Braze, Inc. 10-K

Item 8. Financial Statements and Supplementary Data BRAZE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 61 Consolidated Balance Sheets at January 31, 202 4 and 20 23 64 Consolidated Statements of Operations for the years ended January 31, 202 4 , 202 3 , and 20 2 2 65 Consolidated Statements of Comprehensive Loss for the years ended January 31, 2024, 2023, and 2022 66 Consolidated Statements of Convertible Preferred Stock, Redeemable Non-Controlling Interest and Stockholders’ Equity (Deficit) for the years ended January 31, 2024, 2023, and 2022 67 Consolidated Statements of Cash Flows for the years ended January 31, 2024, 2023, and 2022 69 Notes to Consolidated Financial Statements 71 60 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Braze, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Braze, Inc. (the Company) as of January 31, 2024 and 2023, 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, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2024, in conformity with U.S. 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, 2024, 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 April 1, 2024 expressed an unqualified opinion thereon. Adoption of ASU No. 2016-02 As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases effective February 1, 2022 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 These financial statements are the responsibility of the Company's management. 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 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. 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. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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. 61 Table of Contents Revenue Recognition Description of the Matter As of January 31, 2024, the Company recorded revenue and unearned revenue of $471.8 million and $204.3 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 of recognition and the measurement of the Company's revenue was especially challenging and complex due to the high volume of transactions that are dependent on the design and operation of multiple applications and data sources for processing transactions as well as the complexity of the information technology (IT) environment and the involvement of professionals with expertise in IT to identify, test, and evaluate the revenue data flows, systems, and automated controls. How We Addressed the Matter in Our Audit We tested controls that address the risks of material misstatement relating to the timing of recognition and the measurement of revenue and unearned revenue. For example, we tested controls over the initiation of new and recurring revenue contracts, management’s review of customer provisioning, management’s review of data reconciling revenue recognition to delivery, the reconciliation of revenue and unearned revenue, and the assumptions used within the Company’s analysis of standalone selling price. We also tested the design and operating effectiveness of IT general controls for systems relevant to the revenue recognition process. We performed audit procedures that included, among others, testing completeness and, on a sample basis, accuracy of the underlying data within the Company’s billing and revenue recognition systems, reading a sample of revenue contracts, including modifications, evaluating the contractual terms and conditions, and testing a sample of cash to billings. 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. We tested the revenue recognized and unearned revenue as of year-end by extracting data from the general ledger to evaluate the completeness and accuracy of recorded revenue and deferred revenue amounts and through analytical procedures, including revenue recognized on a monthly basis compared to prior periods. Finally, we assessed the appropriateness of the related disclosures in the consolidated financial statements. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2019. New York, NY April 1, 2024 62 Table of Contents 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, 2024, 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, Braze, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2024, based on the COSO criteria. As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Braze Australia, which is included in the 2024 consolidated financial statements of the Company and constituted 1% of total assets, as of January 31, 2024 and 6% of total revenues, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Braze Australia. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2024 and 2023, 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, 2024, and the related notes and our report dated April 1, 2024 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 New York, NY April 1, 2024 63 Table of Contents BRAZE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) January 31, 2024 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 68,228 $ 68,587 Restricted cash, current 3,373 — Accounts receivable, net of allowance of $ 2,772 and $ 1,613 at January 31, 2024 and January 31, 2023, respectively 92,256 78,338 Marketable securities 407,898 410,083 Prepaid expenses and other current assets 29,366 26,163 Total current assets 601,121 583,171 Restricted cash, noncurrent 530 4,036 Property and equipment, net 29,358 20,339 Operating lease right-of-use assets 81,163 46,261 Deferred contract costs 63,661 48,451 Goodwill 28,448 — Intangible assets, net 3,690 500 Other assets 2,970 2,648 TOTAL ASSETS $ 810,941 $ 705,406 LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 6,321 $ 3,101 Accrued expenses and other current liabilities 63,264 37,415 Deferred revenue 204,269 166,092 Operating lease liabilities, current 15,585 10,695 Total current liabilities 289,439 217,303 Operating lease liabilities, noncurrent 75,027 40,590 Other long-term liabilities 2,050 755 TOTAL LIABILITIES 366,516 258,648 COMMITMENTS AND CONTINGENCIES (Note 13) Redeemable non-controlling interest (Note 4) 192 1,455 STOCKHOLDERS’ EQUITY Class A common stock, $ 0.0001 par value; 2,000,000,000 and 2,000,000,000 shares authorized as of January 31, 2024 and January 31, 2023, respectively; 73,037,015 and 61,585,973 shares issued and outstanding as of January 31, 2024 and January 31, 2023, respectively 7 6 Class B common stock, $ 0.0001 par value; 110,000,000 and 110,000,000 shares authorized as of January 31, 2024 and January 31, 2023, respectively; 27,173,408 and 34,389,453 shares issued and outstanding as of January 31, 2024 and January 31, 2023, respectively 3 4 Additional paid-in capital 928,494 806,044 Accumulated other comprehensive loss ( 1,178 ) ( 6,824 ) Accumulated deficit ( 483,093 ) ( 353,927 ) TOTAL STOCKHOLDERS’ EQUITY 444,233 445,303 TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY $ 810,941 $ 705,406 The accompanying notes are an integral part of these consolidated financial statements. 64 Table of Contents BRAZE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Fiscal Year Ended January 31, 2024 2023 2022 Revenue $ 471,800 $ 355,426 $ 238,035 Cost of revenue 147,527 115,818 78,511 Gross Profit 324,273 239,608 159,524 Operating expenses: Sales and marketing 247,125 201,684 127,137 Research and development 119,863 97,293 59,034 General and administrative 101,977 88,771 51,564 Total operating expenses 468,965 387,748 237,735 Loss from operations ( 144,692 ) ( 148,140 ) ( 78,211 ) Other income (expense), net 16,220 7,977 ( 121 ) Loss before provision for income taxes ( 128,472 ) ( 140,163 ) ( 78,332 ) Provision for (benefit from) income taxes 1,957 583 ( 165 ) Net loss ( 130,429 ) ( 140,746 ) ( 78,167 ) Net loss attributable to redeemable non-controlling interest ( 1,263 ) ( 1,780 ) ( 1,448 ) Net loss attributable to Braze, Inc. $ ( 129,166 ) $ ( 138,966 ) $ ( 76,719 ) Net loss per share attributable to Braze, Inc. common stockholders, basic and diluted $ ( 1.32 ) $ ( 1.47 ) $ ( 2.20 ) Weighted-average shares used to compute net loss per share attributable to Braze, Inc. common stockholders, basic and diluted 98,096 94,569 34,897 The accompanying notes are an integral part of these consolidated financial statements. 65 Table of Contents BRAZE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Fiscal Year Ended January 31, 2024 2023 2022 Net loss $ ( 130,429 ) $ ( 140,746 ) $ ( 78,167 ) Other comprehensive loss: Change in foreign currency translation adjustments 230 ( 633 ) ( 534 ) Unrealized gains (losses) on marketable securities 5,416 ( 5,551 ) ( 64 ) Other comprehensive income (loss), net 5,646 ( 6,184 ) ( 598 ) Comprehensive loss, net ( 124,783 ) ( 146,930 ) ( 78,765 ) Less: comprehensive loss, net, attributable to redeemable non-controlling interest ( 1,263 ) ( 1,780 ) ( 1,448 ) Comprehensive loss attributable to Braze, Inc. $ ( 123,520 ) $ ( 145,150 ) $ ( 77,317 ) The accompanying notes are an integral part of these consolidated financial statements. 66 Table of Contents BRAZE, INC. CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands) Convertible Preferred Stock Redeemable Non-controlling Interest Class A and Class B Common Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity (Deficit) Shares Amount Shares Amount Shares Amount Balance at January 31, 2021 62,831 $ 174,229 $ 2,233 — $ — 19,498 $ — $ 29,777 $ ( 138,242 ) $ ( 42 ) $ ( 108,507 ) 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 Vesting of restricted stock units — — — 70 — — — — — — — Repurchase of unvested shares related to early exercised options — — — ( 3 ) — — — — — — — Stock-based compensation — — — — — — — 47,567 — — 47,567 Investment in redeemable non-controlling interests — — 2,450 — — — — — — — — Other comprehensive loss — — — — — — — — — ( 598 ) ( 598 ) 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. — — — — — — — — ( 76,719 ) — ( 76,719 ) Balance at January 31, 2022 — $ — $ 3,235 92,968 $ 9 — $ — $ 717,175 $ ( 214,961 ) $ ( 640 ) $ 501,583 The accompanying notes are an integral part of these consolidated financial statements. 67 Table of Contents BRAZE, INC. 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 Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount Balance at January 31, 2022 $ 3,235 92,968 $ 9 $ 717,175 $ ( 214,961 ) $ ( 640 ) $ 501,583 Issuance of common stock for options exercised — 2,156 1 8,455 — — 8,456 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 shares related to early exercised options — ( 1 ) — — — — — Stock-based compensation — — — 73,133 — — 73,133 Other comprehensive loss — — — — — ( 6,184 ) ( 6,184 ) Net loss attributable to redeemable non-controlling interests ( 1,780 ) — — — — — — Charitable donation of stock — 96 — 4,260 — — 4,260 Net loss attributable to Braze, Inc. — — — — ( 138,966 ) — ( 138,966 ) Balance at January 31, 2023 $ 1,455 95,975 $ 10 $ 806,044 $ ( 353,927 ) $ ( 6,824 ) $ 445,303 Issuance of common stock for options exercised — 1,955 — 7,263 — — 7,263 Issuance of common stock under employee stock purchase plan — 234 — 6,011 — — 6,011 Vesting of restricted stock units — 1,760 — — — — — Stock-based compensation — — — 99,293 — — 99,293 Other comprehensive income — — — — — 5,646 5,646 Net loss attributable to redeemable non-controlling interests ( 1,263 ) — — — — — — Charitable donation of stock — 96 — 3,762 — — 3,762 Issuance of common stock from acquisition — 190 — 6,121 — — 6,121 Net loss attributable to Braze, Inc. — — — — ( 129,166 ) — ( 129,166 ) Balance at January 31, 2024 $ 192 100,210 $ 10 $ 928,494 $ ( 483,093 ) $ ( 1,178 ) $ 444,233 The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents BRAZE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Fiscal Year Ended January 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (including amounts attributable to redeemable non-controlling interests) $ ( 130,429 ) $ ( 140,746 ) $ ( 78,167 ) Adjustments to reconcile net loss to net cash provided by/(used in) operating activities: Stock-based compensation 97,232 72,243 47,180 Amortization of deferred contract costs 29,788 23,639 17,710 Depreciation and amortization 6,963 4,618 2,773 Provision for credit losses 2,020 807 88 Value of common stock donated to charity 3,762 4,260 — (Accretion) amortization of (discount) premium on marketable securities ( 2,077 ) 1,336 369 Non-cash foreign exchange loss 460 1,612 387 Fair value adjustments to contingent consideration ( 1,572 ) — — Other ( 349 ) 495 ( 80 ) Changes in operating assets and liabilities: Accounts receivable ( 14,008 ) ( 14,650 ) ( 29,821 ) Prepaid expenses and other current assets ( 3,413 ) 3,596 ( 17,537 ) Deferred contract costs ( 45,119 ) ( 30,469 ) ( 31,967 ) ROU assets and liabilities 4,275 3,355 — Other assets 229 1,711 ( 4,723 ) Accounts payable 3,419 906 1,649 Accrued expenses and other current liabilities 20,990 5,075 6,026 Deferred revenue 34,108 39,894 51,471 Other long-term liabilities 571 10 ( 756 ) Net cash provided by/(used in) operating activities 6,850 ( 22,308 ) ( 35,398 ) CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for acquisition, net of cash acquired ( 16,319 ) — — Purchases of property and equipment ( 9,761 ) ( 15,447 ) ( 2,310 ) Capitalized internal-use software costs ( 3,574 ) ( 1,258 ) ( 2,065 ) Purchases of marketable securities ( 248,059 ) ( 638,221 ) ( 36,894 ) Maturities of marketable securities 257,737 256,407 59,309 Net cash (used in)/provided by investing activities ( 19,976 ) ( 398,519 ) 18,040 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock upon initial public offering, net of offering costs — — 462,260 Investment from redeemable non-controlling interest — — 2,450 Proceeds from exercise of common stock options 7,263 11,332 8,362 Proceeds from stock associated with employee stock purchase plan 6,011 — — Payment of deferred offering costs — — ( 5,157 ) Payments of deferred purchase consideration ( 165 ) — — Repurchase of shares related to early exercised options — — ( 5 ) Net cash provided by financing activities 13,109 11,332 467,910 Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash ( 475 ) ( 855 ) ( 597 ) Net change in cash, cash equivalents, and restricted cash ( 492 ) ( 410,350 ) 449,955 Cash, cash equivalents, and restricted cash, beginning of period 72,623 482,973 33,018 Cash, cash equivalents, and restricted cash, end of period $ 72,131 $ 72,623 $ 482,973 The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents BRAZE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL CASH FLOWS DISCLOSURE (in thousands) Fiscal Year Ended January 31, 2024 2023 2022 SUPPLEMENTAL CASH FLOW DISCLOSURE: Cash paid for income taxes, net of refunds $ 309 $ 365 $ 299 NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock-based compensation capitalized to internal-use software $ 2,152 $ 1,121 $ 387 Net change in capitalized internal-use software development costs in accrued expenses $ — $ 21 $ ( 58 ) Unrealized net gain (loss) on marketable investment securities $ 5,416 $ ( 5,551 ) $ ( 64 ) Net change to property and equipment (included in accounts payable / accrued liabilities) $ 208 $ 75 $ ( 23 ) Vesting of early exercised options $ — $ 145 $ 524 Common stock option receivables $ — $ — $ 22 Conversion of convertible preferred stock to common stock $ — $ — $ 174,229 Deferred offering costs reclassed to Stockholders’ Equity (Deficit) $ — $ — $ 183 Asset retirement obligation $ 62 $ 374 $ — Common stock issuance, acquisition $ ( 6,121 ) $ — $ — Contingent consideration, acquisition $ ( 1,795 ) $ — $ — Indemnity holdbacks, acquisition $ ( 3,081 ) $ — $ — The accompanying notes are an integral part of these consolidated financial statements. 70 Table of Contents BRAZE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Company Overview Description of Business Braze, Inc., together with its subsidiaries (collectively, the “Company”, “we”, “us”, “our”, or “Braze”), is a cloud-based customer engagement platform that delivers customer-centric experiences across push notifications, email, in-product messaging, SMS and MMS messages, and more. Customers use the Braze platform to facilitate real-time experiences between brands and customers in a more authentic and human way. We began operations in 2011 and are incorporated in the state of Delaware. Our headquarters are located in New York, New York. As of January 31, 2024, we also lease additional office space in Austin, Berlin, Chicago, Jakarta, London, Paris, San Francisco, Singapore, Sydney, and Tokyo. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). 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. Reclassifications Certain reclassifications and immaterial changes have been made to prior-period financial statements to conform to the current-period presentation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reported period. We evaluate estimates based on historical and anticipated results, trends, and various other assumptions. Significant items subject to such estimates and assumptions include, but are not limited to, the standalone selling price for separate performance obligations in our revenue arrangements, expected period of benefit for deferred contract costs, the valuation of common stock and stock-based compensation, the allocation of overhead costs between cost of revenue and operating expenses, the estimated useful lives of intangible and depreciable assets, the fair value of acquired assets and assumed liabilities from business combinations, valuation of long-lived assets and their recoverability, including goodwill, the incremental borrowing rate, the valuation of deferred tax assets and liabilities and other tax estimates including our ability to utilize net operating losses. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments as facts and circumstances dictate. As future events and their effects, including the uncertainty surrounding rapidly changing market and economic conditions from global or domestic macroeconomic and socioeconomic 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, that impact us and our customers, cannot be determined with precision, actual results could differ from those estimates and many of our estimates and assumptions have required increased judgement and carry a higher degree of variability and volatility. Basic and Diluted Net Loss attributable to Braze, Inc. Common Stockholders per Share Basic net loss attributable to Braze, Inc. per common stockholder’s share is computed by dividing the net loss by the weighted-average number of shares of Braze, Inc. common stock outstanding during the period. Diluted loss per share is computed by dividing the net loss attributable to Braze, Inc. by the weighted-average number of shares of Braze, Inc. common stock together with the number of additional shares of Braze Inc. common stock that would have been outstanding if all potentially dilutive shares of Braze Inc. common stock had been issued. Since we were in a loss position for the periods presented, basic net loss per share attributable to Braze, Inc. common stockholders is the same as diluted net loss per share attributable to Braze, Inc. common stockholders since the effects of potentially dilutive securities are antidilutive. 71 Table of Contents Prior to our IPO, basic and diluted net loss attributable to Braze, Inc. per common stockholder’s share is presented in conformity with the two-class method required for participating securities. Under the two-class method, net loss is attributed to common stockholders and participating securities based on their participation rights. Prior to our IPO, we considered all series of our convertible preferred stock to be participating securities. Under the two-class method, the net loss attributable to Braze, Inc. common stockholders is not allocated to the convertible preferred stock as the holders of our convertible preferred stock do not have a contractual obligation to share in our losses. Segment Reporting Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. Our Chief Executive Officer (“CEO”) is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, we have one operating segment, which is the business of cloud-based customer engagement platform subscriptions. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities Level 3 – Unobservable inputs that are supported by little or no market data for the related assets or liabilities The categorization of a financial instrument within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our financial instruments include cash equivalents, marketable securities, accounts receivable, accounts payable, and other current assets and liabilities. At January 31, 2024 and 2023, the carrying amounts of accounts receivable, accounts payable, and other current assets and liabilities approximated fair values because of their short-term nature. Foreign Currency The functional currency of our foreign subsidiaries is primarily the local currency. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the exchange rate on the transaction date. 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 (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. The gain or loss resulting from the process of translating foreign currency financial statements into U.S. 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 (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. Cash and cash equivalents consist of deposit accounts and interest-bearing money market accounts that are stated at fair value. 72 Table of Contents As of January 31, 2024 and 2023, approximately $ 3.9 million and $ 4.0 million, respectively, of deposits were restricted due to multiple letters of credit related to our leased and subleased properties. These deposits were classified as current and noncurrent based on the related underlying lease term. The following table provides a reconciliation of the cash, cash equivalents, and restricted cash as of January 31, 2024 and 2023 (in thousands): January 31, 2024 2023 Cash and cash equivalents $ 68,228 $ 68,587 Restricted cash, current 3,373 — Restricted cash, noncurrent 530 4,036 Total cash, cash equivalents, and restricted cash $ 72,131 $ 72,623 Accounts Receivable, Net and Credit Losses Accounts receivable, net 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. 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 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 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 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, 2024 and 2023, 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 consolidated balance sheets. As of January 31, 2024, one customer accounted for approximately 11 % of accounts receivable, net. No other customer accounted for more than 10% of our total accounts receivable balance. As of January 31, 2023, no customers 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 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 (expense), 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 73 Table of Contents 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 (expense), net in the consolidated statements of operations. Impairments related to factors other than credit losses are recognized in accumulated other comprehensive loss. As of January 31, 2024, the Company had not recorded any credit impairments. Property and Equipment, Net Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful life of the related asset. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. 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 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, office equipment, and software 3 to 5 years Furniture and fixtures 7 years Leasehold improvements Shorter of lease term or estimated useful life of assets Impairment of Long-Lived Assets Long-lived assets, subject to depreciation and amortization, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets or asset groups may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of these assets or asset groups is measured by comparison of the carrying amount of each asset or asset group to the future undiscounted cash flows the asset or asset group is expected to generate over their remaining lives. If the asset or asset group is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset or asset group. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the new shorter useful life. There w ere no material impair ment losses of long-lived assets recognized for the fiscal years ended January 31, 2024, 2023 and 2022. Capitalized Internal-use Software Costs We capitalize certain costs incurred to develop new or additional customer-facing software functionality, on the consolidated balance sheets as a component of property and equipment, net. We capitalize qualifying personnel costs, including stock-based compensation, and consulting costs incurred during the application development stage so long as the project is authorized, it is probable the project will be completed, and the software will be used to perform the function intended. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred and included in research and development expenses on the consolidated statements of operations. These capitalized costs are amortized over the software’s expected useful life, which is generally three years , within cost of revenue on the consolidated statements of operations. Comprehensive Loss Our comprehensive loss is currently comprised of unrealized gains or losses on available-for-sale securities and foreign currency translation adjustments. Variable Interest Entity 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. 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. This assessment includes identifying the activities that most significantly impact the VIE’s economic performance and identifying which party, if any, has power over those activities. In general, the party that makes the most 74 Table of Contents significant decisions affecting the VIE is determined to have the power to direct the activities of the VIE. 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. The reassessment process considers whether we have acquired or divested the power to direct the most significant activities of the VIE through changes in governing documents or other circumstances. We also reconsider whether entities previously determined not to be VIEs have become VIEs, based on new events, and therefore could be subject to the VIE consolidation framework. Redeemable Non-controlling Interest Redeemable non-controlling interests represent the portion of net income (loss), net, and comprehensive income (loss), net, that is not allocable to us, in situations where we consolidate an equity interest or as the primary beneficiary of a VIE for which there are other owners. The amount of non-controlling interest is comprised of the greater of the amount of such interests at the date of the original acquisition of an equity interest in an investment, plus the other shareholders’ share of changes in equity since the date of the investment or estimated redemption value. The resulting changes in the estimated redemption amount (increases or decreases) are recorded with corresponding adjustments against retained earnings or, in the absence of retained earnings, additional paid-in-capital. The redeemable non-controlling interest is classified outside of permanent equity as mezzanine equity on the consolidated balance sheets as the redemption option is outside of our control. Revenue Recognition We derive our revenue primarily from subscriptions to our platform, including associated support, and professional services. Our subscriptions do not provide customers with the right to take possession of the software supporting the applications and, as a result, are accounted for as service contracts. Professional services primarily consist of fees for distinct services rendered in training and assisting customers to configure and optimize the use of the platform. Revenue is recognized when control of the promised goods or services is transferred to clients in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We apply the following five-step model to recognize revenue from contracts with clients: • Identification of the contract or contracts with a customer; • Identification of the performance obligation(s) in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligation(s) in the contract; and • Recognition of revenue when, or as, a performance obligation is satisfied. We identify the performance obligations in a contract or multiple contracts with a customer and determine whether they are distinct or distinct within the context of the contract. When there is more than one distinct performance obligation in a contract, we allocate the transaction price to the performance obligations on a relative standalone selling price basis based on standalone selling prices (“SSP”). We have identified two performance obligations within our contracts with our customers: (i) subscription and (ii) professional services and other. All contracts generally contain fixed consideration payable upfront by the customer. Some of our multi-year arrangements may contain fixed fees with escalating pricing structures each year. The nature of our subscription performance obligation remains unchanged each period of the arrangement and therefore may create a contract asset reflecting the difference between the amount of revenue recognized compared to the amount billed. Some of our contracts with customers contain terms, such as service level guarantees, product usage and overage fees, that, along with various potential claims, including breach of warranty, may result in variable consideration. Variable consideration exists when the amount which we expect to receive in a contract is affected by the occurrence or non-occurrence of future events. We develop estimates of variable consideration on the basis of historical information, current trends, and any other specific knowledge about future periods. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Typically, our contracts do not provide customers with any right of return or refund; however, we may make exceptions on a case-by-case basis when it makes commercial sense. 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, 2024 and 2023. We allocate the variable consideration related to the product usages and overages to the distinct month during which the related services were performed 75 Table of Contents 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. To the extent that we grant customers an option to acquire additional products or services, we account for the option as a distinct performance obligation in the contract only if the option provides a material right to the customer that the customer would not receive without entering into the contract. If a material right exists in a contract, revenue allocated to the option is deferred and recognized as revenue only when those future products or services are transferred or when the option expires. Contracts do not typically contain material rights and when they do, the material right has not been significant to our consolidated financial statements. Once the transaction price is determined, the total transaction price is allocated to each performance obligation in a manner depicting the amount of consideration to which we expect to be entitled in exchange for transferring the products or services to the customer. This allocation is based on the SSP of the products or services included in the arrangement. Judgment is required to determine the SSP for each performance obligation. We determine SSP based on observable prices for those related goods or services when sold separately, if available. When such observable prices are not available, we determine SSP based on overarching pricing objectives and strategies, taking into consideration market conditions and other factors, including transaction size, product-specific factors, historical sales of the deliverables and costs to deliver the services and applicable margins. Subscription Services Subscription revenue is recognized ratably over the contract term beginning on the commencement date of each contract, which is the date the platform is made available to customers. We have determined that subscriptions to our platform represent a stand-ready obligation to perform over the subscription term. These performance obligations are satisfied over time as the customer simultaneously receives and consumes the benefits. 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. Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and in deferred revenue or revenue. We report revenue net of sales tax and other taxes collected from customers to be remitted to government authorities. Professional Services and Other Professional services and other revenue primarily consist of onboarding services and are typically recognized as services are performed since our customers simultaneously receive the benefits of these services as they are performed, which is generally over a period of up to six months from provisioning access to the platform. We invoice our customers for professional services at the outset of the contract. Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and in deferred revenue or revenue. We report revenue net of sales tax and other taxes collected from customers to be remitted to government authorities. Contract Balances Contract Assets 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 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. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as a current liability in our consolidated balance sheets. The deferred revenue balance does not represent the total contract value of annual or multi-year, non-cancelable agreements. Deferred Contract Costs 76 Table of Contents We capitalize costs of obtaining revenue contracts that are incremental and recoverable. Incremental costs primarily include sales commissions and bonuses for new and renewal revenue contracts and associated payroll tax and fringe benefit costs and are recorded within deferred contract costs on the consolidated balance sheets. Capitalized amounts are recoverable through future revenue streams under all customer contracts. 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. Deferred contract costs related to renewals are amortized over the renewal term which is generally one year to three years . Amortization of contract costs are classified within operating expenses based on the function of the underlying employee receiving the benefit in the accompanying consolidated statements of operations. Deferred contract costs are periodically analyzed for impairment. As of January 31, 2024 and 2023, we have not identified any potential indicators of impairment. Cost of Revenue Cost of revenue consists of expenses related to providing platform access to customers and onboarding services. These costs include payments to third-party cloud infrastructure providers for hosting software solutions and costs associated with application service providers utilized to deliver the platform, allocated personnel-related costs, including salaries, cash-based performance compensation, benefits and stock-based compensation, overhead cost allocations related to facilities and shared IT-related expenses, including depreciation expense and amortization of internal use software. Operating Expenses Operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, cash performance-based compensation, employee benefits and stock-based compensation. Operating expenses also include overhead cost allocations. Sales and Marketing Sales and marketing expenses consist primarily of personnel costs for sales and marketing organization, costs related to sponsorships, events and advertising, agency costs, travel-related expenses, and allocated overhead costs. Costs associated with our advertising and sales promotions are expensed as incurred. During the fiscal years ended January 31, 2024, 2023, and 2022, we recognized $ 25.1 million, $ 20.8 million, and $ 12.2 million, respectively, in advertising costs, which included brand and sponsorship costs. Research and Development Research and development expenses consist primarily of personnel costs for engineering, service, design, and information technology teams. Additionally, research and development expenses include allocated overhead costs and contractor fees. Research and development costs are expensed as incurred. Capitalized internal-use software development costs are excluded from research and development expenses as they are capitalized as a component of property and equipment, net and amortized to cost of revenue over the software’s expected useful life, which is generally three years . General and Administrative General and administrative expenses consist primarily of personnel costs for finance, legal, human resources and other administrative functions, as well as outside professional services. In addition, general and administrative expense includes non-personnel costs, such as legal, accounting and other professional fees, software costs, certain tax, license and insurance-related expenses and allocated overhead costs. 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 (“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 77 Table of Contents 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 ten 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 IPO, the fair value of the common stock underlying the stock option awards was determined by the board of directors (“the Board”). Given the absence of a public trading market, the Board 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 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. 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. Investment Income Investment income consists primarily of income earned on our investments, cash and cash equivalents and restricted cash. Other Income (Expense), Net Other income (expense), net, is primarily comprised of realized and unrealized foreign currency gains and losses. Leases Effective February 1, 2023, the Company adopted ASU 2016-02, utilizing the modified retrospective approach. 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. 78 Table of Contents 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. Prior to adoption, during the fiscal year ended January 31, 2022 and prior, the Company accounted for leases under ASC 840, whereby rent expense associated with operating leases was recognized on a straight-line basis over the lease term. Income Taxes We account for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. In evaluating our ability to recover our deferred income tax assets, we consider all available positive and negative evidence, using a more likely than not standard. The evaluation considers our recent historical operating results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance that would reduce the provision for income taxes. 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, 2024, 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. We recognize the tax benefits on any uncertain tax positions taken or expected to be taken in the consolidated financial statements when it is more likely than not the position will be realized upon ultimate settlement with tax authorities, assuming full knowledge of the position and relevant facts. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Business Combinations The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair values. The excess of the consideration transferred over the fair value of assets acquired and liabilities assumed on the acquisition date is recorded as goodwill. Such valuations require the Company to make significant estimates and assumptions. The Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed, but these estimates are inherently uncertain and subject to refinement. During the measurement period, the Company may record adjustments to the fair values of assets acquired and liabilities assumed, with the corresponding offset to 79 Table of Contents goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations. Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. Goodwill and indefinite-lived intangible assets are not amortized and are tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may be impaired. Goodwill is tested for impairment at the reporting unit level. The Company has the option to first perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit and indefinite-lived intangible assets are less than its carrying amount. The Company may elect to bypass the qualitative assessment and proceed directly to the quantitative impairment tests. The quantitative impairment test for goodwill involves comparing the fair value of the reporting unit to its carrying value, including goodwill. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value. The impairment is limited to the carrying amount of goodwill. The quantitative impairment test for indefinite-lived intangible assets involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of indefinite-lived intangible assets are determined using a discounted cash flow valuation analysis that employs different valuation methodology in estimating the fair value of the asset. Significant judgments are inherent in the discounted cash flow analysis. The Company has determined that it operates as one reporting unit and has selected November 1 as the date to perform its annual impairment test. No goodwill impairment charges have been recorded for any period presented. Restructuring Restructuring costs generally include significant actions involving employee-related severance payments, benefits, and certain facilitation costs, associated with our workforce reductions. Employee-related severance charges are largely based upon substantive severance plans, while some are mandated requirements in certain foreign jurisdictions. Severance costs generally include severance payments, health insurance coverage, and legal costs. These charges are reflected in the period when both the actions are probable, at the balance sheet date, and the amounts are reasonably estimable. Recently Adopted Accounting Pronouncements In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update No. 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, (“ASU 2021-08”), which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The Company adopted ASU 2021-08 prospectively during the second quarter of the fiscal year ended January 31, 2024, and determined that ASU 2021-08 does not have a material impact on the Company’s consolidated financial statements nor its related disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, (“ASU 2023-07”), which requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), an amount for other segment items with a description of the composition, and disclosure of the title and position of the CODM. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the update should be applied retrospectively to each period presented in the financial statements. The Company is currently evaluating the impact of the new standard on the consolidated financial statements and related disclosures. In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, (“ASU 2023-09”), which requires public business entities on an annual basis to disclose specific categories in a tabular rate reconciliation and provide additional information for reconciling items that meet a five percent quantitative threshold. Additionally, the ASU requires all entities to disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes, as well as individual jurisdictions where income taxes paid are equal to or greater than five percent of total income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and the updated should be applied on a prospective basis, with a retrospective 80 Table of Contents application permitted in the financial statements. The Company is currently evaluating the impact of the new standard on its consolidated financial statements and related disclosures. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures. 3. Revenue from Contracts with Customers Disaggregated Revenue Streams The following disaggregation depicts the nature, amount, timing and uncertainty of cash flows related to the primary types of revenue from contracts with customers. The following table presents total revenue by type (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Subscription $ 451,079 $ 338,351 $ 221,664 Professional services and other 20,721 17,075 16,371 Total $ 471,800 $ 355,426 $ 238,035 The following table presents total revenue by geography (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 United States $ 267,224 $ 204,931 $ 142,640 International 204,576 150,495 95,395 Total $ 471,800 $ 355,426 $ 238,035 Revenue by geography is determined based on the location of our users. Other than the United States, no other individual country accounted for 10% or more of total revenue for any of the periods presented. Unbilled Accounts Receivable Unbilled accounts receivable included in trade accounts receivable, net, which generally arise from our contractual right to bill our customers in advance of services on the contract effective date, were $ 1.5 million and $ 1.0 million as of January 31, 2024 and January 31, 2023, respectively. Contract Balances Contract Assets Contract assets as of January 31, 2024 and January 31, 2023 were $ 0.9 million and $ 0.8 million, respectively. The change in contract assets for all periods presented primarily reflects revenue recognized in excess of billings partially offset by contract assets earned during the period. Deferred Revenue The change in deferred revenue for all periods presented primarily reflects cash payments received during the period for which the performance obligation was not satisfied prior to the end of the period, partially offset by revenues recognized during the period. Revenue recognized during the fiscal year ended January 31, 2024, 2023, and 2022 from amounts included in deferred revenue at the beginning of each respective period was $ 165.6 million, $ 126.1 million, and $ 74.6 million, respectively. 81 Table of Contents Credit Losses The following table presents a reconciliation of the allowance for credit losses on accounts receivable (in thousands): Allowance for Credit Losses Balance at January 31, 2023 $ 1,613 Reserve: Credit losses 2,016 Deferred revenue 4,023 Write-offs ( 5,053 ) Recoveries 173 Balance at January 31, 2024 $ 2,772 Remaining Performance Obligations The transaction price allocated to remaining performance obligations represents amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, the timing of service delivery and contract terms. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes and other market factors. The following table presents remaining performance obligations as of the dates indicated below (in millions): Total Less than 1 Year 1-5 Years January 31, 2023 $ 455.7 $ 312.6 $ 143.1 April 30, 2023 477.5 325.4 152.1 July 31, 2023 523.5 353.3 170.2 October 31, 2023 560.1 369.9 190.2 January 31, 2024 639.2 409.1 230.1 4. Variable Interest Entity and Redeemable Non-Controlling Interest On September 14, 2020, we, along with Japan Cloud Computing Co., Ltd., and M30 LLC, (the “Investors”), entered into an agreement, whereby each Investor agreed to purchase shares of common stock of Braze Kabushiki Kaisha (“Braze KK” and “Braze KK Shares”) for a total purchase price of $ 10.0 million in two tranches of $ 5.0 million per tranche in September 2020 and September 2021, to engage in the investment, organization, management and operation of Braze KK focused on the distribution of our products in Japan. The purpose of this arrangement was to further expand our business in the Japanese market. In March 2022, we consented to the periodic issuance of stock options to purchase Braze KK Shares by certain employees of Braze KK. These options 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, 2024, the liability balance was $ 0.4 million. The issuance of stock options does not impact our majority stake in Braze KK, as none of the vesting criteria of the options were met as of the balance sheet date. The issuance of stock options did not result in a reconsideration event and therefore Braze KK still met the criteria of a Variable Interest Entity as Braze KK did not have sufficient equity at risk to finance their activities. As a result, we continue to operate Braze KK as a subsidiary, exposing us to business and foreign exchange risk. We consolidate Braze KK and present the results within our consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows. The common stock held by the Investors is callable by us or puttable by the Investors upon certain contingent events. Should the call or put option be exercised, the redemption value would be determined based on a prescribed formula derived from the discrete revenues of Braze KK and the Company and may be settled, at our discretion, with our stock or cash. The non-controlling interest in Braze KK is classified in mezzanine equity as redeemable non-controlling interest as a result of the 82 Table of Contents put right available to the Investors in the future, an event that is not solely in our control. The non-controlling interest is not accreted to redemption value because it is currently not probable that the non-controlling interest will become redeemable. The following table summarizes the activity in the redeemable non-controlling interests for the periods indicated below (in thousands): Balance as of January 31, 2022 $ 3,235 Net loss attributable to redeemable non-controlling interest ( 1,780 ) Balance as of January 31, 2023 $ 1,455 Net loss attributable to redeemable non-controlling interest ( 1,263 ) Balance as of January 31, 2024 $ 192 The total combined VIE assets, which represent the maximum exposure to loss, and liabilities were as follows (in thousands): January 31, 2024 2023 Assets: Cash and cash equivalents $ 3,926 $ 4,849 Accounts receivable, net of allowance 1,119 535 Prepaid expenses and other current assets 419 331 Total current assets 5,464 5,715 Property and equipment, net 57 84 Operating lease right-of-use assets 490 — Deferred contract costs 1,102 902 Other assets 42 29 Total assets $ 7,155 $ 6,730 Liabilities: Accounts payable $ 1,668 $ 67 Accrued expenses and other current liabilities 2,025 2,793 Deferred revenue 3,625 1,918 Operating lease liabilities, current 448 — Total liabilities 7,766 4,778 Other long-term liabilities 374 322 Total liabilities $ 8,140 $ 5,100 83 Table of Contents 5. Fair Value Measurements The following table sets forth our financial instruments that were measured at fair value on a recurring basis at the periods indicated below, by level within the fair value hierarchy (in thousands): January 31, 2024 Level 1 Level 2 Level 3 Total Financial Assets: Cash equivalents Money market funds $ 20,758 $ — $ — $ 20,758 U.S. government securities 6,996 — — 6,996 Total cash equivalents 27,754 — — 27,754 Marketable securities U.S. government securities $ 318,957 $ — $ — $ 318,957 Foreign securities — 6,367 — 6,367 Corporate debt securities — 82,574 — 82,574 Total marketable securities 318,957 88,941 — 407,898 Liabilities Contingent consideration $ — $ — $ 223 $ 223 Total liabilities — — 223 223 Total financial assets $ 346,711 $ 88,941 $ 223 $ 435,875 January 31, 2023 Level 1 Level 2 Level 3 Total Financial Assets: Cash equivalents Money market funds $ 30,873 $ — $ — $ 30,873 Total cash equivalents 30,873 — — 30,873 Marketable securities U.S. government securities $ 307,744 $ — $ — $ 307,744 Foreign securities — 2,967 — 2,967 Corporate debt securities — 99,372 — 99,372 Total marketable securities 307,744 102,339 — 410,083 Total financial assets $ 338,617 $ 102,339 $ — $ 440,956 Our money market funds are classified as Level 1 within the fair value hierarchy, because they are valued using quoted prices in active markets as of January 31, 2024 and January 31, 2023. Financial instruments classified as Level 2 within our fair value hierarchy are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. Prices of these securities are obtained through independent, third-party pricing services and include market quotations that may include both observable and unobservable inputs. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments. The fair value of our contingent consideration is estimated using Level 3 unobservable inputs. The estimates of fair value are based upon assumptions believed to be reasonable but which are uncertain, and involve significant judgments by management. We will reassess the fair value of the contingent consideration quarterly until the contingency is resolved. The short-term portion of the contingent consideration is recorded within accrued expenses and other current liabilities, and the long-term portion is recorded within other-long term liabilities on the consolidated balance sheets. Changes in the fair value are recorded in operating income in the consolidated statements of operations. 84 Table of Contents There were no transfers of financial instruments among Level 1, Level 2, and Level 3 during the periods presented. The following table summarizes the fair value changes in the contingent consideration liability in connection with the acquisition of North Star Y, Pty Ltd (in thousands): Fiscal Year Ended January 31, 2024 Beginning fair value $ — Additions in the period (1) 223 Ending fair value $ 223 (1) Includes measurement period adjustments related to the Company’s preliminary fair values of the assets acquired and liabilities assumed in business combinations, which did not have a material impact on goodwill. 6. Marketable Securities Marketable securities consist of the following for the periods presented (in thousands): January 31, 2024 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Total Estimated Fair Value U.S. government securities $ 319,343 $ 782 $ ( 1,168 ) $ 318,957 Foreign securities 6,349 31 ( 13 ) 6,367 Corporate debt securities 82,368 340 ( 134 ) 82,574 Total $ 408,060 $ 1,153 $ ( 1,315 ) $ 407,898 January 31, 2023 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Total Estimated Fair Value U.S. government securities $ 312,044 $ 31 $ ( 4,331 ) $ 307,744 Foreign securities 3,028 — ( 61 ) 2,967 Corporate debt securities 100,589 27 ( 1,244 ) 99,372 Total $ 415,661 $ 58 $ ( 5,636 ) $ 410,083 Accrued interest receivables related to our available-for-sale securities of $ 3.4 million as of January 31, 2024 and $ 2.0 million as of January 31, 2023 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 and term deposits. The term deposits are at cost, which approximates fair value. The weighted-average remaining maturity of the Company’s investment portfolio is one and a half years as of the periods presented. The following table summarizes the fair value and gross unrealized losses aggregated by category of individual securities that have been in a continuous unrealized loss position for greater than 12 months (in thousands): 85 Table of Contents January 31, 2024 Continuous Unrealized Loss for Greater than 12 months Estimated Fair Value Gross Unrealized Losses U.S. government securities $ 99,613 $ ( 741 ) Foreign securities 1,325 ( 11 ) Corporate debt securities 28,858 ( 113 ) Total $ 129,796 $ ( 865 ) No individual security incurred continuous unrealized losses for greater than 12 months as of January 31, 2023. 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, 2024, 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, 2024 was primarily related to the continued market volatility associated with market expectations of an aggressive pace of interest rate increases by the Federal Reserve. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments and it is not expected that the investments would be settled at a price less than their amortized cost basis. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. The Company is not aware of any specific event or circumstance that would require the Company to change its assessment of credit losses for any marketable available-for-sale debt security as of January 31, 2024. 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, 2024 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, 2024 Amortized Cost Estimated Fair Value Due within 1 year $ 173,481 $ 172,520 Due in 1 year through 5 years 234,579 235,378 Total $ 408,060 $ 407,898 January 31, 2023 Amortized Cost Estimated Fair Value Due within 1 year $ 247,214 $ 244,280 Due in 1 year through 5 years 168,447 165,803 Total $ 415,661 $ 410,083 Investment Income Investment income consists of interest income and accretion income/amortization expense on our cash, cash equivalents, restricted cash, and marketable securities. Investment income is included within other income (expense), net on the consolidated statements of operations. The primary components of investment income from marketable securities were as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Interest income $ 13,546 $ 7,393 $ 506 Accretion/amortization of discount/premium, net 2,077 1,336 ( 369 ) Investment income $ 15,623 $ 8,729 $ 137 86 Table of Contents 7. Property and Equipment, Net Property and equipment, net, consist of the following (in thousands): January 31, 2024 2023 Capitalized internal-use software $ 13,071 $ 7,344 Computer equipment, office equipment, and software 7,411 8,111 Leasehold improvements 18,789 9,410 Furniture and fixtures 4,223 4,085 Total property and equipment 43,494 28,950 Less: accumulated depreciation and amortization ( 14,136 ) ( 8,611 ) Total property and equipment, net $ 29,358 $ 20,339 The total depreciation expense and amortization expense for property and equipment was $ 5.5 million, $ 3.4 million and $ 2.8 million, during the fiscal years ended January 31, 2024, 2023 and 2022, respectively. During the fiscal years ended January 31, 2024 and 2023, the Company removed $ 1.0 million and $ 1.2 million, respectively, of fixed assets substantially consisting of leasehold improvements and computer equipment, office equipment, and software, that was largely depreciated from property and equipment, gross and accumulated depreciation, which had minimal net impact on the Company’s consolidated financial results. The fixed assets removed during the fiscal year ended January 31, 2022 were immaterial to the Company’s consolidated financial results. We capitalized internal-use software of $ 5.7 million, $ 2.0 million and $ 2.4 million during the fiscal years ended January 31, 2024, 2023, and 2022 respectively. Amortization for capitalized internal-use software costs recognized within cost of revenue on the consolidated statements of operations was $ 2.1 million, $ 1.7 million and $ 1.2 million for the fiscal years ended January 31, 2024, 2023, and 2022, respectively. 8. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): January 31, 2024 2023 Prepaid software subscriptions $ 14,864 $ 12,574 Prepaid advertising 918 833 Prepaid insurance 1,881 2,795 Investment interest receivable 3,426 2,013 Consumption tax receivable 1,606 1,045 Prepaid events 1,170 657 Prepaid employee benefits 902 811 Other 4,599 5,435 Total prepaid expenses and other current assets $ 29,366 $ 26,163 87 Table of Contents 9. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consists of the following (in thousands): January 31, 2024 2023 Accrued compensation costs $ 26,912 $ 12,622 Accrued software subscriptions 10,956 8,454 Accrued commissions 7,440 6,205 Accrued professional service fees 1,555 1,779 Accrued advertising 1,662 922 Accrued tax liability 9,048 4,209 Other 5,691 3,224 Total accrued expenses and other current liabilities $ 63,264 $ 37,415 10. Employee Benefit Plans We sponsor a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. Matching contributions under the plan were $ 4.8 million, $ 4.7 million, and $ 2.4 million for the fiscal years ended January 31, 2024, 2023, and 2022 respectively. 11. Stockholders’ Equity (Deficit) Class A and Class B Common Stock The Company has two classes of common stock, Class A and Class B. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes and may be converted at the option of the holder into one share of Class A common stock. In addition, all shares of Class B common stock will automatically convert into shares of Class A common stock in certain circumstances, including on the earlier of (i) the last trading day of the fiscal quarter during which the number of shares of Class B common stock then outstanding represents less than 10 % of the aggregate number of shares of Class A common stock and Class B common stock then outstanding, or (ii) the last trading day of the fiscal quarter immediately following the fifth anniversary of the initial public offering. 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 and 96,465 shares of our Class A common stock to a charitable donor-advised fund that resulted in the recognition of $ 3.8 million and $ 4.3 million expense within general and administrative in our consolidated statements of operations during the fiscal years ended January 31, 2024 and 2023, respectively. No stock donations were made during the fiscal year ended January 31, 2022. 12. Employee Stock Plans We have historically issued equity awards under our Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) and our 2021 Equity Incentive Plan (the “2021 Plan”). Amended and Restated 2011 Equity Incentive Plan Our 2011 Plan provides for the award of stock options and restricted stock units (“RSUs”) to employees, officers, directors, advisors and other service providers of Braze. The terms of each award and the exercise price of awards under the 2011 Plan are determined by our board of directors. Following effectiveness of the 2021 Plan in connection with our initial public offering, no further awards were made under the 2011 Plan. 2021 Equity Incentive Plan 88 Table of Contents In November 2021, our board of directors and our stockholders approved the 2021 Plan, which became effective on November 16, 2021. No grants were made under the 2021 Plan prior to its effectiveness. No further grants will be made under the 2011 Plan. At effectiveness, we reserved 25,660,249 shares of our Class A common stock to be issued under the 2021 Plan. In addition, the number of shares of our Class A common stock reserved for issuance under the 2021 Plan will automatically increase on February 1 of each year for a period of ten years , beginning on February 1, 2022 and continuing through February 1, 2031, in an amount equal to (1) 5 % of the total number of shares of our common stock (both Class A and Class B) outstanding on the preceding January 31, or (2) a lesser number of shares determined by our board of directors no later than the February 1 increase. On February 1, 2023, the number of shares of our Class A common stock reserved for issuance under our 2021 Plan increased by an additional 4,798,771 shares. Stock Options A summary of stock option activity for the periods presented, is as follows: Options Outstanding Number of Options Weighted Average Exercise Price Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) Balance as of January 31, 2022 11,035,704 $ 12.56 7.69 $ 413,384 Granted — n/a Exercised ( 2,155,929 ) $ 3.94 Forfeited ( 707,834 ) $ 19.13 Balance as of January 31, 2023 8,171,941 $ 14.27 6.58 $ 153,237 Granted — n/a Exercised ( 1,951,569 ) $ 3.72 Forfeited ( 99,104 ) $ 17.83 Balance as of January 31, 2024 6,121,268 $ 17.57 6.09 $ 223,306 Vested and expected to vest as of January 31, 2024 6,029,946 $ 17.32 6.07 $ 221,481 Exercisable - January 31, 2024 4,748,307 $ 13.47 5.78 $ 192,688 Fiscal Year Ended January 31, 2024 2023 2022 Weighted-average grant date fair value per share of options granted during each respective period n/a n/a $ 24.53 Aggregate intrinsic value of options exercised during each respective period (in millions) $ 72.85 $ 71.16 $ 121.90 We estimate the fair value of stock options using the Black-Scholes option-pricing model on the date of grant. The assumptions used in the Black-Scholes option-pricing model were as follows: Fiscal Year Ended January 31, 2024 2023 2022 Dividend yield (in percentage) n/a n/a — % Expected volatility (in percentage) n/a n/a 61.8 - 66.1 % Expected term (in years) n/a n/a 5.9 - 6.7 Risk-free interest rate (in percentage) n/a n/a 1.0 - 1.2 % Fair value of common stock n/a n/a $ 65.00 89 Table of Contents Restricted Stock Units The following table summarizes unvested RSU award activity and related information: Shares Weighted-Average Grant Date Fair Value Balance as of January 31, 2023 4,625,518 Granted 4,085,422 $ 35.96 Vested ( 1,760,536 ) $ 39.48 Forfeited ( 686,665 ) $ 37.86 Balance as of January 31, 2024 6,263,739 RSUs granted during the fiscal year ended January 31, 2024 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 the 2021 Plan, which became effective on November 16, 2021. Following completion of our initial public offering, the ESPP authorized the issuance of 1,825,000 shares of our Class A common stock under purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our Class A common stock reserved for issuance will automatically increase on February 1 of each year for a period of ten years , beginning on February 1, 2022 and continuing through February 1, 2031, by the lesser of (i) 1 % of the total number of shares of our common stock (both Class A and Class B) outstanding on the preceding January 31; and (ii) 2,737,000 shares, except before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii) above. On February 1, 2023, the number of shares of our Class A common stock reserved for issuance under our ESPP increased by an additional 959,754 shares. The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of the Company’s Class A common stock on specified dates during such offerings. Under the ESPP, our board of directors will be permitted to specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our Class A common stock will be purchased for employees participating in the offering. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85 % of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period or (2) the fair market value of the Company’s Class A common stock on the last day of the offering period, as defined by the ESPP. The Company recognized $ 2.2 million and $ 1.8 million of stock-based compensation expense related to the ESPP during the fiscal year ended January 31, 2024 and 2023, respectively. As of January 31, 2024, $ 0.6 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 years ended January 31, 2024 and 2023, the Company issued 234,089 and 125,276 shares of Class A common stock under the ESPP, respectively. As of January 31, 2024, there are 3,355,070 shares of Class A common stock available for issuance under the ESPP. Stock-based Compensation Expense The following table summarizes stock-based compensation expense, which was included in the consolidated statements of operations as follows (in thousands): 90 Table of Contents Fiscal Year Ended January 31, 2024 2023 2022 Cost of revenue $ 3,585 $ 3,616 $ 2,185 Sales and marketing 31,198 23,871 16,281 Research and development 38,962 28,897 15,613 General and administrative 23,432 15,833 13,101 Stock-based compensation, net of amounts capitalized 97,177 72,217 47,180 Capitalized stock-based compensation expense 2,152 1,121 387 Total stock-based compensation expense $ 99,329 $ 73,338 $ 47,567 As of January 31, 2024, total compensation cost not yet recognized related to unvested equity awards and the weighted-average remaining period over which these costs are expected to be realized were as follows: Stock Options RSUs Unrecognized compensation costs (in thousands) $ 27,434 $ 160,810 Weighted-average remaining recognition period (years) 1.70 2.71 Secondary Transaction In March 2021, certain existing investors entered into an arms-length transaction to purchase 292,486 shares of our common stock from certain of our current employees (the “2021 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 2021 Secondary Transaction, we recognized $ 3.0 million of stock-based compensation expense which represented the amounts paid above fair value of common stock. The expense is included in the same financial statement line items as the employees’ other compensation. No secondary transactions involving employees occurred during the fiscal years ended January 31, 2024 and 2023 . 13. Commitments and Contingencies Indirect Taxes We are subject to indirect taxation in some, but not all, of the various U.S. states and foreign jurisdictions in which we conduct business. Therefore, we have an obligation to charge, collect and remit Value Added Tax (“VAT”) or Goods and Services Tax (“GST”) in connection with certain of our foreign sales transactions and sales and use tax in connection with eligible sales to subscribers in certain U.S. states. On June 21, 2018, the U.S. Supreme Court issued an opinion in South Dakota v. Wayfair. The State of South Dakota alleged that U.S. constitutional law should be revised to permit South Dakota to require remote sellers to collect and remit sales tax in South Dakota in accordance with South Dakota’s sales tax statute. Under the U.S. Supreme Court’s ruling, the longstanding Quill Corp v. North Dakota sales tax case was overruled, and states may now require remote sellers to collect sales tax under certain circumstances. We began collecting sales tax in relevant jurisdictions for the fiscal year ended January 31, 2019. As a result of this ruling and given the scope of our operations, taxing authorities continue to provide regulations that increase the complexity and risks to comply with such laws and could result in substantial liabilities, prospectively as well as retrospectively. Based on the information available, we continue to evaluate and assess the jurisdictions in which indirect tax nexus exists and believe that the indirect tax liabilities are adequate and reasonable. Due to the complexity and uncertainty around the application of these rules by taxing authorities, results may vary materially from expectations, and we have recognized liabilities for contingencies related to state sales and use tax, VAT, and GST deemed probable and estimable totaling $ 1.0 million and $ 0.5 million as of January 31, 2024 and 2023, respectively, which is included in accrued expenses and other current liabilities on the consolidated balance sheets. As of January 31, 2024, we have filed prior period returns in several jurisdictions in order to remediate this potential exposure, and the Company continues to evaluate the potential exposure on an ongoing basis. Legal Contingencies From time to time, in the ordinary course of business, we are or may be involved in various legal or regulatory proceedings, claims or purported class actions related to, among other things, alleged infringement of third-party patents and other intellectual property rights, commercial, labor and employment, wage and hour and other claims. We have been, and may in the future be, put on notice or sued by third-parties for alleged infringement of their proprietary rights, including patent infringement. We accrue a liability when we believe that it is both probable that a liability has been incurred and the amount of 91 Table of Contents loss can be reasonably estimated. We believe we have recorded adequate provisions for any such matters and, as of January 31, 2024, we believe that no material loss will be incurred in excess of the amounts recognized in our financial statements. 14. Leases The Company’s lease portfolio consists solely of office space with lease terms ranging from approximately 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 components of lease cost reflected on the consolidated statements of operations were as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 Operating lease cost $ 17,619 $ 13,638 Variable lease cost 3,098 2,521 Short-term lease cost 439 1,795 Total net lease cost $ 21,156 $ 17,954 The future maturities of the Company’s operating lease liabilities by fiscal year are as follows (in thousands): 2025 $ 15,713 2026 15,569 2027 14,589 2028 13,151 2029 12,639 Thereafter 51,262 Total future undiscounted lease payments 122,923 Less: imputed interest ( 32,311 ) Total reported lease liability $ 90,612 The Company's lease terms and discount rates are as follows: January 31, 2024 2023 Weighted-average remaining lease term (years) 8.1 6.6 Weighted-average discount rate 7.1 % 5.5 % Other information for the Company's leases is as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities $ 13,404 $ 10,292 Operating lease right-of-use assets obtained in exchange for new operating lease liabilities $ 47,834 $ — 15. Income Taxes The components of the provision for (benefit from) income taxes are as follows (in thousands): 92 Table of Contents Fiscal Year Ended January 31, 2024 2023 2022 Current: Federal $ — $ — $ — State and local 65 52 15 Foreign 2,380 496 ( 100 ) Total current 2,445 548 ( 85 ) Deferred: Federal $ — $ — $ — State and local — — — Foreign ( 488 ) 35 ( 80 ) Total deferred ( 488 ) 35 ( 80 ) Provision for (benefit from) income taxes $ 1,957 $ 583 $ ( 165 ) The components of loss before income taxes are as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 United States $ ( 130,927 ) $ ( 138,226 ) $ ( 76,030 ) Foreign 2,455 ( 1,937 ) ( 2,302 ) Loss before provision for income taxes $ ( 128,472 ) $ ( 140,163 ) $ ( 78,332 ) A reconciliation of the provision for (benefit from) income taxes to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows: Fiscal Year Ended January 31, 2024 2023 2022 Statutory income tax expense 21.0 % 21.0 % 21.0 % Foreign tax rate differential — % 0.1 % 0.8 % State taxes ( 0.1 ) % — % — % Permanent items ( 2.7 ) % ( 0.3 ) % ( 3.0 ) % Change in valuation allowance ( 28.9 ) % ( 24.2 ) % ( 26.5 ) % Stock-based compensation 5.1 % 1.5 % 5.8 % Tax credits 4.1 % 1.5 % 2.1 % Effective tax rate ( 1.5 ) % ( 0.4 ) % 0.2 % Deferred Income Taxes The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below (in thousands). The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized. 93 Table of Contents January 31, 2024 2023 Deferred tax assets: Loss carryforwards $ 98,834 $ 72,878 Compensation and benefits 20,814 16,834 Operating lease liabilities 22,597 12,679 Tax credits 11,609 5,689 Capitalized costs 15,064 5,568 Other 5,612 3,999 Deferred tax assets 174,530 117,647 Less: valuation allowance ( 135,865 ) ( 93,150 ) Deferred tax asset, net of valuation allowance 38,665 24,497 Deferred tax liabilities: Deferred contract costs ( 15,561 ) ( 11,826 ) Property, equipment and software ( 2,362 ) ( 1,264 ) Operating lease right-of-use assets ( 20,240 ) ( 11,447 ) Intangible assets ( 957 ) — Deferred tax liabilities ( 39,120 ) ( 24,537 ) Net deferred tax assets/(liabilities) $ ( 455 ) $ ( 40 ) As of January 31, 2024, we had NOL carryforwards for federal and state income tax purposes of approximately $ 355.4 million and $ 248.4 million, respectively. Under current law, U.S. federal NOLs incurred in tax years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of federal NOLs is limited to 80% of taxable income in tax years beginning after December 31, 2020. Accordingly, $ 316.0 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. The majority of state NOLs if not utilized, will expire at various times between 2026 and 2044. We also had foreign NOL carryforwards as of January 31, 2024 of $ 30.9 million, the majority of which may be carried forward indefinitely. As of January 31, 2023, we had NOL carryforwards for federal and state income tax purposes of approximately $ 281.6 million and $ 182.4 million, respectively. At January 31, 2024, the Company had tax credit carryforwards of $ 11.9 million, the majority of which are related to credits for research activities, and if not utilized, will expire between 2037 and 2044. 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. Generally, after a change in control, a loss corporation cannot deduct carryforward tax attributes in excess of the limitation prescribed by Sections 382 and 383. Therefore, certain of our carryforward tax attributes may be subject to an annual limitation regarding their utilization against taxable income in future periods. As a result of issuances of different classes of preferred stock to investors in 2013, 2014 and 2017, we triggered “ownership shifts” as defined in Internal Revenue Code Section 382 and related provisions. 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. 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. 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 jurisdictions where we have net deferred tax assets can be realized as of January 31, 2024. Accordingly, we have recorded a full valuation allowance against these respective net deferred tax assets. The valuation allowance increased by $ 42.7 million, and $ 40.9 million, during the fiscal years ended January 31, 2024, and 2023, respectively. The Company has not provided for U.S. federal income and foreign withholding taxes on undistributed earnings from non-U.S. operations as of January 31, 2024 because the Company intends to reinvest such earnings indefinitely outside of the United States. The amount of any unrecognized deferred tax liability related to these earnings would not be material. 94 Table of Contents A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Balance at February 1 $ — $ 647 $ 902 Additions for tax positions of prior years — — — Reductions for tax positions of prior years — ( 647 ) ( 255 ) Balance at January 31 $ — $ — $ 647 The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. As of January 31, 2024, 2023 and 2022, there were no interest and penalties recorded. As of January 31, 2024, 2023 and 2022, accrued unrecognized tax benefits were $ 0.0 million , $ 0.0 million , and $ 0.6 million, respectively, and if recognized would reduce the provision for income taxes, and our effective tax rate. We are subject to income tax examinations in the United States and various state and foreign jurisdictions. Our most significant operations are in the United States and the earliest open tax year subject to potential examination is the period ended January 31, 2021. However, amounts reported as NOLs from these prior tax periods also remain subject to review by most tax authorities. 16. Net Loss per Share We compute the basic and diluted net loss per share of our Class A common stock and Class B common stock. 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 stockholders during the periods presented (in thousands, except per share amounts): Fiscal Year Ended January 31, 2024 2023 2022 Numerator: Net loss attributable to Braze, Inc. $ ( 129,166 ) $ ( 138,966 ) $ ( 76,719 ) Denominator: Weighted-average shares of Braze, Inc. common stock outstanding 98,099 94,597 35,078 Less: weighted-average unvested shares of Braze, Inc. subject to repurchase ( 3 ) ( 28 ) ( 181 ) Weighted-average shares used to calculate net loss per share attributable to Braze, Inc. common stockholders, basic and diluted 98,096 94,569 34,897 Net loss per share attributable to Braze, Inc. common stockholders, basic and diluted $ ( 1.32 ) $ ( 1.47 ) $ ( 2.20 ) The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per share attributable to Braze, Inc. common stockholders for the periods presented, because their inclusion would be anti-dilutive (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Options to purchase common stock 6,121 8,172 11,036 Restricted stock units 6,264 4,626 1,355 ESPP shares estimated to be purchased 92 121 — Total 12,477 12,919 12,391 17. Related Party Transactions 95 Table of Contents In May 2021, the Chief Financial Officer of Datadog, Inc., one of our vendors, joined our board of directors. We have purchased services from Datadog, Inc. in the aggregate amount of approximately $ 2.5 million during the fiscal year ended January 31, 2024. We have purchased $ 1.4 million and $ 1.2 million during the fiscal years ended January 31, 2023 and 2022, respectively. 18. Restructuring In May 2023, the Company implemented a workforce reduction designed to rebalance talent to better meet customer needs and achieve business priorities. As a result, the Company recorded associated severance and other termination costs of approximately $ 0.6 million during the fiscal year ended January 31, 2024 related to these measures. No restructuring costs were recognized during the fiscal years ended January 31, 2023 and 2022. 19. Business Combination Acquisition of North Star Y, Pty Ltd On June 1, 2023, the Company acquired all the outstanding stock of North Star Y, Pty Ltd (“North Star”), Braze’s exclusive reseller in Australia and New Zealand. The transaction provides Braze with a direct market presence in Australia and New Zealand, along with local market expertise from the North Star team. The total purchase price consideration, as adjusted, of $ 27.0 million consisted of cash payments of $ 17.6 million, $ 6.1 million in issuances of Braze Class A common stock, and contingent consideration payments, the fair value of which was $ 1.8 million as of the acquisition date. The sellers are eligible to receive cash earn-out payments calculated based on qualified revenue performance metrics for the two individual twelve month periods immediately subsequent to the closing of the acquisition. The earn-out payments are capped at $ 10.0 million for the first earn-out period and $ 16.0 million for the second earn-out period. The fair value measurement of the contingent consideration liability has been influenced by developments in the significant inputs, notably the new and incremental actual and forecasted deal closings from the Australia-New Zealand region. As a result, during the quarter ended January 31, 2024, the Company reduced the contingent consideration liability by $ 1.6 million to $ 0.2 million. The preliminary purchase price, as adjusted, was allocated to intangible assets in the amount of $ 3.8 million and goodwill in the amount of $ 28.4 million based on the respective estimated fair values. The resulting goodwill is not deductible for income tax purposes. An indemnification holdback of $ 2.8 million was recorded within accrued expenses and other current liabilities on the consolidated balance sheets. The indemnification holdback represents security for potential indemnification claims against the seller. The indemnification holdback will be released subject to amounts withheld for actual, pending or potential claims. Of the initial $ 0.5 million working capital holdback, $ 0.3 million is subject to release based on the completion of post-close adjustment procedures. The results of operations of North Star from the date of acquisition, which were not material, have been included in the Company’s consolidated statements of operations for the fiscal year ended January 31, 2024. 20. Intangible Assets, Net Intangible assets, net, consisted of the following (in thousands): 96 Table of Contents January 31, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortization Period Amortizable intangible assets Customer relationships $ 3,119 $ ( 208 ) $ 2,911 10 years Restrictive covenant relationships 186 ( 62 ) 124 2 years Trademark 465 ( 310 ) 155 1 year Total amortizable intangible assets 3,770 ( 580 ) 3,190 Non-amortizable intangible assets Technology licenses $ 500 $ — $ 500 n/a Total intangible assets, net $ 4,270 $ ( 580 ) $ 3,690 January 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortization Period Non-amortizable intangible assets Technology licenses $ 500 $ — $ 500 n/a Total intangible assets, net $ 500 $ — $ 500 Intangible amortization expense was approximately $ 0.6 million for the fiscal year ended January 31, 2024. There were no amortizable intangible assets in the fiscal years ended January 31, 2023 and 2022, therefore no intangible amortization expense was recorded. As of January 31, 2024, future amortization expense by fiscal year is expected to be as follows (in thousands): Amount 2025 $ 560 2026 343 2027 312 2028 312 2029 312 Thereafter 1,351 Total $ 3,190 21. Goodwill The changes in the carrying amounts of goodwill were as follows (in thousands): Amount Balance at January 31, 2023 $ — North Star addition and related adjustments (1) 28,448 Balance at January 31, 2024 $ 28,448 (1) Includes measurement period adjustments related to the Company’s preliminary fair values of the assets acquired and liabilities assumed in business combinations, which did not have a material impact on goodwill. 97 Table of Contents 22. Subsequent Events In February 2024, the Company granted RSUs for a total of 610,521 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 $ 33.6 million. In March 2024, the Company granted RSUs for a total of 1,140,477 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 $ 59.3 million. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.