Braze Inc

Previous wording

We have grown significantly in recent periods. We generated revenue of $135.5 million in the three months ended April 30, 2024, representing year-over-year growth of 33.1% from the three months ended April 30, 2023. We had net losses of $35.7 million and $38.8 million in the three months ended April 30, 2024 and 2023, respectively. We had net cash provided by operating activities of $19.4 million in the three months ended April 30, 2024 and net cash provided by operating activities of $22.5 million in the three months ended April 30, 2023, respectively. Our Non-GAAP free cash flow was $11.4 million and $21.7 million in the three months ended April 30, 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 provided by operating activities, the most directly comparable measure calculated in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

Current wording

We have grown significantly in recent periods. We generated revenue of $145.5 million and $115.1 million in the three months ended July 31, 2024, and 2023, respectively, representing year-over-year growth of 26.4%, and $281.0 million and $216.9 million in the six months ended July 31, 2024 and 2023, respectively. We had net losses of $23.1 million and $32.0 million in the three months ended July 31, 2024 and 2023, respectively, and $58.9 million and $70.9 million in the six months ended July 31, 2024 and 2023, respectively. We had net cash provided by operating activities of $31.0 million in the six months ended July 31, 2024 and net cash provided by operating activities of $5.0 million in the six months ended July 31, 2023, respectively. Our Non-GAAP free cash flow was $18.7 million and $3.0 million in the six months ended July 31, 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 provided by operating activities, the most directly comparable measure calculated in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

Previous wording

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. Through our sales and marketing efforts, we also plan to capitalize on industries subject to ongoing digital transformation and where direct-to-consumer relationships are accelerating, to further propel adoption of our technology. As of April 30, 2024, we had 2,102 customers across a broad range of sizes and industries. Our ability to attract new customers will depend on a number of factors, including the quality and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts.

Current wording

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. Through our sales and marketing efforts, we also plan to capitalize on industries subject to ongoing digital transformation and where direct-to-consumer relationships are accelerating, to further propel adoption of our technology. As of July 31, 2024, we had 2,163 customers across a broad range of sizes and industries. Our ability to attract new customers will depend on a number of factors, including the quality and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts.

Previous wording

Historically, we have experienced significant expansion within a customer’s business once our platform is deployed, with customers typically increasing the number of monthly active users, channels and use cases, as well as purchasing additional products. A monthly active user is an end user of a customer who has engaged with the customer’s applications and websites in the previous thirty-day period. We include each distinguishable end user in our calculation of monthly active users, even though some users may access our customers’ applications and websites using more than one device, and multiple users may gain access using the same device. As of April 30, 2024, we had approximately 6.5 billion monthly active users, up from approximately 6.2 billion monthly active users as of January 31, 2024.

Current wording

Historically, we have experienced significant expansion within a customer’s business once our platform is deployed, with customers typically increasing the number of monthly active users, channels and use cases, as well as purchasing additional products. A monthly active user is an end user of a customer who has engaged with the customer’s applications and websites in the previous thirty-day period. We include each distinguishable end user in our calculation of monthly active users, even though some users may access our customers’ applications and websites using more than one device, and multiple users may gain access using the same device. As of July 31, 2024, we had approximately 6.7 billion monthly active users, up from approximately 6.2 billion monthly active users as of January 31, 2024.

Previous wording

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

Current wording

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

Previous wording

A further indication of the propensity of our customer relationships to expand over time is our dollar-based net retention rate. We calculate our dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. We then calculate the weighted average point-in-time dollar-based net retention rates as of the last day of each month in the current trailing 12-month period to arrive at the dollar-based net retention rate. Our dollar-based net retention rate for the trailing 12 months ended April 30, 2024 and April 30, 2023 was 117% and 122%, respectively, for all our customers, and 119% and 124%, respectively, for our customers with ARR of $500,000 or more. In addition, 212 and 164 of our customers had ARR of $500,000 or more as of April 30, 2024 and April 30, 2023, respectively.

Current wording

A further indication of the propensity of our customer relationships to expand over time is our dollar-based net retention rate. We calculate our dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. We then calculate the weighted average point-in-time dollar-based net retention rates as of the last day of each month in the current trailing 12-month period to arrive at the dollar-based net retention rate. Our dollar-based net retention rate for the trailing 12 months ended July 31, 2024 and July 31, 2023 was 114% and 120%, respectively, for all our customers, and 117% and 123%, respectively, for our customers with ARR of $500,000 or more. In addition, 222 and 173 of our customers had ARR of $500,000 or more as of July 31, 2024 and July 31, 2023, respectively.

Previous wording

We believe there is a significant opportunity to continue to expand our presence in international markets we have already penetrated and by entering markets we have not yet penetrated. For the three months ended April 30, 2024 and 2023, approximately 44% and 43% of our revenue was generated outside of the United States, respectively. We expect to increase market penetration in regions including Europe and Asia-Pacific and to further capitalize on the greenfield opportunity in regions such as Latin America. Although these investments in geographic regions may negatively affect our operating results in the near term, we believe that they will contribute to our long-term growth.

Current wording

We believe there is a significant opportunity to continue to expand our presence in international markets we have already penetrated and by entering markets we have not yet penetrated. For the six months ended July 31, 2024 and 2023, approximately 45% and 43% of our revenue was generated outside of the United States, respectively. We expect to increase market penetration in regions including Europe and Asia-Pacific and to further capitalize on the greenfield opportunity in regions such as Latin America. Although these investments in geographic regions may negatively affect our operating results in the near term, we believe that they will contribute to our long-term growth.

Previous wording

The increase in revenue of $33.7 million, or 33.1%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, was primarily driven by a $33.0 million or 34.0% increase in subscription revenue. Approximately 56.3% of the increase in subscription revenue was attributable to the growth from existing customers, increase in monthly active users, expansion across channels, and committed entitlements and features, and the remaining 43.7% was attributable to new customers. Total customers grew to 2,102 as of April 30, 2024, from 1,866 as of April 30, 2023. Professional services revenue increased $0.7 million or 15% due to an increase in deliverability services, technical account management, and support engagement services. These increases were partially offset by the decline in onboarding revenue as a result of the continued engagement of new customers with third-party partner-led onboarding. Additionally, in the three months ended April 30, 2024, our international revenue increased by $16.5 million as we continued to expand market penetration in regions such as Europe and Asia-Pacific.

Current wording

The increase in revenue of $30.4 million, or 26.4%, for the three months ended July 31, 2024, compared to the three months ended July 31, 2023, was primarily driven by a $30.2 million, or 27.6%, increase in subscription revenue. Approximately 50.6% of this increase in subscription revenue was attributable to the growth from existing customers, an increase in monthly active users, expansion across channels, and committed entitlements and features, and the remaining 49.4% was attributable to new customers. Total customers grew to 2,163 as of July 31, 2024 from 1,958 as of July 31, 2023. Professional services revenue increased $0.1 million, or 2.7%, due to an increase in deliverability services, technical account management, and support engagement services. These increases were partially offset by the decline in onboarding revenue as a result of the continued engagement of new customers with third-party partner-led onboarding. Additionally, in the three months ended July 31, 2024, our international revenue increased by $15.3 million as we continued to expand market penetration in regions such as Europe and Asia-Pacific.

Previous wording

The increase in cost of revenue of $11.9 million, or 36.3%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was primarily driven by an increase of $4.7 million in hosting, infrastructure and other third-party fees associated with delivering our platform and a $5.9 million increase in third-party messaging fees associated with growth in SMS and new channel offerings. In addition, we had an increase in personnel costs and overhead costs of $1.0 million. The increased infrastructure, messaging, and personnel costs were incurred to support overall revenue growth.

Current wording

The increase in cost of revenue of $7.9 million, or 22.4%, for the three months ended July 31, 2024, compared to the three months ended July 31, 2023, was primarily driven by an increase of $1.1 million in hosting, infrastructure, and other third-party fees associated with delivering our platform and a $5.7 million increase in third-party messaging fees associated with growth in premium messaging channels. In addition, we had an increase in personnel costs and overhead costs of $0.9 million. The increased infrastructure, messaging, and personnel costs were incurred to support overall revenue growth.

Previous wording

The increase in sales and marketing expense of $12.6 million, or 21.9%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was primarily driven by an increase in personnel costs and overhead costs of $6.9 million, which included $1.6 million of stock-based compensation costs. Additionally, the increase was driven in part by an increase of $4.1 million in promotional and product marketing, primarily related to the hosting of regional customer events and sales related events.

Current wording

The increase in sales and marketing expense of $8.2 million, or 13.5%, for the three months ended July 31, 2024, compared to the three months ended July 31, 2023, was primarily driven by an increase in personnel costs and overhead costs of $5.2 million, which included $2.1 million of stock-based compensation costs. Additionally, the increase was driven in part by an increase of $1.5 million in promotional and product marketing, primarily related to the hosting of regional customer events and sales related events, and an increase of $1.0 million in software costs.

Previous wording

The increase in research and development expense of $4.6 million, or 15.6%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was primarily driven by an increase of personnel and overhead costs of $4.0 million, which included $1.0 million of stock-based compensation costs. The increase in personnel costs was primarily due to a period-over-period increase in headcount to support our continued investment in the features and functionality of our platform.

Current wording

The increase in research and development expense of $4.0 million or 13.8%, for the three months ended July 31, 2024, compared to the three months ended July 31, 2023, was primarily driven by an increase of personnel and overhead costs of $3.7 million, which included $1.5 million of stock-based compensation costs. The increase in personnel costs was primarily due to a period-over-period increase in headcount to support our continued investment in the features and functionality of our platform.

Previous wording

The increase in general and administrative expenses of $2.8 million, or 11.7%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was primarily driven by an increase in personnel and overhead costs of $3.6 million, which included$1.5 million of stock-based compensation costs. 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. The increases were partially offset by a decrease of $0.6 million in professional services costs and 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 $0.1 million, as a result of developments in significant inputs for such calculation, notably new and incremental actual and forecasted deal closings from the Australia-New Zealand region.

Current wording

The increase in general and administrative expenses of $2.9 million, or 11.3%, for the three months ended July 31, 2024, compared to the three months ended July 31, 2023, was primarily driven by an increase of personnel and overhead costs of $3.1 million, which included $1.3 million of stock-based compensation costs. 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. The increases in expenses were partially offset by a decrease in software costs of $0.4 million.

Previous wording

The increase in other income, net of $1.7 million, or 49.5%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was attributable to a $1.6 million increase in investment income from marketable securities.

Current wording

The increase in other income, net of $1.6 million, or 42.4%, for the three months ended July 31, 2024, compared to the three months ended July 31, 2023, was attributable to a $1.5 million increase in investment income from marketable securities.

Previous wording

Our gross profit increased $21.8 million, or 31.6%, in the three months ended April 30, 2024, compared to the three months ended April 30, 2023, and our gross margin decreased 0.8% to 67.1% in the three months ended April 30, 2024 from 67.9% in the three months ended April 30, 2023. The margin decrease was primarily due to increased expenses associated with the increased adoption of premium messaging channels and a one-time charge to revenue related to our April service disruption.

Current wording

Our gross profit increased $44.3 million, or 29.8%, in the six months ended July 31, 2024, compared to the six months ended July 31, 2023, and our gross margin increased 0.1% to 68.7% in the six months ended July 31, 2024, compared to the six months ended July 31, 2023. These margin increases were due primarily to improved personnel efficiencies, 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. These increases were partially offset by expenses associated with the continued adoption of premium messaging channels and a one-time charge to revenue related to our April service disruption.

Previous wording

As of April 30, 2024, our principal source of liquidity was cash, cash equivalents, and marketable securities of $487.7 million. Our cash and cash equivalents consist of deposit accounts, interest-bearing money market accounts, and U.S. government securities that are stated at fair value. Our marketable securities positions consist mostly of highly liquid short-term investments. The investment income that we generate on these investments is not material to our overall cash balance, but may be adversely affected due to volatility in interest rates.

Current wording

As of July 31, 2024, our principal source of liquidity was cash, cash equivalents, and marketable securities of $504.5 million. Our cash and cash equivalents consist of deposit accounts, interest-bearing money market accounts, and U.S. government securities that are stated at fair value. Our marketable securities positions consist mostly of highly liquid short-term investments. The investment income that we generate on these investments is not material to our overall cash balance, but may be adversely affected due to volatility in interest rates.

Previous wording

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 $518.7 million as of April 30, 2024, and cash flows provided by operating activities for the three months ended April 30, 2024 of $19.4 million.

Current wording

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 $541.7 million as of July 31, 2024, and cash flows provided by operating activities for the six months ended July 31, 2024 of $31.0 million.

Previous wording

A substantial source of our cash provided by operating activities is our deferred revenue, which is included on the consolidated balance sheets as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recorded as revenue over the term of the subscription agreement. As of April 30, 2024, we had total deferred revenue of $229.7 million, of which $229.3 million was recorded as a current liability. Deferred revenue will be recognized as revenue when all of the revenue recognition criteria are met.

Current wording

A substantial source of our cash provided by operating activities is our deferred revenue, which is included on the consolidated balance sheets as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recorded as revenue over the term of the subscription agreement. As of July 31, 2024, we had total deferred revenue of $212.4 million, of which, $212.1 million was recorded as a current liability. Deferred revenue will be recognized as revenue when all of the revenue recognition criteria are met.

Previous wording

For the three months ended April 30, 2024, net cash provided by operating activities was $19.4 million, primarily due to a net loss of $35.7 million adjusted for non-cash charges of $39.1 million and net changes in our operating assets and liabilities of $16.0 million. The non-cash adjustments primarily relate to stock-based compensation of $28.6 million, amortization of deferred contract costs of $8.3 million. The cash inflow from changes in our operating assets and liabilities were primarily due to a decrease in accounts receivable of $9.9 million and increase in deferred revenue of $25.3 million as a result of billings for new bookings and renewals. The cash inflow was offset by cash outflows primarily from an increase in deferred contract costs of $10.7 million as a result of commissions on new bookings and renewals.

Current wording

For the six months ended July 31, 2024, net cash provided by operating activities was $31.0 million, primarily due to a net loss of $58.9 million, adjusted for non-cash charges of $80.8 million, and net changes in our operating assets and liabilities of $9.1 million. The non-cash adjustments primarily relate to stock-based compensation of $58.8 million and amortization of deferred contract costs of $17.0 million. The cash inflow from changes in our operating assets and liabilities were primarily due to a decrease in accounts receivable of $20.7 million and increase in deferred revenue of $7.8 million as a result of billings for new bookings and renewals. The cash inflow was offset by cash outflows primarily from an increase in deferred contract costs of $22.0 million as a result of commissions on new bookings and renewals.

Previous wording

For the three months ended April 30, 2023, net cash provided by operating activities was $22.5 million, primarily due to a net loss of $38.8 million adjusted for non-cash charges of $33.8 million and net changes in our operating assets and liabilities of $27.6 million. The non-cash adjustments primarily relate to stock-based compensation of $24.2 million, amortization of deferred contract costs of $6.7 million. The cash inflow from changes in our operating assets and liabilities were primarily due to a decrease in accounts receivable of $11.0 million and increase in deferred revenue of $15.2 million as a result of billings for new bookings and renewals. The cash inflow was offset by cash outflows primarily from an increase in deferred contract costs of $9.5 million as a result of commissions on new bookings and renewals.

Current wording

For the six months ended July 31, 2023, net cash provided by operating activities was $5.0 million, primarily due to a net loss of $70.9 million, adjusted for non-cash charges of $70.0 million, and net changes in our operating assets and liabilities of $5.9 million. The non-cash adjustments primarily relate to stock-based compensation of $49.0 million and amortization of deferred contract costs of $13.9 million. The cash inflow from changes in our operating assets and liabilities were primarily due to a decrease in accounts receivable of $8.9 million and increase in deferred revenue of $6.5 million as a result of billings for new bookings and renewals. The cash inflow was offset by cash outflows primarily from an increase in deferred contract costs of $21.0 million as a result of commissions on new bookings and renewals.

Previous wording

Net cash used in investing activities was $10.6 million for the three months ended April 30, 2024, primarily consisting of purchases of marketable securities of $59.7 million and purchases of property and equipment of $6.9 million, partially offset by maturities of marketable securities of $57.0 million.

Current wording

Net cash used in investing activities was $27.4 million for the six months ended July 31, 2024, primarily consisting of purchases of marketable securities of $142.1 million, purchases of property and equipment of $10.2 million, and capitalization of internal-use software costs of $2.1 million, partially offset by maturities of marketable securities of $127.0 million.

Previous wording

Net cash provided by investing activities was $24.3 million for the three months ended April 30, 2023, primarily consisting of maturities of marketable securities of $71.5 million, partially offset by purchases of marketable securities of $46.3 million and capitalization of internal-use software costs of $0.9 million.

Current wording

Net cash used in investing activities was $3.5 million for the six months ended July 31, 2023, primarily consisting of purchases of marketable securities of $121.4 million, cash paid for the acquisition of North Star Y, Pty Ltd of $16.3 million, and capitalization of internal-use software costs of $1.6 million, partially offset by maturities of marketable securities of $136.3 million.

Previous wording

Net cash used in financing activities was $1.9 million for the three months ended April 30, 2024, primarily consisting payments of deferred purchase consideration of $2.9 million, partially offset by proceeds from the exercise of common stock options of $1.0 million.

Current wording

Net cash provided by financing activities was $4.0 million for the six months ended July 31, 2024, primarily consisting of proceeds from the exercise of common stock options of $2.2 million and proceeds from stock associated with employee stock purchase plan of $4.8 million, partially offset by payments of deferred purchase consideration of $2.9 million,

Previous wording

Net cash provided by financing activities was $2.2 million for the three months ended April 30, 2023, consisting solely of proceeds from the exercise of common stock options.

Current wording

Net cash provided by financing activities was$7.3 million for the six months ended July 31, 2023, consisting solely of proceeds from the exercise of common stock options.

Previous wording

Our free cash flow decreased for the three months ended April 30, 2024 from the three months ended April 30, 2023, primarily due to the significant outflow related to purchases of property and equipment, mainly associated with our new offices, including our New York City headquarters. 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.

Current wording

Our free cash flow increased for the six months ended July 31, 2024 from the six months ended July 31, 2023, primarily due to higher collections as a result of an increase in billings that are aligned with new contracts and contract renewals. We expect our free cash flow to fluctuate in future periods with changes in our operating expenses and as we continue to invest in our growth.

Previous wording

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 $210.7 million and $118.6 million, respectively, as of April 30, 2024. 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.

Current wording

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 $189.1 million and $117.8 million, respectively, as of July 31, 2024. 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.