriting discounts and offering costs, of $457.1 million, proceeds from the exercise of common stock options of $8.4 million and an investment from our redeemable non-controlling interest in connection with our joint venture Braze KK of $2.5 million.

Non-GAAP Free Cash Flow

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Free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

Some of these limitations are (1) it is not a substitute for net cash used in operating activities, (2) other companies may calculate free cash flow or similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison, and (3) the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for any given period.

Some of these limitations are (1) it is not a substitute for net cash provided by/(used in) operating activities, (2) other companies may calculate free cash flow or similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison, and (3) the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for any given period.

The following table presents a reconciliation of free cash flow to net cash provided by/(used in) operating activities, the most directly comparable measure calculated in accordance with GAAP, for the periods presented:

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(in thousands)

Net cash used in operating activities $ (22,308) $ (35,398) $ (6,080)

Net cash provided by/(used in) operating activities $ 6,850 $ (22,308) $ (35,398)

Purchases of property and equipment (9,761) (15,447) (2,310)

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Net cash provided by financing activities $ 13,109 $ 11,332 $ 467,910

Our free cash flow increased slightly for the fiscal year ended January 31, 2023 from the fiscal year ended January 31, 2022, primarily as a result of continued investment in our sales and marketing function and in our infrastructure to support the growth of our business and our operations as a public company.

Our free cash flow increased for the fiscal year ended January 31, 2024 from the fiscal year ended January 31, 2023, primarily due to higher collections as a result of an increase in billings that are aligned with new contracts and contract renewals.

We expect our free cash flow to fluctuate in future periods with changes in our operating expenses and as we continue to invest in our growth.

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Our most significant funding requirements are principally comprised of employee compensation and related taxes and benefits, non-cancelable purchase commitments, and operating lease obligations.

Non-cancelable purchase commitments for business operations and operating lease obligations total $248.6 million and $62.1 million, respectively, as of January 31, 2023, due primarily over the next five years.

Non-cancelable purchase commitments for business operations and operating lease obligations total $255.1 million and $122.9 million, respectively, as of January 31, 2024, due primarily over the next three years.

Purchase commitments for business operations are primarily related to cloud hosting, infrastructure, and other software-based services.

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While we anticipate being able to satisfy our commitments through a combination of our available current cash, cash equivalents and marketable securities, and cash generated from the sale of subscriptions to our platform, if our estimates prove to be inaccurate we may seek to sell additional equity or other securities that may result in dilution to our stockholders, issue debt or seek other third-party funding, in order to satisfy our future funding requirements.

Comparison of the Fiscal Years Ended January 31, 2022 and January 31, 2021

For a discussion regarding our financial condition and results of operations for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021, refer to “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended January 31, 2022, filed with the SEC on March 31, 2022.

We have experienced seasonality in our cost of revenue as a result of our customers’ increased usage of our platform based on their business demands.

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Estimating standalone selling prices for our performance obligations requires judgment and is based on multiple factors, including, but not limited to, observable cost data, industry margin studies, historical selling prices, internal cost structure, internal pricing policies, and pricing practices in different regions and sales channels.

We review the estimated standalone selling price for our performance obligations periodically and update, if needed, to ensure that the methodology utilized reflects our current pricing practices.

We review the estimated standalone selling price for our performance obligations periodically and update, if needed, to ensure that the methodology

utilized reflects our current pricing practices.

The transaction price allocated to each performance obligation is recognized as revenue when or as the products or services are transferred to the customer.

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We determine the estimated benefit period by considering 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 factors.

Stock-Based Compensation

We measure and record the expense related to stock-based payment awards based on the fair value of those awards as determined on the date of grant.

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, or 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.

We estimate our forfeitures rate based on an analysis of our actual historical forfeitures materializing in the previous fiscal years, and revise the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

We routinely evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and expectations of future option exercise behavior.

We calculate the fair value of options granted by using the Black-Scholes option-pricing model with the following assumptions:

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 sufficient trading history of our common stock.

Expected Term

The expected term of our stock options represents the period that the stock-based awards are expected to be outstanding.

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.

Risk-Free Interest Rate

The risk-free interest rate is based on the implied yield currently available on U.S.

Treasury zero-coupon issues with an equivalent term of the expected life of the option on the grant date.

Dividend Yield

We have not declared or paid dividends to date and do not anticipate declaring dividends in the foreseeable future.

As such, the dividend yield has been estimated to be zero.

Fair Value of Common Stock

Prior to our initial public offering, the fair value of the common stock underlying the stock option awards was determined by our board of directors.

Given the absence of a public trading market, our board of directors considered numerous objective and subjective factors to determine the fair value of our common stock at each meeting at which awards were approved.

These factors included, but were not limited to, (i) contemporaneous third party valuations of our common stock;

(ii) the rights, preferences, and privileges of our convertible preferred stock relative to our common stock;

(iii) the lack of marketability of our common stock;

(iv) stage and development of our business;

(v) general economic conditions;

and (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of our 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.

Subsequent to our initial public offering, 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.

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

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Summary of Significant Accounting Policies, to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.

JOBS Act Accounting Election

Section 107(b) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.

Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We previously elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt some of the reduced disclosure requirements available to emerging growth companies.

As a result of the accounting standards election, we have not historically been subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies.

This may make comparison of our consolidated financial statements to those of other public companies more difficult.

Based on the market value of our common equity held by non-affiliates as of July 29, 2022 (the last business day of our most recently completed second fiscal quarter), we ceased to qualify as an emerging growth company as of the end of the fiscal year ended January 31, 2023.

As a result, we 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 our 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, we 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.

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What changed 10-K

Item 7. Management’s Discussion and Analysis