Q4 and Full Year Fiscal 2022 Earnings Results March 30, 2022 Forward Looking Statements and Disclaimer Forward-Looking Statements This presentation contains, and statements made during this presentation contain, "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding Braze's financial outlook for the first quarter of and full fiscal year ended January 31, 2023. Words such as "a ...

Financial Data and Key Metrics Changes - Braze reported Q4 2022 revenue of $70.4 million, a 64% increase year-over-year and a 10% increase sequentially [11][35] - The dollar-based net retention rate reached a new high of 128%, up 500 basis points year-over-year and 200 basis points sequentially [37] - Non-GAAP gross profit was $47.3 million, with a gross margin of 67.2%, compared to 65% in the same quarter last year [40] Business Line Data and Key Metrics Changes - The total customer count increased by 54% year-over-year to 1,375 customers, with large customers (ARR of $500,000 or more) growing by 51% [36] - Customers with ARR over $1 million grew by 58% year-over-year, contributing 38% to total ARR [36] - The total remaining performance obligation rose 60% year-over-year to $374 million [39] Market Data and Key Metrics Changes - Revenue outside the U.S. contributed 40% of total revenue in both Q4 and the full year [39] - Monthly active user count reached approximately 3.7 billion, with over 9 trillion consumer-generated data points processed [12] Company Strategy and Development Direction - Braze aims to enhance customer engagement through new product offerings, including Braze for Commerce, which focuses on personalized campaigns driven by first-party data [15][16] - The company is expanding its global footprint, with new locations planned in Toronto and Paris, and is focusing on the fast-growing APAC region [22][24] - Braze is committed to investing in its product roadmap to maintain competitive advantages against legacy marketing clouds [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue growth potential, citing a strong pipeline of new business and upsell opportunities [44] - The company is aware of macroeconomic risks but believes its focus on first-party data and customer engagement strategies positions it well during economic slowdowns [61] - For Q1 2023, revenue is expected to be between $72 million and $73 million, representing a year-over-year growth rate of approximately 51% [44] Other Important Information - Braze has launched a social impact department to drive diversity, equity, and inclusion initiatives, including a program for Black-owned startups [32][33] - The company ended the quarter with $518.1 million in cash and cash equivalents, with cash used in operations amounting to $24.5 million [43] Q&A Session Summary Question: What is driving the strength overall? - Management highlighted multiple generational trends, including digitization and the move to first-party data, as key drivers of business strength [49] Question: Can you unpack the dollar-based net retention strength? - Management noted strong renewals and the impact of trailing statistics from previous weaker quarters as contributing factors [51] Question: How sensitive is the business to a macro slowdown? - Management believes that Braze's focus on customer engagement provides a comparative advantage during economic slowdowns [61] Question: Are there signs of a slowdown in monthly active users in specific categories? - Management stated that they do not break out monthly active users by category but emphasized high retention rates among customers using Braze [66] Question: Is landing a seven-figure deal an anomaly? - Management indicated a trend of improvement in landing seven-figure deals, driven by an expanding product portfolio and customer engagement strategies [72] Question: How will the new commerce products drive revenue opportunities? - Management discussed the importance of data integrations and the ability to optimize customer engagement strategies as key to driving revenue from new commerce products [78]

Part I [Business](index=5&type=section&id=Item%201.%20Business) Braze, Inc. provides a comprehensive customer engagement platform that enables brands to manage customer interactions across various channels in real-time - Braze is a customer engagement platform that powered interactions with **3.7 billion monthly active users** as of January 2022, an increase from **3.0 billion** in January 2021[26](index=26&type=chunk) - The company serves over **1,300 customers** globally and processed over **nine trillion consumer-generated data points** in fiscal year 2022[26](index=26&type=chunk) - Braze's platform supports cross-channel interactions including in-app messages, push notifications, email, SMS, and integrations with ad networks like Facebook and Google[32](index=32&type=chunk) - The company's growth strategy focuses on acquiring new customers, expanding within its existing customer base, expanding geographically, investing in technology leadership, and strengthening partnerships[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [Overview](index=5&type=section&id=Item%201.%20Business%20-%20Overview) Braze provides a leading customer engagement platform designed to power personalized, real-time interactions between consumers and brands - Braze's mission is to forge human connections between consumers and the brands they love through relevant and memorable experiences[25](index=25&type=chunk) - The platform is built on a proprietary, enterprise-grade stream processing architecture that processes first-party customer data in real time, avoiding channel silos[29](index=29&type=chunk)[30](index=30&type=chunk) [Our Products](index=8&type=section&id=Item%201.%20Business%20-%20Our%20Products) Braze offers a vertically integrated platform covering data ingestion, classification, orchestration, personalization, and action - Data ingestion is managed via Braze SDKs for various platforms (iOS, Android, Web, etc.) and REST APIs for server-to-server integration[61](index=61&type=chunk)[62](index=62&type=chunk) - The Orchestration layer features 'Canvas', a flagship tool for creating multi-step, cross-channel messaging journeys, and 'Campaigns' for single-channel or multi-channel messages[67](index=67&type=chunk)[68](index=68&type=chunk) - The Action layer includes a wide range of messaging channels: In-Product (In-App/In-Browser Messages, Content Cards) and Out-of-Product (Push, Email, SMS/MMS, Ad Network Sync)[79](index=79&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Braze Currents allows for real-time data export to partners like Snowflake, Segment, and Amplitude, enhancing the customer's technology ecosystem[88](index=88&type=chunk)[89](index=89&type=chunk) [Competition](index=12&type=section&id=Item%201.%20Business%20-%20Competition) The customer engagement market is highly competitive, with Braze facing competition from legacy marketing clouds and point solutions - Key competitors include legacy marketing clouds (Adobe, Salesforce) and point solutions (Airship, Iterable, Leanplum, MailChimp, MoEngage)[93](index=93&type=chunk) - Competitors may have substantial advantages such as greater name recognition, longer operating histories, and significantly more financial and technical resources[94](index=94&type=chunk) - Larger competitors may bundle products or restrict access to their platforms, making it difficult for customers to integrate Braze's platform[96](index=96&type=chunk) [Human Capital](index=14&type=section&id=Item%201.%20Business%20-%20Human%20Capital) Braze considers its employees its most valuable resource, emphasizing culture, diversity, and social responsibility - As of January 31, 2022, Braze had **1,164 full-time employees**[124](index=124&type=chunk) - The company's workforce as of January 31, 2022, was **54% male** and **44% female**, with the remainder being non-binary or declining to self-identify[118](index=118&type=chunk) - Braze has joined the Pledge 1% movement, reserving up to **964,647 shares** of Class A common stock for social impact and ESG initiatives[122](index=122&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces numerous risks that could materially affect its business, including operating losses, intense competition, and regulatory compliance - The company has a history of operating losses and may not achieve or sustain profitability in the future[140](index=140&type=chunk) - Braze faces intense competition from legacy marketing clouds like Adobe and Salesforce and point solutions, which may have greater resources[147](index=147&type=chunk) - The business relies on third-party providers, particularly Amazon Web Services (AWS), for cloud infrastructure, and any disruption could adversely affect operations[216](index=216&type=chunk) - Three material weaknesses in internal control over financial reporting have been identified, related to the financial close process, revenue recognition controls, and IT controls[303](index=303&type=chunk) - The dual-class stock structure concentrates approximately **97.6% of voting power** with holders of Class B common stock as of January 31, 2022, limiting the influence of Class A stockholders[314](index=314&type=chunk) [Unresolved Staff Comments](index=45&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[343](index=343&type=chunk) [Properties](index=45&type=section&id=Item%202.%20Properties) Braze's corporate headquarters is located in New York City, with additional leased office spaces globally, and it owns no real property - The company's headquarters is in New York City, with a lease for approximately **84,000 square feet** expiring in April 2024[344](index=344&type=chunk) - Braze leases additional office space in San Francisco, Austin, Chicago, Berlin, London, and Singapore and does not own any real property[344](index=344&type=chunk) [Legal Proceedings](index=45&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any litigation expected to have a material adverse effect on its business or financial condition - As of the filing date, the company is not a party to any litigation expected to have a material adverse effect on its business[345](index=345&type=chunk) [Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[347](index=347&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=47&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Braze's Class A common stock trades on Nasdaq, the company has never paid dividends, and its November 2021 IPO generated significant net proceeds - Class A common stock is traded on Nasdaq under the symbol "**BRZE**". Class B common stock is not listed[350](index=350&type=chunk) - The company has never declared or paid dividends and does not intend to in the foreseeable future[353](index=353&type=chunk) - The November 2021 IPO of **7.5 million Class A shares** at **$65.00 per share** generated net proceeds of **$456.8 million** for the company[356](index=356&type=chunk)[359](index=359&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Braze's revenue grew significantly in fiscal 2022, driven by customer acquisition and expansion, though net losses increased due to investments, while liquidity remains strong from IPO proceeds Key Financial Performance (FY2022 vs FY2021) | Metric | Fiscal Year 2022 | Fiscal Year 2021 | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | $238.0 million | $150.2 million | +58% | | **Net Loss** | ($78.2 million) | ($32.0 million) | +144% | | **Net Cash Used in Operating Activities** | ($35.4 million) | ($6.1 million) | +480% | - The number of customers grew from **890** as of January 31, 2021, to **1,375** as of January 31, 2022[369](index=369&type=chunk)[406](index=406&type=chunk) - The dollar-based net retention rate for the trailing 12 months ended January 31, 2022, was **128%** for all customers and **136%** for customers with ARR of **$500,000** or more[377](index=377&type=chunk) - International revenue accounted for approximately **40% of total revenue** in fiscal 2022, consistent with the prior year[378](index=378&type=chunk) [Results of Operations (FY2022 vs. FY2021)](index=53&type=section&id=Item%207.%20MD%26A%20-%20Results%20of%20Operations) For fiscal year 2022, revenue increased by 58.5% to $238.0 million, but operating expenses rose significantly, leading to a larger loss from operations Revenue Comparison (FY2022 vs. FY2021) | Revenue Type | FY 2022 ($M) | FY 2021 ($M) | Change ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$238.0** | **$150.2** | **$87.8** | **58.5%** | Operating Expense Comparison (FY2022 vs. FY2021) | Expense Category | FY 2022 ($M) | FY 2021 ($M) | Change ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales and Marketing | $127.1 | $70.7 | $56.5 | 79.9% | | Research and Development | $59.0 | $29.2 | $29.8 | 102.1% | | General and Administrative | $51.6 | $28.0 | $23.6 | 84.4% | | **Total Operating Expenses** | **$237.7** | **$127.8** | **$109.9** | **86.0%** | - The increase in revenue was driven by growth from existing customers (**62%**) and new customers (**38%**)[406](index=406&type=chunk) - Gross margin increased from **63.7%** to **67.0%** due to economies of scale and cost optimization initiatives[409](index=409&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Item%207.%20MD%26A%20-%20Liquidity%20and%20Capital%20Resources) As of January 31, 2022, Braze's liquidity was $518.1 million, significantly boosted by IPO proceeds, and is deemed sufficient for the next 12 months - Principal liquidity as of Jan 31, 2022, was **$518.1 million** in cash, cash equivalents, and marketable securities[416](index=416&type=chunk) - The company received net proceeds of **$456.8 million** from its IPO in November 2021[417](index=417&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Activity | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(35,398) | $(6,080) | $(7,365) | | Net cash provided by/(used in) investing activities | $18,040 | $22,472 | $(87,234) | | Net cash provided by financing activities | $467,910 | $4,866 | $1,257 | Non-GAAP Free Cash Flow Reconciliation (in thousands) | Metric | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(35,398) | $(6,080) | $(7,365) | | Less: Purchases of property and equipment | $(2,310) | $(2,466) | $(1,724) | | Less: Capitalized internal-use software costs | $(2,065) | $(1,886) | $(830) | | **Non-GAAP Free cash flow** | **$(39,773)** | **$(10,432)** | **$(9,919)** | [Critical Accounting Policies and Estimates](index=58&type=section&id=Item%207.%20MD%26A%20-%20Critical%20Accounting%20Policies%20and%20Estimates) Braze's critical accounting policies involve significant judgment in revenue recognition, capitalization of contract costs, and stock-based compensation valuation - Revenue recognition (ASC 606) requires judgment in identifying performance obligations and determining standalone selling prices (SSP) to allocate transaction prices[441](index=441&type=chunk)[443](index=443&type=chunk) - Incremental costs to obtain contracts, mainly sales commissions, are capitalized and amortized over an estimated benefit period of up to **four years**[444](index=444&type=chunk) - Stock-based compensation is valued using the Black-Scholes model, which requires subjective inputs for expected volatility, term, and, prior to the IPO, the fair value of common stock[447](index=447&type=chunk) - The company maintains a full valuation allowance on its net deferred tax assets, concluding it is not more likely than not that they will be realized[461](index=461&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks primarily from interest rate fluctuations on its cash holdings and foreign currency exchange rates on operating expenses - The company's primary market risk exposures are interest rate risk and foreign currency exchange rate risk[464](index=464&type=chunk) - As of January 31, 2022, the company had **$518.1 million** in cash, cash equivalents, and marketable securities subject to interest rate changes[467](index=467&type=chunk) - Foreign currency risk arises from operating expenses denominated in local currencies (primarily in the UK, Singapore, and Japan), as most sales are in U.S. dollars[469](index=469&type=chunk) [Financial Statements and Supplementary Data](index=62&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for Braze, Inc. for the fiscal years ended January 31, 2022, 2021, and 2020 Consolidated Balance Sheet Highlights (as of Jan 31, 2022) | Account | Amount (in thousands) | | :--- | :--- | | **Total Assets** | **$666,262** | | Total Current Assets | $608,185 | | Cash and cash equivalents | $478,937 | | **Total Liabilities** | **$161,444** | | Deferred revenue | $126,260 | | **Total Stockholders' Equity** | **$501,583** | Consolidated Statement of Operations Highlights (FY ended Jan 31, 2022) | Account | Amount (in thousands) | | :--- | :--- | | **Revenue** | **$238,035** | | Gross Profit | $159,524 | | Loss from operations | $(78,211) | | **Net Loss** | **$(78,167)** | | Net loss per share, basic and diluted | $(2.20) | [Controls and Procedures](index=98&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management evaluated the company's disclosure controls and procedures and concluded they were not effective as of January 31, 2022 - Management concluded that disclosure controls and procedures were not effective as of January 31, 2022[676](index=676&type=chunk) - The ineffectiveness is due to three unremediated material weaknesses in internal control over financial reporting[679](index=679&type=chunk) - The material weaknesses are related to the financial close process, revenue recognition controls, and IT general controls[679](index=679&type=chunk) - A remediation plan is in place, but the controls have not been operational long enough to be considered fully remediated[680](index=680&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=100&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2022 Annual Meeting Proxy Statement - Required information is incorporated by reference from the forthcoming 2022 Proxy Statement[688](index=688&type=chunk) - The company has adopted a Code of Conduct, the full text of which is available on its website[689](index=689&type=chunk) [Executive Compensation](index=100&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement - Required information on executive compensation is incorporated by reference from the 2022 Proxy Statement[690](index=690&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=100&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners, management, and related stockholder matters, including securities authorized for issuance under equity compensation plans, is incorporated by reference from the company's 2022 Proxy Statement - Required information on security ownership and equity compensation plans is incorporated by reference from the 2022 Proxy Statement[691](index=691&type=chunk)[692](index=692&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=100&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2022 Proxy Statement - Required information on related transactions and director independence is incorporated by reference from the 2022 Proxy Statement[693](index=693&type=chunk) [Principal Accounting Fees and Services](index=100&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's 2022 Proxy Statement - Required information on principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement[694](index=694&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=101&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Annual Report on Form 10-K - This item lists the consolidated financial statements and an index of exhibits filed with the report[697](index=697&type=chunk)[699](index=699&type=chunk) - Financial statement schedules have been omitted because the required information is either inapplicable or already included in the financial statements and notes[698](index=698&type=chunk) [Form 10-K Summary](index=102&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that there is no Form 10-K summary provided - None[704](index=704&type=chunk)

Investor Presentation January 2022 Disclaimer 2 Forward-Looking Statements This presentation contains, and statements made during this presentation contain, "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding Braze's anticipated business growth and market opportunity. These forward-looking statements are based on current expectations, estimates, forecasts and projections. W ...

Braze, Inc. (NASDAQ:BRZE) Q3 2022 Earnings Conference Call December 20, 2021 5:00 PM ET Company Participants Chris Ferris - Head of Investor Relations Bill Magnuson - Co-Founder & Chief Executive Officer Isabelle Winkles - Chief Financial Officer Conference Call Participants Gabriela Borges - Goldman Sachs Mark Murphy - JPMorgan Raimo Lenschow - Barclays Arjun Bhatia - William Blair Brent Bracelin - Piper Sandler DJ Hynes - Canaccord Derrick Wood - Cowen & Company Brian Peterson - Raymond James Scott Berg - ...

Part I. Financial Information [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Braze, Inc.'s unaudited condensed consolidated financial statements for periods ended October 31, 2021, are presented [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets reached **$184.1 million**, liabilities **$124.7 million**, and accumulated deficit **$172.0 million** as of October 31, 2021 Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Oct 31, 2021 | Jan 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $41,976 | $28,509 | | Marketable securities | $34,906 | $58,004 | | Total Assets | $184,086 | $171,394 | | **Liabilities & Equity** | | | | Deferred revenue | $98,427 | $74,789 | | Total Liabilities | $124,700 | $103,439 | | Accumulated deficit | $(172,026) | $(138,242) | | Total Stockholders' Deficit | $(118,486) | $(108,507) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2021 revenue grew **62.6%** to **$64.0 million**, with increased operating expenses leading to a **$9.1 million** net loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $63,968 | $39,332 | $167,601 | $107,261 | | Gross Profit | $44,794 | $24,901 | $113,865 | $68,029 | | Loss from operations | $(10,448) | $(8,788) | $(35,623) | $(21,634) | | Net loss | $(9,058) | $(8,822) | $(34,824) | $(21,217) | | Net loss per share | $(0.42) | $(0.47) | $(1.67) | $(1.21) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$10.9 million** for the nine months ended October 31, 2021 Cash Flow Summary for the Nine Months Ended October 31 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,868) | $(6,100) | | Net cash provided by investing activities | $19,789 | $19,644 | | Net cash provided by financing activities | $4,604 | $5,100 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the November 2021 IPO, revenue recognition, RPO growth, and stock-based compensation expenses - On November 19, 2021, the company completed its IPO, receiving net proceeds of approximately **$457.1 million**. All convertible preferred stock was converted to Class B common stock[53](index=53&type=chunk) - Subscription revenue is the primary revenue source, growing to **$59.3 million** in Q3 2021 from **$36.8 million** in Q3 2020. International revenue accounted for approximately **40%** of total revenue for the nine months ended October 31, 2021[73](index=73&type=chunk) - Remaining Performance Obligations (RPO) increased to **$304.0 million** as of October 31, 2021, up from **$234.2 million** at January 31, 2021, indicating strong future revenue visibility[79](index=79&type=chunk) - Upon completion of the IPO, the company recognized **$16.1 million** in compensation expense related to RSUs whose performance-based vesting conditions were satisfied by the event[139](index=139&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q3 revenue growth to **$64.0 million**, improved gross margin, and increased operating expenses [Factors Affecting Our Performance](index=28&type=section&id=Factors%20Affecting%20Our%20Performance) Performance driven by customer acquisition and expansion, with **1,247** customers and a **126%** dollar-based net retention rate - The number of customers grew to **1,247** as of October 31, 2021, up from **841** as of October 31, 2020[153](index=153&type=chunk)[189](index=189&type=chunk) Dollar-Based Net Retention Rate (Trailing 12 Months) | Customer Cohort | As of Oct 31, 2021 | As of Oct 31, 2020 | | :--- | :--- | :--- | | All Customers | 126% | 124% | | Customers with ARR ≥ $500k | 136% | 134% | - International revenue constituted approximately **40%** of total revenue for the nine months ended October 31, 2021, highlighting successful geographic expansion[161](index=161&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Analysis shows significant revenue growth and improved gross margin, offset by substantial increases in operating expenses Revenue Growth (in thousands) | Period | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Oct 31 | $63,968 | $39,332 | $24,636 | 62.6% | | Nine Months Ended Oct 31 | $167,601 | $107,261 | $60,340 | 56.3% | Gross Margin Performance | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Oct 31 | 70.0% | 63.3% | | Nine Months Ended Oct 31 | 67.9% | 63.4% | - The increase in operating expenses for Q3 2021 was primarily driven by higher personnel and overhead costs due to increased headcount: Sales & Marketing (**$7.1M**), R&D (**$4.7M**), and G&A (**$3.9M**)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity was **$76.9 million** as of October 31, 2021, bolstered by **$457.1 million** net IPO proceeds - Principal source of liquidity as of October 31, 2021, was **$76.9 million** in cash, cash equivalents, and marketable securities[209](index=209&type=chunk) - The company closed its IPO in November 2021, resulting in net proceeds of **$457.1 million**[210](index=210&type=chunk) - A substantial source of cash is deferred revenue, which stood at **$98.6 million** as of October 31, 2021[213](index=213&type=chunk) Non-GAAP Free Cash Flow (in thousands) | Period | Nine Months Ended Oct 31, 2021 | Nine Months Ended Oct 31, 2020 | | :--- | :--- | :--- | | Non-GAAP Free cash flow | $(13,820) | $(9,824) | [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks are interest rate and foreign currency fluctuations, both minimal with no hedging instruments - The company's main market risks are interest rate risk and foreign currency exchange rate risk[234](index=234&type=chunk) - As of October 31, 2021, a hypothetical **10%** change in interest rates would not have a material impact on the value of cash, cash equivalents, or marketable securities[237](index=237&type=chunk) - Foreign currency risk is limited as substantially all sales are denominated in U.S. dollars. A hypothetical **10%** change in exchange rates would not have had a material effect[238](index=238&type=chunk)[240](index=240&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective due to three material weaknesses in financial statement close, revenue recognition, and IT controls - Management concluded that disclosure controls and procedures were not effective as of October 31, 2021[242](index=242&type=chunk) - Three material weaknesses were identified in internal controls over: the financial statement close process, revenue recognition accounting (ASC 606), and inadequate IT controls for financial systems[245](index=245&type=chunk) - Remediation efforts are underway, including hiring more staff, engaging external resources, and implementing new policies and a revenue recognition system[249](index=249&type=chunk) Part II. Other Information [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) Braze is not a party to any legal proceedings expected to materially affect its business or financial condition - The company is not presently a party to any litigation that is expected to have a material adverse effect on its business[251](index=251&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) Key risks include unsustainable growth, intense competition, platform dependence, data privacy, internal control weaknesses, and concentrated voting power - The company's rapid revenue growth may not be indicative of future growth and makes future prospects difficult to evaluate[256](index=256&type=chunk) - Braze faces intense competition from legacy marketing clouds like Adobe and Salesforce, as well as point solutions, many of which have greater resources[271](index=271&type=chunk) - The business is subject to stringent and changing data privacy laws like GDPR and CCPA, which impose significant compliance costs and risks related to data transfer and processing[352](index=352&type=chunk)[358](index=358&type=chunk) - Three material weaknesses in internal control over financial reporting have been identified, which could adversely affect the accuracy and timing of financial reporting[447](index=447&type=chunk) - The dual-class stock structure concentrates approximately **98.8%** of voting power with holders of Class B common stock, limiting the influence of Class A stockholders[457](index=457&type=chunk)[458](index=458&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued RSUs and common stock in unregistered transactions and received **$457.1 million** net proceeds from its November 2021 IPO - From August 1, 2021, to October 31, 2021, the company granted **767,554** RSUs and issued **749,299** shares of common stock from option exercises in unregistered transactions[489](index=489&type=chunk) - The November 2021 IPO resulted in net proceeds of **$457.1 million** after deducting underwriting discounts and offering expenses[492](index=492&type=chunk) [Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section indexes exhibits including corporate governance documents and CEO/CFO certifications - The Exhibit Index lists key corporate governance documents, including the Amended and Restated Certificate of Incorporation and Bylaws[499](index=499&type=chunk) - Certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[497](index=497&type=chunk)[499](index=499&type=chunk)