What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-01 · 53 added, 47 removed, 298 unchanged (25% of the section changed)

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For a discussion regarding our financial condition and results of operations for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023, refer to “Management's Discussion and Analysis of Financial Condition

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

and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended January 31, 2024, filed with the SEC on April 1, 2024.

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

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

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

Our customers include many established global enterprises and leading technology innovators, and span a wide variety of sizes and industries, including retail and consumer goods, media and entertainment, telecommunications, restaurants and on-demand services, healthcare and life sciences, technology, manufacturing, education, government and public services, and financial services.

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

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We had net losses of $104.0 million, $130.4 million and $140.7 million, in the fiscal years ended January 31, 2025, 2024, and 2023, respectively.

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

We had net cash provided by operating activities of $36.7 million in the fiscal year ended January 31, 2025.

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

Our Non-GAAP free cash flow was $19.6 million, $(6.5) million and $(39.0) million in the fiscal years ended January 31, 2025, 2024, and 2023, respectively.

See the section titled “— Non-GAAP Free Cash Flow” for additional information about how we calculate free cash flow, a non-GAAP financial metric, and a reconciliation to net cash us ed in operating activities, the most directly comparable measure calculated in accordance with accounting principles generally accepted in the United States, or U.S.

See the section titled “— Non-GAAP Free Cash Flow” for additional information about how we calculate free cash flow, a non-GAAP financial metric, and a reconciliation to net cash provided by operating activities, the most directly comparable measure calculated in accordance with accounting principles generally accepted in the United States, or U.S.

Factors Affecting Our Performance

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

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

We intend to continue to expand our customer base in verticals where we already have a strong presence, such as retail and consumer goods, media and entertainment, telecommunications, restaurants and on-demand services, healthcare and life sciences, technology, manufacturing, education, government and public services, and financial services — and to increase our presence in verticals where we are not yet strongly represented.

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

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

We expand the use of our platform by existing customers by, among others, adding new channels and increasing the messaging volume we sell to our customers as their businesses and needs continue to grow and as they connect directly with additional consumers, which in

turn leads to a need for greater messaging capacity.

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

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In addition, 247, 202, and 156 of our customers had ARR of $500,000 or more as of January 31, 2025, 2024, and 2023, respectively.

Our dollar-based net retention rate is influenced by macroeconomic factors that impact our customers’ purchasing decisions, which may impact the revenue attributable to such customers.

The decline in our trailing 12-month dollar-based net retention rate was primarily due to customer turnover and renewals at lower subscription levels.

In particular, we have observed that customer renewals in the current uncertain macroeconomic environment and high interest rate climate have led customers to renew their contracts at levels more closely aligned with their current needs, rather than opting for larger commitments based on anticipated future demand.

Expanding Geographically

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

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

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

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

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Cost of revenue consists of direct costs related to providing platform access to our customers and to performing onboarding and professional services including consulting services.

These costs primarily include payments to third-party cloud infrastructure providers for hosting software solutions, costs associated with application service providers utilized to deliver the platform, personnel-related costs, including salaries, cash-based performance compensation, benefits and stock-based compensation, and overhead cost allocations, including rent, utilities, depreciation, information technology costs, amortization of internal use software and certain administrative personnel costs.

compensation, and overhead cost allocations, including rent, utilities, depreciation, information technology costs, amortization of internal use software and certain administrative personnel costs.

We intend to continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the capabilities of our platform.

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

Other Income (Expense), Net

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

Other Income, Net

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

Provision for Income Taxes

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Loss from operations (122,159) (144,692) (148,140)

Other income (expense), net 16,220 7,977 (121)

Other income, net

21,557 16,220 7,977

Loss before provision for income taxes (100,602) (128,472) (140,163)

Provision for (benefit from) income taxes 1,957 583 (165)

Provision for income taxes

3,445 1,957 583

Net loss $ (104,047) $ (130,429) $ (140,746)

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Loss from operations (21) % (30) % (42) %

Other income (expense), net 3 % 2 % — %

Other income, net 4 % 3 % 2 %

Loss before provision for income taxes (17) % (27) % (40) %

Provision for (benefit from) income taxes — % — % — %

Provision for income taxes 1 % — % — %

Net loss (18) % (27) % (40) %

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

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

Additionally, in the fiscal year ended January 31, 2025, our international revenue increased by $62.4 million as we continued to expand market penetration in regions such as Europe and the Asia-Pacific region.

Cost of Revenue, Gross Profit and Gross Margin

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Gross margin 69.1 % 68.7 %

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

T he increase in co st of revenue of $35.7 million, or 24.2%, for the fiscal year ended January 31, 2025 compared to the fiscal year ended January 31, 2024 was primarily driven by an increase of $7.5 million in hosting, infrastructure, and other third-party fees associated with delivering our platform and a $24.0 million increase in third-party messaging fees associated with growth in premium messaging channels.

In addition, we had an increase in personnel and overhead costs of $3.2 million.

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These increases were due primarily to improved personnel efficiencies,

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

economies of scale, and the optimization of costs of our tech stack as our infrastructure costs to support our revenue growth did not increase at the same pace as our revenue.

Operating Expenses

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Sales and marketing $ 282,316 $ 247,125 $ 35,191 14.2 %

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

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

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

The increase in sales and marketing expense of $35.2 million, or 14.2%, for the fiscal year ended January 31, 2025 compared to the fiscal year ended January 31, 2024, was primarily driven by an increase in personnel and overhead costs of $22.9 million, which included $7.0 million of stock-based compensation costs.

Additionally, the increase was driven in part by an increase of $6.4 million in promotional and product marketing, primarily related to the hosting of regional customer events, our annual customer conference, and other sales related events, an increase of $3.7 million in software costs, and an increase of $2.5 million in deferred contract costs as a result of sales growth.

Research and Development Expense

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Research and development $ 133,969 $ 119,863 $ 14,106 11.8 %

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

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

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

The increase in research and development expense of $14.1 million, or 11.8%, for the fiscal year ended January 31, 2025 compared to the fiscal year ended January 31, 2024, was primarily driven by an increase in personnel and overhead costs of $11.7 million, which included $4.0 million of stock-based compensation costs, an increase of $1.6 million in software costs, and an increase in professional services of $0.7 million.

These increases were primarily due to a period-over-period increase in headcount to support our continued investment in the features and functionality of our platform.

General and Administrative Expense

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General and administrative $ 116,093 $ 101,977 $ 14,116 13.8 %

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

The increase in general and administrative expenses of $14.1 million, or 13.8%, for the fiscal year ended January 31, 2025 compared to the fiscal year ended January 31, 2024 was primarily driven by an increase in personnel and overhead costs of $13.2 million, which included $5.6 million of stock-based compensation costs and $2.3 million of depreciation expense, primarily related to the winding down of our old office as we moved to our new headquarters in the fiscal year.

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

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

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

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

Other Income (Expense), Net

The increases in expenses were partially offset by a decrease in professional services costs of $0.5 million related to the acquisition of North Star in the fiscal year ended January 31, 2024.

Other Income, Net

Fiscal Year Ended January 31,

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($ in thousands)

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

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

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

Other income, net $ 21,557 $ 16,220 $ 5,337 32.9 %

The increase in other income, net of $5.3 million, or 32.9%, for the fiscal year ended January 31, 2025, compared to the fiscal year ended January 31, 2024, was attributable to a $5.2 million increase in investment income from marketable securities.

The investment income increase was driven primarily by the graded maturation of the portfolio positions at higher interest rates and the reinvestment of proceeds in a high interest rate environment.

Liquidity and Capital Resources

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As of January 31, 2025, our principal source of liquidity was cash, cash equivalents, and marketable securities of $514.0 million.

Our cas h and cash equivalents consist of deposit accounts, interest-bearing money market accounts, and U.S.

government securities that are stated at fair value.

Our cash and cash equivalents consist of deposit accounts, interest-bearing money market accounts, U.S.

government, and corporate securities that are stated at fair value.

Our marketable securities positions consists mostly of highly liquid short-term investments.

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

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

We have generated losses from our operations as reflected in our accumulated deficit of $586.8 million as of January 31, 2025.

We had cash flows provided by operating activities for the fiscal year ended January 31, 2025 of $36.7 million.

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

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Net cash provided by/(used in) operating activities $ 36,680 $ 6,850 $ (22,308)

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

Net cash used in investing activities $ (36,470) $ (19,976) $ (398,519)

Net cash provided by financing activities $ 11,695 $ 13,109 $ 11,332

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The cash inflows from changes in our operating assets and liabilities were primarily due to an increase in deferred revenue of $35.9 million as a result of increased billings driven by timing of subscriptions and renewals.

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

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

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

The cash inflows were offset by cash outflows primarily from an increase in accounts receivable of $5.4 million and an increase in deferred contract costs of $48.2 million as a result of commissions on new bookings and renewals.

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

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

The cash inflows from changes in our operating assets and liabilities were primarily due to an increase in deferred revenue of $34.1 million as a result of increased billings driven by timing of subscriptions and renewals.

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Investing Activities

Net cash used in investing activities was $36.5 million for the fiscal year ended January 31, 2025, primarily consisting of purchases of marketable securities of $218.0 million,, purchases of property and equipment of $13.2 million, and capitalization of internal-use software costs of $3.8 million, partially offset by maturities of marketable securities of $195.4 million.

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

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

Financing Activities

Net cash provided by financing activities was $11.7 million for the fiscal year ended January 31, 2025, primarily consisting of proceeds from the exercise of common stock options of $6.9 million and proceeds from stock purchases associated with our employee stock purchase plan of $7.7 million, offset by payments of deferred purchase considerations related to the acquisition of North Star of $2.9 million.

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

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

Non-GAAP Free Cash Flow

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Non-GAAP free cash flow

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

$ 19,632 $ (6,485) $ (39,013)

Net cash used in investing activities $ (36,470) $ (19,976) $ (398,519)

Net cash provided by financing activities $ 11,695 $ 13,109 $ 11,332

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

Additionally, our free cash flow may be influenced by macroeconomic factors that impact our collection efforts for customer payments.

If we experience collection pressure it may lengthen the time to collect on accounts receivable and increase our bad debt expense, either of which could negatively impact our free cash flow.

Liquidity Outlook

We assess our liquidity primarily through our cash on hand as well as the projected timing of billings under contracts with our paying customers and related collection cycles.

While our future capital requirements will depend on many factors, including revenue growth and costs incurred to support customer usage and growth in our customer base, increased research and development expenses to support the growth of our business and related infrastructure, and increased general and administrative expenses to support being a publicly-traded company, we believe our current cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

While our future capital requirements will depend on many factors, including revenue growth and costs incurred to support customer usage and growth in our customer base, increased research

and development expenses to support the growth of our business and related infrastructure, and increased general and administrative expenses to support being a publicly-traded company, we believe our current cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

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

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

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

Non-cancelable purchase commitments for business operations and operating lease obligations total $224.4 million and $114.8 million, respectively, as of January 31, 2025.

Purchase commitments for business operations are predominately related to cloud hosting, infrastructure, and other software-based services and due primarily over the next three years.

Our future funding requirements to settle our obligations in foreign jurisdictions are subject to fluctuations due to changes in foreign exchange rates.

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

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

utilized reflects our current pricing practices.

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis